Lawyers ALERT. Table of Contents. Share now. November 2016

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1 Table of Contents Law firm succession planning: retaining firm revenue while transitioning knowledge and relationships Three tactics to help you own your law firm brand Five things lawyers hate to hear clients say Nine emerging truths about legal service delivery

2 Law firm succession planning: retaining firm revenue while transitioning knowledge and relationships Michael Nicoló, CPA, CA, CPA (Illinois), is a partner in the Audit and Assurance Group in the Toronto office of Collins Barrow It has been called the pig in the python a graphic image of Canada s Baby Boom generation that has moved through time and is now nearing retirement. Law firms that manage this outsized demographic wave well can position themselves to maintain their revenue streams, transition knowledge and relationships and preserve partner equity. Firms that do not take action may lose revenue and equity when partners leave for other firms or retire, causing the partner s client relationships to be lost to the firm. Rhonda Klosler, Chief Operating Officer at Collins Barrow Toronto, notes, A good succession plan is also valuable in attracting and retaining top talent. Good people will come and grow with the firm if they understand the firm has a commitment to transferring ownership to the next generation. With years of experience advising law firms, Collins Barrow Toronto conducted a recent survey that reveals succession as a key law firm priority. The survey indicates that 79 per cent of the equity partners from the law firms surveyed range from age 50 to 65. Canadian Bar Association figures paint a similar picture, showing that a significant number of actively practicing lawyers are at an age where they are retiring or contemplating phasing down. The depth of change will be most prevalent in law firms where baby boomers have been instrumental in building, growing, managing and leading. Perhaps most critical for law firms are estimates that these older partners control at least a quarter of total firm revenue. Without steps to transfer those client relationships to the next generation, a firm s future may be compromised. Despite the inevitable move toward retirement for this critical class of senior lawyers, many firms do not have a formal succession planning process in place. Without systematic planned transitions, the firm will lose revenue, valuable relationships, and a wave of skills and knowledge when the individual leaves or retires. Hasan Khorasanee, a senior manager at CIBC s Professional Services Group, has noted, Succession is a key issue facing Canadian law firms. The business development, legal experience and leadership gaps are issues our clients tell us they are facing and which all firms should be actively planning for. What gets in the way of succession planning at law firms? One of the key reasons law firms struggle with succession issues is structural: the client relationships are seen as being held by the firm s individual partners, rather than the firm as a whole. While this helps reassure clients that their main partner contact will be well informed of the issues, it carries significant downsides from the firm s perspective. If the partner moves to another firm or retires, it may be difficult for the firm to retain the stream of work from that client. In addition, the partner has no great incentive to support a smooth succession in the run-up towards retirement. The partner s retirement payout, if one exists, is generally based on their last few years of billings, so there is no incentive to pass billable hours on to a successor partner. As well, partners may want to protect their importance within the firm by staying central to the client relationship. There are conflicting views among firms regarding the inclusion of mandatory retirement age clauses in partnership agreements. Critics note that the absence of a mandatory retirement age often complicates the succession planning process. Often, managing partners themselves do not consider succession planning to be a priority, creating yet another barrier to implementing effective processes. But what is pushing the succession planning issue to greater prominence is the pig-in-the-python situation the Page 2

3 Law firm succession planning: retaining firm revenue while transitioning knowledge and relationships number of partners expected to head for the exits in the next few years. Building a culture that supports succession planning Succession planning is not an easy agenda discussion item, but it is critical that leadership address it. It is critical to a firm s future sustainability, especially as it relates to knowledge and relationship transfer to incoming leaders. Each law firm s situation is different, but here are some of the steps we have found effective in encouraging smoother succession planning, so that the firm can continue thriving as partners retire. Quantify the risk to see what is at stake Many firms do not have a clear idea of their risks and exposure to potential loss from the looming retirement wave. Determining the amount of the firm s revenue that is tied to each partner and estimating how much of this revenue would be lost upon the partner s departure will give an idea of the issues at stake. Bringing in external professional counsel, including advisors who have worked with a wide range of law firms and understand how to place valuations on a revenue stream, can add transparency and accuracy to this process. Review partnership agreements and compensation models Firms should review their partnership agreements and compensation models to ensure they do not include clauses that would act as disincentives to a senior partner from active succession planning. Partner compensation in the years immediately prior to retirement, as well as the pension payout if one exists should be tied to a successful transition of client relationships. The managing partner must champion succession planning We have found that in most law firms, few initiatives happen particularly major cultural and structural changes without the active support of the managing partner. This would include a major change, such as one that would reward and encourage equity partners to support succession of client relationships. Create a culture and process around succession planning With so many barriers stacked against effective succession planning, it may be necessary to state clearly what behavioural changes must be made to support good succession planning. This can include setting out standards on how partners are expected to involve junior professionals in meetings with clients, in the management of files, and responsibility for seeking new business from existing clients. The succession process should be accompanied by milestones and timelines that must be met. Create incentives for partners to support succession planning Once a clear succession planning process is established, there should be financial rewards for partners who meet recognized milestones. It is important that junior partners buy into the plan and that senior partners help junior partners grow the practice. Create a culture that develops the next generation of partners It is great to have senior partners on board with a transition plan, but it is also important to ensure the next generation of partners are prepared to take on that responsibility. Creating an environment that is focused on developing the leadership skills of the firm s top talent is key. Formal mentoring and coaching programs and robust learning and development curricula focused on soft skills will serve firms well. Page 3

4 Law firm succession planning: retaining firm revenue while transitioning knowledge and relationships There is no easy fix for the succession planning issues facing law firms. Attention to the issues and a businesslike approach can go a long way, but do not underestimate the time it takes to properly transition relationships. The process does not happen overnight and it requires real effort and commitment. In the same way law firms clients rely on their legal counsel to help them with issues beyond their expertise, law firms can rely on expert succession planning advice from advisors who are familiar with the issues and have the necessary skills to help. Michael Nicoló, CPA, CA, CPA (Illinois), is a partner in the Audit and Assurance Group in the Toronto office of Collins Barrow. Contact Michael at mnicolo@collinsbarrow.com or by phone at Page 4

5 Three tactics to help you own your law firm brand Alan E. Singles is Director, Marketing & Graphic Services at Jaffe The 2016 Summer Olympics are now in the past, but throughout the event it was made clear who could and could not use the very protected Olympic brand and how permitted entities could use it. Over the past two decades, the International Olympic Committee (IOC) has developed a growing list of guidelines for the use of its brand, a list that has stretched beyond the name and iconic five-coloured rings. For example, the IOC has added keywords and specific hashtags to the list, such as #Rio2016 and #TeamUSA. If you were not a full sponsor this year, you were excluded from using any of these items during a specified time period before, during and after the event. Like the IOC, a law firm needs to own its brand. This is part of running a law firm like a business. If your firm is not thinking this way, it should be. After all, your brand is your most valuable asset. Brand protection activities include trademarking logos, unique phrases and word structures whenever possible. Of course, your brand is more than your logo. It also includes your firm s message, story, visual identity, colours and fonts. In its totality, your brand is a package of who you are and what you stand for. But beyond legal protections, how do you own your brand, especially when it encompasses certain elements that cannot be trademarked? The answer is that it requires consistency, authenticity, firm-wide involvement and effort. 1. Consistency Every brand should be accompanied by a style guide, created by the agency that worked with you on developing your identity and messaging. This is the one go-to document that covers every aspect of your brand and how to implement it. It will show you the proper ways the logo should be used, what your verbal message is and what visual images best convey who you are. Your firm s brand guide often is a very large document. To streamline the information, a more compressed cheat sheet can be developed for distribution throughout the firm. Remember, everyone in your firm needs to be a brand ambassador. Using and telling your brand message internally and externally requires consistency from each and every person. 2. Authenticity Your brand should be true to who you are and should deliver on your brand promise. It is important that the people in charge of your brand (usually the marketing department) monitor its use and follow the principles from where the brand evolved, as outlined in your style guide. When it comes to brand use, these are the go-to people for the rest of the firm. If your firm does not have a marketing department to handle questions about your brand, appoint a person (or a small committee) to be in charge of managing the brand, or who can work with your outside agency to get the necessary answers. Make sure those who handle the firm s social media accounts are well informed and trained in the brand message, strategy and goals. This will help eliminate any confusion internally and externally. 3. Firm-wide involvement Every single person in your firm is an ambassador with the potential to interact with clients and potential clients. This is why it is necessary to teach everyone throughout the firm what your brand stands for and how to convey that message. For example, are all the receptionists answering the phone in the same way? Do your attorneys and secretaries understand your verbal message and core values? Does the support staff know the firm s story? When you bring a new attorney or staff member into the firm, set aside time in the orientation process to go over your firm s brand and messaging. Periodically refresh people on these items, so that they are always at the top of everyone s mind. Page 5

6 Three tactics to help you own your law firm brand Making the Effort Owning and maintaining your law firm s brand takes work. Remember, building your brand is not a sprint but a marathon that takes place over a long period of time. You have to put in the effort to ensure you and your partners are positioning your brand properly in the marketplace and that, if unauthorized use occurs, you catch it. To this end, monitor social media to ensure your internal people are following your guidelines. Check up on charity organizations you work with to confirm your logo is presented as it should be. If not, ask what happened and how to correct it for the next time. Keep your eyes open for other firms or companies that may be using similar designs in their logos or messaging that may reduce the impact of your branding efforts. If there is an act of infringement or replication, take legal steps to stop it. A lot of work goes into creating your brand, starting with the initial research about your firm and its history and values, along with gathering perspectives on the firm s reputation. A brand is a promise to your clients and your staff. That is all the more reason to own and protect your brand. Alan E. Singles is Director, Marketing & Graphic Services at Jaffe, a full-service legal marketing and PR agency. Three Tactics to Help You Own Your Law Firm Brand appeared as a post on the Jaffe blog at jaffepr. com on September 14, Contact Alan at asingles@jaffepr.com or by phone at Page 6

7 Five things lawyers hate to hear clients say Gerry Riskin, B.Com., LL.B., P. Admin, is a founding partner of Edge International In situations involving you and your client, the adversarial system is your worst enemy. The only win is a long-term client relationship that is sustainable. A short-term victory gained by your legal swordsmanship almost guarantees a failure on that score. Although certain things clients say are sure to get your dander up, I respectfully suggest you put the sword away and try a response designed to maintain the relationship. Below are five examples of conversations most likely to test your client relationship skills, along with possible responses. Of course, I offer these possibilities assuming you always offer unsurpassed quality, give solid value for your fee, really care about your client, and are prepared to provide excellent service. The options are meant to be catalysts to help you think through responses in your own natural style and language; they are not scripts. 1. Asking for the retainer When you ask for a retainer, your client might say something like: Why am I being asked to pay in advance? Don t you trust me? Possible response Of course I trust you. If I didn t, my firm would not represent you. Be assured that you are not paying in advance. In fact, you are paying as the work is being done. The retainer allows my firm to draw funds as they are used. As long as you remain in step with what we ve requested, I can assure you it will be fair to both of us. Would it be more convenient to provide the $5,000 today, or would you prefer to provide $2,500 today and $2,500 more by a week Friday? Be aware that your client may say: I am short of funds right now. In this case, the possible response is: Let s establish a pace for your file that your resources allow. Where this is not practical, you might use an alternate response, such as: Our law firm is not equipped to lend you money for your legal work, but we can certainly help you explore options to borrow what you need. 2. Delegating work to someone else When delegating to another lawyer in your firm, your client might say something like: I don t want anyone else working on my files. Possible response Why? Wait for an answer, and get the real reason if you can. Typically, your clients will be afraid that you will not be personally involved and that they will lose your caring concern, or that someone else may not have your intelligence and skill. By finding out the real reasons, your response can address them specifically. Then you might say: I can assure you that I will take personal responsibility for your satisfaction. I will know how this matter is unfolding at all times and will step in if I think it is necessary. You are welcome to contact me at any time if you have concerns. 3. Proposing additional work When proposing work your client needs (let s say drafting a policy manual or doing some riskprevention training), your client might say something like: Our people can ill afford the time that would be required. Possible response If you still feel that way once we make our initial report, let s leave it there. We will only move beyond that point if you decide some aspect of this is a priority for you. Is that fair? 4. The bill is greater than expected When fees exceed the estimate, your client might say something like: I m a good client, surely I deserve a break. Possible response You deserve the very best our firm has to offer and, rest assured, we will always ensure you get it. As I mentioned, I have gone over the file with a fine-toothed comb and eliminated any time where the value to you might have been questionable. I have also determined that the reason we exceeded the original estimate is based on circumstances that neither you nor we could have anticipated. Finally, we brought this to your attention the Page 7

8 Five things lawyers hate to hear clients say moment it came to ours. I can tell you that our proposed invoice is fair and represents strong value for you. If you disagree, it is important for me to understand why so I can either explain it or compromise if necessary, in order to ensure that you are completely satisfied. 5. A complaining client When delivering a complaint, your client might say something like: I m very unsatisfied and frustrated. Possible response Tell me about it in full, if you would, please. Do not react until you have it all. Ask as many questions as it takes. Often it is not so much about the specific solution as how you reach it. By demonstrating that you are a great listener and you care deeply, you will be the beneficiary of reduced tension, stress and anxiety on the part of your client. And they will be much more receptive to exploring reasonable solutions. At that point, you can say: I m glad you took the time to fully explain this to me. I have a couple of thoughts about how we might make this right for you, but before I tell you what I have in mind, did you have any thoughts on a solution? If your client has no such ideas, proceed. But if your client does have an idea, you will be much more successful if you can weave that idea into a jointly conceived solution. Gerry Riskin, B.Com., LL.B., P. Admin, is a founding partner of Edge International, a former managing partner, a best-selling author, a Fellow of the College of Law in London, and a Visiting Professor at the University of Pretoria in South Africa, serving law firms on six continents. Contact Gerry at riskin@edge-international.com or by phone at Page 8

9 Nine emerging truths about legal service delivery Jordan Furlong is an Ottawa-based legal market analyst and consultant The market for legal services in Canada is changing in ways that not every lawyer will like and that no one in the legal profession can control. Global shifts in legal service regulation, the rise of new competition for our clients business and extraordinary advances in technology are placing enormous pressure on lawyers. What s more, this unprecedented and potent combination of forces is taking place in the shadow of great economic turmoil and growing public impatience with our access to justice failures. If you ve ever wondered what a perfect storm of change might look like in the law, this is it. It is time for lawyers to look past the narrow confines of the legal profession and see the larger, multi-faceted legal market of needs and opportunities. It is also time we fully understand some crystallizing truths about legal service delivery in this new market. Here are nine for your consideration. 1. Lawyers will no longer be the sole providers of legal services. Para-professionals, accounting firms, legal document websites and advanced legal technologies will take a growing share of the legal market in the coming years. No law society can stop this, and some are already amending their rules to adapt to it. You can hate it and fight it if you like, but our monopoly is effectively over and it is not coming back. 2. Lawyers will ultimately benefit from a multi-provider market. In truth, we have been punching below our weight for some time now, devoting our immense talents to tasks that are essentially clerical, transactional or procedural in nature. Others will take that work from us and in the long run we ll thank them because we will be freed to apply our highest and deepest skills to more important and valuable needs and opportunities. 3. Lawyers will not become extinct in my lifetime or yours. Paralegals, accountants and legal technology developers all agree that they are complements to, not replacements for, lawyers. The legal market needs the expertise, ethics and humanity that the legal profession provides. As long as we are prepared and qualified to consistently deploy those features in service of client needs and public interests, our future is assured. 4. Lawyers will learn to collaborate more than compete. If we try to stifle competitors and innovations from outside the profession, we will be seen as eliminating client choice to protect our turf, and we will suffer accordingly. The lawyers who survive and succeed will be those who work alongside, not against, complementary performers and powerful machines and ultimately, who collaborate with other lawyers in the service of client value. 5. Lawyers will learn to value and promote the client experience. The key to meaningful reform of legal service delivery lies in improving the experience of legal service buyers. New market players have shown us the way by prioritizing accessibility, affordability, convenience and ease of use in their product design and service delivery. Lawyers and law firms who follow suit will thrive. Those who do not will eventually disappear. 6. Lawyers will start to care about access to justice. Actually, many lawyers do care about access, deeply. But the legal profession as a whole does not. Multiple studies in different countries show lawyers serve only about 15 per cent of all legal needs and opportunities and block anyone else from meeting the rest. We will begin to address that by allowing new legal service providers into the market to meet those needs. We will address it completely when we start serving those needs ourselves. 7. Lawyers will become efficient and effective businesspeople. A competitive market will force down lawyers fees, requiring us to reduce our costs of doing business. We will be obliged to streamline and improve our internal processes, which will allow Page 9

10 Nine emerging truths about legal service delivery us to enhance the quality of our work and offer predictable or fixed prices to our clients in the confident knowledge that we will ultimately turn a profit. We will come to see how law is both a profession and a business. 8. Lawyers will not reach this promised land quickly or easily. There is a lot of turmoil and pain ahead for the legal profession there is no point in denying it. Market upheaval is hardest on the incumbents, and harder still when the incumbents are risk-averse, resistant to change, and poorly trained in business fundamentals. Look for more new lawyers without jobs, more senior lawyers without successors, and more law firms to shrink or even shut down. 9. Lawyers will ultimately be better positioned than ever before. As perfect a storm as this might prove to be, it is also true that every storm eventually gives way to sunshine. Whatever befalls individual lawyers, the legal profession will emerge from this process stronger and more formidable than ever. We will have higher skills, better processes, newer offerings and a keener ability to identify and deliver value to our clients. That is the reward awaiting those who can make the transition. Legal service delivery is shifting from a reactive, inefficient, single-channel routine to a dynamic, client-centric, multi-provider opportunity. Better tools are emerging, healthy competition is flourishing, and a larger, deeper and more lucrative market is waiting, poised to exploit and enjoy a cavalcade of new options. Lawyers can and should be first in line to meet those needs and fulfill those opportunities. The way forward is becoming clear. It only remains for us to take it. Jordan Furlong is an Ottawa-based legal market analyst and consultant who has addressed dozens of audiences worldwide on the new legal market. He writes at law21.ca. Nine Emerging Truths About Legal Service Delivery appeared in the Spring 2016 edition of Law Matters, the newsletter of the Canadian Bar Association - Alberta. Page 10