Making a success of succession

Appointing the right leader for your firm is an absolute necessity for business success but getting it right is a tough task, demanding time, energy and a forward-thinking attitude. Noel Carroll, area director, London North and City, at Allied Irish Bank (GB), provides some guidelines on approaching this essential but difficult area of effective law-firm management.

Appointing the leader of any organisation, be it a company, football team or political party, involves some major decision making. Mistakes can be costly and damaging, with corporate history littered with examples of past failures. Indeed, succession can even change the course of history: at the battle of Bosworth in 1485, The Earl of Richmond, the future Henry VII, defeated Richard III, bringing to an end the Plantagenets’ reign.

This article explores some succession options available to a law firm and discusses what might be the best approach for you.

The personality of a leader has a fundamental effect on a company. What would Virgin be without Richard Branson or EasyJet without Stelios? Post Enron, more prudent, less charismatic leaders may be sought by organisations, but choosing a leader is still one of the most crucial decisions a firm will make. And, as the pressures on leaders increase, the calibre of managing partners needs to be first rate.

As a managing partner, you have many stakeholders whose views need to be considered when thinking about who will run the business in the future. This includes other partners and employees who have a financial, as well as an emotional stake in the business, and important clients and key advisers, such as your bankers and accountants. Make sure you consult and take their counsel.

Time to manage

Managing a law firm is tough, and getting tougher: long hours, demanding clients and relentless competition. Added to this is the increasing complexity of business and it is easy to see why it’s difficult for busy fee earners to manage parts of the business, such as marketing, even if they want to. Management is now a full-time job.

So the question is: who is the best person to run your firm? A very different type of leader is required by a professional-service firm that is selling intellectual capital than say a large manufacturing company. For one, the partnership model is very different. Furthermore, you employ professionals who have worked hard to hone their craft and who, therefore, might prefer to remain lawyers, spending time in a courtroom rather than in a boardroom.

The wisdom of Solomon

Before exploring the pros and cons of different options, let’s look at the process leading up to the decision.

As with most big business decisions, the more you anticipate and plan, the more likely you will get it right. There are a few suggestions to help ensure succession management is handled professionally:

Get the right person for the job – obvious, of course, but far from easy. You need to ensure you have the systems in place to select the right candidate. Fundamentally, you need to know the kind of leader you are looking for, including skills, style and experience. Also consider the firm’s culture;
Plan ahead – ideally your human-resources function should be looking at succession management far in advance. The more time you have, the more likely the right decision will be made. You want to avoid an interregnum or any instability. Continuity is essential. Perhaps now is the time to think about recruiting a fee earner with management experience and who would be keen to develop their skills further in this area. You need to think about the type of skills the firm will need over the next 15 years;
Communication – indispensable during any change, but critical when a new leader is being appointed. You need to avoid, as much as possible, water-cooler gossip. Don’t forget to tell those outside the business who need to know – your bankers, accountants and key clients, for instance. The smoother the process, the more likely that the new leader will have a positive rather than a negative effect on the firm.

These are just a few of the considerations. It might be worth thinking about some professional external advice long before the change needs to be made.

The options

There are two real options: groom someone internally or recruit externally.

Outside expertise

There are many examples of CEOs from one industry successfully switching to a new one. If you can succeed in one place, so the logic goes, you can somewhere else.

There are several advantages of having a managing partner who is not a lawyer:

Fresh perspective: the advantage of recruiting outside your industry is that you will probably get a new-world view, a fresh perspective and chance for some challenging thinking. Often this is just what organisations need to thrive, especially as the world gets more complex and the importance of innovation increases;
A professional manager: you want someone who has some understanding of how a professional-service firm works. You might consider an accountant with audit experience in professional services. What you are getting, hopefully, is a professional manager with a successful track record in running an organisation. They will bring with them all the skills – finance, etc. – which might really help the firm;
The golden goose: fee earners can continue to do what they do best – bringing in revenue. They don’t have to take on what they might perceive as onerous management responsibilities;
Learning lessons: outside expertise can help other partners learn more about business. Even though they will perhaps take a bit more of a back seat, it is nevertheless an opportunity to develop new skills and improve commercial acumen. And don’t forget that external appointments might provide lucrative business-development opportunities.

There are of course pitfalls. Each firm has a unique culture. This needs to be thoroughly understood and analysed before any decision is made. Think about the difficulties of replacing someone with the stature and track record of Jack Welch, ex-CEO of General Electric. You also need to think about the firm’s business plan. What stage is your business at? Do you want to expand or perhaps diversify into new areas? Different leaders are needed at different times. Churchill was supreme as a war leader but found wanting in peacetime.

There are some obvious dangers to be aware of when recruiting externally:

Company culture: a professional manager will have his or her own views about what needs to be done. These might not blend well with what the managing partner wants and it will need to be handled delicately;
Clients: how would they react to a professional manager taking over? It needs to be seen as a positive development for the firm and they will need to meet the new manager as soon as possible;
Contingency plans: what if things go wrong? There is, of course, no guarantee that an executive coming from another industry will succeed in a very different environment. If things don’t work out you need to carefully plan how this will be managed.

Cream rising to the top

The other option is to recruit internally. The advantage of home-grown talent is that they should understand the company culture, making it a safer option in terms of disruption to the business. They are also a known quantity. And it avoids potential de-motivation when parachuting in outsiders.

If you are considering an internal appointment, it might be worth considering an MBA or an MSC in business administration to provide the candidate with broader business knowledge. Again, this needs to be planned well in advance. Any managing partner needs to have certain attributes, particularly ‘softer’ people-management skills.

One other option might be to recruit a managing partner from another firm. The downside is that you will probably have to use a head-hunter, incurring added costs and it can set a precedent for firms to poach competitors’ management.

Irrespective of what option you choose, succession management needs to be handled professionally to give it credibility. All those in the business need to know that the process has been handled in the right way.

One size doesn’t fit all

Each law firm is different. Handled well, the transition to a new leader can make a successful firm blossom. It needs to be given the time needed, as in the end, most great leaders tend to endure. So think long term.

There are as many different leaders as there are firms. Take the time to find the one who is right for your firm now.

Allied Irish Bank (GB) is a trademark used under licence by AIB Group (UK), a wholly owned subsidiary of Allied Irish Banks.

Noel Carroll is area director, London North and City, at Allied Irish Bank (GB). For more information, please contact senior manager Michael McFerran on 020 7606 4900.