Mandatory Retirement Creates Succession Planning Problems For Top Law Firms
The distribution of aging lawyers is trending upwards, but firms may still have to rethink their insistence on mandatory retirement and succession planning.
Ed. note: This is the latest installment in a series of posts Lateral Link’s team of expert contributors. Michael Allen is Managing Principal at Lateral Link, focusing exclusively on partner placements with Am Law 200 clients.
With baby boomers pushing past 65, mandatory retirement policies are becoming more troublesome for firms without strong succession plans. Roughly half of Am Law 200 firms have some mandatory retirement policy. Not all stipulate retirement at 65, most range roughly from 63-68, with different protocols as to how to deal with retiring attorneys. Some firms will transition partners into counsel positions where they can practice while transferring their clients and work to a younger attorney, and others broach the topic of the impending retirement a year or two in advance to ease the partner’s transition out of the law firm.
Most partners in senior vintages begrudge the practice of mandatory retirement; some bemoan that it is an overcautious safeguard or the epitome of ageism. Some claim the practice is supported by scientific studies that link cognitive decline with advancing age — especially after 65, which is about the average for mandatory retirement. There is, however, sound reasoning behind the age cut-off. Most men and women are at a much greater risk of developing Alzheimer’s after the age of 65. The blowback of having an attorney working an important case with Alzheimer’s — whether knowingly or unknowingly — could be enormous depending on the outcome of that case.
Most firms do a decent job of replenishing talent in the partner ranks. The drop-off in practicing attorneys from age 65 to age 70 is precipitous.
Even more telling is the drop-off in the ratio of partners to counsels after the age of 60. At 60, roughly 84% of practicing Biglaw attorneys are partners. By 68, that number drops to 63%, including a 10% drop from 67 to 68.
The degree of severity to which firms enforce mandatory retirement varies. Some firms take a stricter approach to mandatory retirement, like Bradley Arant and Knobbe Martens who have almost no attorneys over 65 years of age. On the other hand, Holland & Knight, Greenberg Traurig, Duane Morris, Pillsbury, and K&L Gates tend to eschew the mandatory retirement requirement.
Promoting partners and associates to create a path to leadership positions, or rewarding them with lucrative work, is an efficient way to seamlessly transfer responsibility to younger lawyers. Increased lateral movement has made this plan less feasible. Most firms prefer to buy business instead of build it to mitigate the risk of homegrown attorneys leaving with clients.
Two interesting dilemmas could impact partner promotion in the future. The baby boomer generation opened up the ranks for a lot more partner positions, but given their resistance to retiring, Biglaw could face a lost generation of partners who are being crowded out of clients by the baby boomers.
Second, as the proportion of those passing the bar to the general population decreases, firms will have to start having internal discussions on the value of future classes. When these classes are up for partnership in ten years’ time, partner jobs may be closed in lieu of counsel positions if firms aren’t high on the business generating potential of their crop of senior associates. This could make lateral partners even more valuable down the line.
While the distribution of aging lawyers is trending upwards, firms may have to rethink their insistence on mandatory retirement and succession planning. While there are no studies of the prevalence of Alzheimer’s in the legal community, those in the legal profession are exposed to both catalytic and preventive stimuli that can encourage or discourage the development of the disease. Nonetheless, relying on a firm mandatory retirement deadline hurts both the lawyer and the firm, especially if there is no succession plan in place. Firms would be wiser to ease the severity of the rule and instead impose a transition period during which the lawyer could operate in a mentoring capacity to facilitate a smooth transfer of responsibility — which many firms like Winston & Strawn already do.
Executing a proper plan easily solves the dilemmas brought about by mandatory retirement. While identifying an aging leadership problem is helpful, firms need to be more proactive in their implementation of a plan. If your firm needs to benchmark their leadership, or wishes to learn practices to cope with mandatory retirement, I am happy to share my suggestions and help you craft a game plan.
Lateral Link is one of the top-rated international legal recruiting firms. With over 14 offices world-wide, Lateral Link specializes in placing attorneys at the most prestigious law firms and companies in the world. Managed by former practicing attorneys from top law schools, Lateral Link has a tradition of hiring lawyers to execute the lateral leaps of practicing attorneys. Click ::here:: to find out more about us.
