LSAG Legal Briefs - Vol 2

The Future is Now: Succession Planning in Law Firms

BY DAVID C. SMITH (CUSHMAN & WAKEFIELD)

I n mid-August 2019, 1.2 million people 1 tuned in to watch the season two premier of HBO’s award-winning drama, Succession. With 35% of equity partners currently at or approaching retirement age, law firms are living their own version of Succession every day. Preparing for the coming turnover as a large cohort of partners hit retirement age is a growing challenge for law firms across the globe. In fact, retirement increased in the past year by 6% as a reason for attorney departures according to Cushman & Wakefield’s 2019 Bright Insight survey results 2 including only 27% of law firms that have true succession plans that are formal and are closely coordinated. As the Baby Boomer generation ages and retires, talent turnover is an issue that will transcend industry. In fact, recruitment and retention took the #1 spot as the biggest issue for business competition per Cushman & Wakefield’s survey. For the first time, more native- born U.S. residents will turn age 65 than celebrate their 25th birthday in 2019. This gap is expected to persist until 2028 with over 2.1 million more native-born Americans achieving retirement age than entering the

workforce over the coming decade 3 . As it relates to the legal sector however, the three biggest issues for a partner to resist retiring are ego, finances, and the lack of trust in turning clients over to someone else. The challenge may be even more acute among law firms given that the average age of lawyers is significantly higher than the national average. Within the management and professional occupations, the highest 2018 median age of workers belonged to the legal sector (46.8 years old) 4 . And the median age of lawyers—a subset of the legal sector—is even slightly higher at 47.1 years old. In fact, in 2018 one- third of the lawyers practicing were over 54 years old and 14% of them were more than 64 years old. This is a significantly higher proportion than the U.S. workforce as a whole (23% and 6%, respectively). At the same time, national law school enrollment hit a near-term low in 2015 5 so the number of newly graduated lawyers has been declining and hit its nadir in 2018. Also keep in mind that the number of female law students has increased to a level over 50% - yet today’s practicing partners are only 23% female.

MEDIAN AGE OF LAWYERS FIVE YEARS HIGHER THAN MEDIAN U.S. WORKER 6

Within the management

10% 9% 8% 2%

Debt

and professional occupations, the highest 2018 median age of workers belonged to the legal sector (46.8 years old).

Non-Labor Overhead too High

Globalization

Real Estate Issue

12% 11%

Internal Consensus

Other

14%

Conflicts

20%

Labor Overhead too High

26%

22 | Legal Sector Advisory Group | ADVISING FOR EXCELLENCE

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