With Baby boomers hitting retirement age many New Zealand law firms are now scrambling to pull together succession plans, a law firm planning specialist says.
But many of these Baby boomers simply don’t want to retire, Moore Stephens Markhams director Sam Bassett told NZLawyer.
He strongly recommended New Zealand firms start adopting a retirement age of 65 for all equity partners.
“We aren’t expecting them to walk out the door at 65. But it is really important to free up equity slots in firms for their ongoing growth and success.”
He was staggered by the number of firms who haven’t collectively agreed on a retirement age and set that down in their partnership or shareholder agreement.
“If you start on a succession strategy at 60 and sell out your equity ownership stake in the firm at 65 and then stay on in a consultancy role, you can actually have a really good transitional phase.”
If a succession plan is managed properly, the retiree can earn more and the younger person taking over can also do well, he said.
“There’s more for everyone. But if you don’t plan, what tends to happen is that, by its nature, the firm shrinks [and] you ultimately don’t get as much money for your equity stake.”
Another trend he observed was that the younger generation were no longer tolerating the long pay-in to equity partnership.
“There is also lot of talk around town that the younger generation are not interested in buying in to law firms. I think there is some truth to that, but I don’t think it’s entirely the case,” he said.
“In my experience, if there is a good efficient, profitable firm, then there are plenty of people lined up wanting to take equity slots in it.
“The firms that struggle are the ones who have not addressed how they are performing and therefore don’t have an equity slot, and thus are not as attractive as they should be to younger people.”
One firm with a strong succession plan in place is Chen Palmer, with managing partner Mai Chen taking a less hands-on approach and allowing her younger lawyers to start taking the reins in the firm’s 21st year.
“It is important to know when seasons start, and when seasons end,” she told NZLawyer.
“Geoffrey Palmer and I dominated the firm in the first ten years, then he retired when he turned 60, and I dominated in the next 10 years.”
Chen no longer needs to do some of the work she did before, freeing up her time to be able to focus on new endeavours such as her recent BNZ board appointment
, while her staff can carry out that work at lower charge-out rates.
“Otherwise you get a situation where you don’t grow, because you’re always doing the same thing. And it prevents other people growing, because they can’t step up.
“I love watching the team step up. They see the opportunity, and then move into the space. So this allows me to grow into the next phase of my legal and governance career, and it allows them to grow into top public and employment lawyers.”