It doesn't—or at least it shouldn't—take an army of business consultants to explain why law firms lacking succession plans are probably headed for trouble down the road.

What may be less obvious is the fact that failing to prepare for the future can have very real consequences in the present, as clients and young lawyers display little tolerance for firms that take a laissez-faire attitude toward succession planning.

This intolerance is particularly true of midsize and small firms, where leadership roles and key client relationships can often become concentrated among a small cadre of senior partners, leaving younger lawyers seeing no opportunity for advancement, and clients wondering whether they should start seeking more long-term relationships elsewhere.

A study released by ALM Legal Intelligence last year, "Securing the Future: Law Firm Succession Planning and the Challenges of Managing a Multigenerational Workforce," found that one-third of respondents did not have succession plans in place for either firm leadership or client teams. Nearly 40 percent of those who said they did not have a plan in place for firm leadership reasoned that it is "not an immediate concern." Forty-nine percent of those who said that they did not have a plan in place for client team leadership said that they had "difficulty identifying successors" and "faced resistance from senior partners."

What's more, according to the study, the Am Law 151-200 partnership is nearly half Baby Boomer and only 3 percent millennial. By contrast, Am Law 1-10 partnership is only one-third Baby Boomer and already 6 percent millennial.

For midsize and small firms, overreliance on senior partners can begin to have a detrimental effect long before those partners cease practicing.

George Pallas

George Pallas of 64-lawyer Philadelphia-based construction law firm Cohen Seglias Pallas Greenhall & Furman, said he's seen a number of firms in the city and, more broadly, in construction law forced to close their doors because they failed to clear the way for the younger generation, making retention a struggle.

"The reason is the young attorneys—both partners and associates—if they didn't see a pathway for growth of the company and their ownership in it, they decided not to stay," he said.

Pallas said his first order of business upon taking over as firmwide managing partner of Cohen Seglias in January 2017 was to decentralize management and instead create a 10-member executive committee comprising an even mix of equity and nonequity partners, each of whom chairs a subcommittee responsible for an aspect of the firm's business—such as branding.

"These young partners now feel vested in the company because they have a sphere of influence," Pallas said.

Cohen Seglias also established a path to equity partnership that runs parallel to the more traditional equity partnership track but is based more on experience than on books of business. While the traditional track is speedier, Pallas said, the alternative track is another way to show young lawyers that the firm is invested in advancing their careers.

"We have a group of young partners who have been designated as next in line based on years of experience and commitment," Pallas said, adding that the firm also "strongly encourages" senior attorneys to pass down client matters to be managed by younger attorneys.

Meanwhile, the firm also has a policy that requires partners to give up their equity stakes when they hit age 75, though they do not have to retire, according to Pallas.

Pallas said Cohen Seglias has "almost no turnover," which he credits in large part to its succession plan.

W. Raymond Felton, co-managing partner of Greenbaum, Rowe, Smith & Davis in Woodbridge, New Jersey, which has 95 attorneys and grew from a solo practice launched in Newark more than a century ago, said there's two parts to succession planning: the firm management side and the client side.

In early 2017, the firm added two younger partners to its management committee, increasing the panel's size to seven. Unlike the existing members, the new additions were nonequity partners. Over the past several years, the firm has added younger members to various firm committees tackling issues such as technology, marketing and employee benefits.

"I like to get the younger people a taste," said Felton, noting that the appointments have been received "very positively because, if you're a younger person, you like to have a stake" in the firm's future.

"As the lawyer population ages—as it certainly has here—it's not just a matter of who's running the firm, but who's serving the clients," he said.

And, like the younger generation of attorneys, the clients are watching closely.

James Matsoukas, chief marketing officer and director of business development at 141-lawyer Pierce Atwood in Maine, said that's readily apparent in the questions clients ask when considering whether to hire a firm.

Matsoukas said that, in his experience, clients don't typically ask directly about a firm's succession plan. But, when introduced to a senior partner at the firm, the client is often keenly interested in whether younger attorneys will also be part of the team handling a given matter, he said.

"It's not just about succession planning—they also just want to know if you have depth—but implicitly it is," he said. "They want to know if there's anything behind the senior attorney."

Sarah Duniway, managing partner of 176-lawyer Gray Plant Mooty in Minneapolis, said succession planning is a topic that routinely comes up during the client satisfaction interviews she conducts.

"It's a question that clients ask and are wondering about," she said. "They want to know there's going to be stability, they want to know who they're going to be working with and they want to have a voice in that."

And allowing that voice to be heard is important, Duniway added, because perhaps the only thing worse than no succession plan is a succession plan with which the clients aren't on board.

Duniway said she's heard "horror stories" from other firms where senior attorneys "thought they had a really clear heir apparent and the client didn't really think that person was a good fit."

And while some clients will not be shy about verbalizing their opinions of the younger attorneys they've been paired with, others will express their feelings in more subtle—but equally telling—ways, Duniway said.

"We have to be really attuned to the other way we get feedback, which is through action," she said, adding, for example, "When a client is working with a more senior lawyer and a more junior lawyer, I always take it as a really good sign when the client starts calling that junior lawyer directly."

While succession planning "is top of mind" for Gray Plant Mooty, and the firm is committed to fostering relationships between its young lawyers and clients, it does not have a mandatory retirement policy, Duniway said. The firm recognizes that each attorney is different and that some will continue to make valuable contributions long after others have chosen to step back from practicing, she added.

With this more personally tailored approach to succession planning, communication is all the more important. Duniway said the firm is proactive about asking senior attorneys whether they envision retirement in the near future. In fact, it formally poses the question in an annual survey.

If the answer is yes, the firm opens a dialogue with those attorneys and helps solidify a succession plan. In some cases, where a senior partner's practice may be highly specialized, that plan may involve beginning the search for lateral hires, Duniway said.

But even attorneys who say they have no immediate plans to retire need to have a strategy, she added.

"I tell them, 'You'd better make sure you're talking to your clients, because they're looking at you and they're making assumptions about your age,'" Duniway said.

Duniway said she's witnessed firsthand the price firms can pay for failing to properly plan for the future.

"I can point to examples in my own practice where we have gotten clients from other firms" because those firms lacked an articulated succession plan, she said. "[The clients] were concerned their relationship lawyer was close to retirement and they hadn't heard anything about a succession plan and they were getting nervous."

Timothy Phillips, chief legal and risk officer of the American Cancer Society, said he expects the firms he works with to have succession plans because the legal department he runs has its own, which it takes very seriously.

"I start with the premise that even though the terminology we use is 'outside counsel,' I view the lawyers we work with as external members of my team," he said, adding that when it comes to succession planning, "The law firms that are smart today should be gauging the environment of the internal legal departments they work with and patterning that behavior."

Phillips said it's also in a firm's best interest financially to start fostering next-generation client relationships as early as possible, because clients are not going to foot the bill for last-minute efforts to get attorneys past the learning curve.

"In my world, that's poor stewardship," Phillips said. "I'm not going to spend money I could have otherwise saved through good succession planning [by outside counsel]."

And in today's ultra-competitive legal services climate, most clients are unlikely to wait until it gets to that point anyway, he said.

"I do my crisis planning before the crisis comes in," he said, adding, "If the [outside lawyer] I typically call is in the sunsetting of a career and I don't see a promising next-generation lawyer there, I am going to find someone else. I will move to another shop."

David Gialanella contributed to this report.