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Law firms plan for change in leadership

A number of Maryland law firms are restructuring their leadership as aging founders and partners retire or relinquish the management role. Attorneys said these changes, though fraught with challenges, are necessary for firms to survive long-term.

From left, Nicole Windsor, Matt Hjortsberg and Jeremy Garner make up Bowie & Jensen’s new executive committee, which handles day-to-day management functions at the firm.

While planning ahead is essential for any firm, “it’s a life-or-death issue in a smaller firm where a retiring founder or a major rainmaker is phasing out of the firm,” said Eric A. Seeger, a principal in legal consulting firm Altman Weil Inc. in Newtown Square, Pa. “Failure to deal with succession issues can be crippling for the firm.”

Most firms consider their foremost issue to be the retirement of baby boom lawyers, according to a 2011 survey by Altman Weil.

“At some point, law firms have to make the decision — are they going to survive beyond their original partners?” said Matthew Hjortsberg, managing partner at Bowie & Jensen in Baltimore. “You can look around and there are plenty firms that haven’t done that. If you are going to make the decision, if a firm is going to decide to go on, then you have got to come up with a system that allows for orderly succession and governance of the firm.”

Looking forward

Bowie & Jensen transitioned its leadership last June. Robert R. Bowie Jr. founded the firm in 1990 and Mark T. Jensen joined as partner a year later. Today, the firm has about 14 attorneys.

The firm’s partners made executive decisions together up until last summer when the firm installed a three-member executive committee to take over day-to-day operations. Hjortsberg was named managing partner and Nicole J. Windsor and Jeremy Garner became the other members of the executive committee.

“In past year, we decided we wanted to shift firm governance so the firm could sustain itself for the long-term,” Hjortsberg said. “The best way to do that is to have the younger generation of partners step up and perform more of a leadership role because they are the ones who are going to be carrying firm 10, 15, 20 years from now.”

The executive committee handles issues like personnel and financial decisions, leaving other partners free to concentrate on their practices, Hjortsberg said.

“At some point, all lawyers went to law school to practice law,” Hjortsberg said. “The quicker decisions get made, the quicker everyone can go back to practicing law.”

Hjortsberg said management became more complicated as more partners were added. The firm initially set up a number of committees that would in turn make recommendations to the partners. That system was hard to manage, as well, Hjortsberg said, and the firm decided to completely restructure management at the end of 2010. The firm mapped out specifics from January to June 2011. In June, the firm sent out emails notifying their clients of the change.

Since the executive committee formed, it has implemented new management techniques such as a more defined system for keeping track of employee hours, overtime and leave, Hjortsberg said.

The transition has not been without its challenges, but Hjortsberg said problems are simpler to deal with under the executive committee system.

“I think everyone will acknowledge it is better,” Hjortsberg said. “Is there room for improvements? Yes. We are coming across things to cause us to rethink things. The difference is now we have a system that allows us to deal with it. If an issue comes up, it can be dealt with quickly and effectively.”

Advance planning

Altman Weil has seen a spike in the number of firms seeking out its advice on succession plans over the past two to three years, Seeger said.

The key, he said, is to start the process early.

“Law firms in every market are driven by an aging demography overall,” Seeger said. “We are seeing a lot of firms coming at this a little too late with founders and partners in the profession who are well into their 60s with no clear successor behind them.”

Seeger said firms should start planning their futures at least three to five years in advance so that clients can form relationships with the emerging leaders and the firm can deal with financial issues, like whether a partner will walk away or get bought out by other partners.

Many firms do not even want to talk about a transition of power, he said.

“It’s a difficult subject to bring up in many firms because you are talking about a major life change, sometimes you are talking about mortality,” Seeger said. “Usually, you are talking with people who have a lot of their personal identity tied up in the firm. It starts with candid conversations with people, getting clear on what individuals want, what they expect, what they will accept and over what time period. It’s a matter of reaching a solution.”

Emphasizing the next generation

Kramon & Graham P.A. transitioned to a leadership structure more focused on its younger lawyers in January. David J. Shuster took over as managing principal for Philip M. Andrews, who had held the position for 13 years. The firm also placed younger lawyers at the head of its eight committees at the end of last year.

“One of the things we wanted to do to ensure the firm has a bright future beyond its founding generation was to phase in new leadership,” Shuster said.

Andrews, a lawyer since 1977, now concentrates more on his practice while Shuster, 43, handles daily operations at the 32-attorney firm, which Andrew Jay Graham and James M. Kramon founded in 1975. Shuster deals with staff issues, managing financials, hiring and recruiting.

Kramon & Graham discussed leadership changes over the past couple years, culminating in a summit weekend last fall where the firm decided to hire a new managing principal and make younger attorneys leaders of the firm’s management committees, including its long-range planning, technology, hiring and marketing committees, Shuster said.

The committees meet regularly and make recommendations to partners, who meet about once a month. The partners then make final decisions.

“It’s an effort to get younger people involved in prominent roles in the community and to make efforts to continue to grow the business,” Shuster said.

Second succession

Gordon Feinblatt LLC is just beginning its second transition of leadership since its founding 60 years ago, said firm chairman and CEO Barry F. Rosen.

The firm has named an assistant managing partner who will work under the longtime managing partner, Herbert Goldman, in order to take over that role “very soon,” Rosen said.

Rosen declined to identify the future managing partner or pinpoint when the transition would take place. After mentoring and training his successor, Goldman will step down as managing partner and concentrate more on his practice, Rosen said.

“We are embarking now on what I think is our next succession, which will be the third generation,” Rosen said. “It will take 10 years to complete it, but we are in that succession process now.”

This is the second time the firm, which now has 70 attorneys, has changed its leadership. The firm was founded in 1953, and about 20 years ago, the founders handed over leadership to the Baby Boomer generation. Rosen took over as chairman and CEO in 1989 at the age of 39. Goldman had become managing partner nine years earlier at the age of 38.

In the first and oncoming succession, Rosen said, the firm emphasized introducing younger attorneys to clients early on so these attorneys can take over when another retires.

“We clearly recognized then that the founders here brought in most of the business and we needed to diversify that platform,” Rosen said. “We energized ourselves to continue that.”

Rosen said the firm has also named a younger-generation lawyer to its eight-member executive committee, with plans to add a second younger lawyer in the near future. The executive committee approves decisions made by the chairman, managing partner and executive director.

Working on it

Attorneys at Wright, Constable & Skeen LLP in Baltimore started planning for its future five years ago, said managing partner Howard S. Stevens.

The firm was founded in 1986 and is made up of 21 attorneys, 18 of whom are partners, Stevens said. As several of these partners reach retirement age, Stevens said the company has been slowly implementing a plan for younger attorneys to take on leadership roles.

Stevens took over as managing partner three years ago, replacing an attorney that had had the post for 12 years, he said.

Most of the changes are not planned out, since none of the senior partners plan to retire in the immediate future, Stevens said. The firm will be meeting again this year to reassess how they will be moving forward.

At Pasternak & Fidis in Bethesda, senior partners emphasize teaching younger attorneys leadership skills to ensure the firm’s future, said founding partner Marcia C. Fidis.

Fidis stepped down as managing partner five years ago after holding the position since 1986. The firm’s other partner N. Alfred Pasternak is semi-retired, Fidis said.

The firm, which was founded in 1980, does not have a concrete structure for succession, but spends a lot of time training attorneys in building their own client base and professional development, Fidis said. They introduce younger attorneys to clients in order to build the relationships between clients and the younger generation of attorneys, Fidis said.

“I think it’s mainly bringing younger attorneys along and finding younger attorneys that work in our group and making sure they are trained and prepared to deal with modern technology,” Fidis said. “That’s typically been our succession plan.”

The succession experts

Then there are firms like Niles, Barton & Wilmer LLP. Founded as Brown & Brune in 1838, the firm is no stranger to leadership shake-ups, since it has been around so long.

Jeffrey A. Wothers took over as managing partner at the firm seven years ago, replacing Robert F. Scholz, who had the job for 15 years. The firm has 31 attorneys and 21 are partners.

“I felt like the kid at the grownups’ table for awhile,” Wothers said. “It was just going through that transition.”

The firm’s managing partner heads up a five-member management committee. When Wothers took over, he said he took a different managing approach by consulting with his committee more often. Scholz would meet with people one-on-one before committee meetings to solve issues. Wothers said he likes to discuss problems with the committee as a whole.

He also gave more responsibility to the firm administrator, who now manages the daily tasks of operating the firm, leaving Wothers free to concentrate on long-term planning and his own practice.

“Anytime you change the leadership of an organization, the uncertainty can cause angst and that can cause distrust,” Wothers said. “In this case, that was all minimized. It really was handled very respectfully and very well.”