Feature

posted 3 Aug 2006 in Volume 9 Issue 3

Passing the baton

Leadership succession planning has become a serious concern among law firms that often struggle to nurture enthusiastic leaders from within the fee-earning ranks. The potential vacuum left by the departure of a good managing partner, however, could be disastrous for maintaining profitability.

By Tina Lofthouse

Today’s increasingly competitive legal market has made the role of managing partner more crucial and demanding than ever before, and to achieve their business strategy, firms need the best leaders at the helm to drive them forwards. But how do law firms choose their next leader?

While most firms now recognise and value the importance of management generally, there are still a good number who don’t pay enough attention to succession-planning issues, nor do they do enough to nurture leadership skills within the organisation so that when the time comes, there are a number of partners with the potential to fill the shoes of managing partner.

Moreover, little is done to make the role attractive for the right candidate given they are expected to relinquish some, if not all, their fee-paying work, and take on a job that is frequently likened to ‘herding cats’.

Succession raises a number of difficult questions. Some legal firms have brought in a non-lawyer manager, but while the chief-executive role can bring objectivity and skills from the corporate world, there are integration issues to tackle. So, should law firms be looking externally for their next leader or can more be done to ensure that there are suitably trained, and suitably enthused, partners ready to step into the role of manager? And how can the transition both from lawyer to managing partner, and back to lawyer, be made as smooth as possible so future candidates are not deterred from management?

Developing leadership from within

There is plenty of evidence that lawyers can make excellent managers and there are myriad examples of managing partners who are leading their firms on to great things.

Unlike external chief executives, they already know the business inside out; they have developed strong client relationships; and they know the opportunities arising from this. They are also aware of the firm’s culture and how to play to its strengths and overcome its weaknesses.

There is much to be gained from an internal appointment, but only if the candidate is a strong one and can actually carry out all of the above. This requires not simply managerial but leadership skills, and the common trait in successful firms is strong leadership from the top.

The expression ‘a born leader’ is much used, yet it is not a truism. Some are more natural leaders than others, but it is a skill that can be learnt. Firms should look at the less obvious candidates that might be imbued with a wealth of the more subtle qualities a leader needs: vision, empathy, listening skills, the respect of their peers. It might be that they have not yet had the opportunities to demonstrate these skills or such talents have not been encouraged within the organisation.

Firms need to continually encourage their partners to take on leadership roles and give them opportunities to lead new initiatives. This should be an ongoing process, not something that is addressed the minute a succession issue looms.

However, there is a balance to be struck between training potential candidates, and identifying the chosen one outright. Nick Jarrett-Kerr, a principal with consultants Edge International, points out that the typical corporate model of succession planning, where there is a designated successor for each management position, is unrealistic in a law-firm partnership.

“Partners will rebel if they feel that the process is being stage-managed and removes their right to vote,” says Jarrett-Kerr. “So strong is this defence of partnership discretion, that many firms have found the label of ‘designated successor’ to be the kiss of death for anyone aspiring to firm management.”

This further highlights the importance of a firm-wide, long-term strategy to encourage and nurture leadership skills in all lawyers, which then provides a talent pool from which to choose. It is an area that DLA Piper Rudnick Gray Cary takes very seriously. “All partners need leadership skills whether or not they will go on to lead the firm,” says Nigel Knowles, the firm’s joint CEO. “At DLA Piper we send 50 partners a year to Harvard for a week-long course to develop [leadership and management] skills and awaken interest.”

The same attitude is reflected at Eversheds. Cornelius Medvei, managing partner, London Region, at Eversheds, explains: “We look for leadership and people skills at an early stage and we train them from the beginning, but increasingly as people move up the career track. Thus leadership and management skills are required to lead small teams and, on a more one-off basis, sometimes quite large projects, deals or cases.”

Eversheds selects people for promotion to associate by measuring their strengths against core competencies, which clearly identify people and leadership skills. For promotion to partnership they are required to go through development centres that help identify their strengths and the areas where they need to develop new or greater skills. Eversheds provides a good deal of management training and, in particular, leadership training. This includes, for example, a programme run for them by two Harvard Business School professors.

Firms should be continually looking ahead and reviewing succession policies accordingly. They need to look at what would happen if a senior member leaves or retires and the gaps it might open. Firms should consider how this person’s skills can be passed on and client relationships maintained.

“Law firms are now substantial businesses in their own right, and you can’t play around with succession issues,” says Knowles. “Partners need to recognise that a lot of consultation and planning is needed. You could end up with a situation where a managing partner may not want to stand for re-election and then the firm has to rush the decision, ending up with someone completely unsuited to the role.

“People can’t just be thrust into the main job. It’s crazy. If a leader is retiring he or she needs to be identifying in their mind some likely successors and passing on their skills and knowledge at least a year or two in advance of their retirement.”

The new job description

Given law firms are becoming more commercially minded, succession issues should be considered in the context of business strategy. Law firms should not feel they have to pass the baton to the most obvious candidate, but should look at where the company is heading, and who the best candidate is to deliver that vision.

As Knowles says: “The managing partner has got to be responsible for setting the strategic direction. They then have to be responsible for achieving alignment so the firm can deliver that strategy. Law firms have to be run as serious businesses and the managing partner will have to make sure all decisions are based on strategy and not for personal reasons based around individuals.”

Asb law’s new managing partner Andrew Clinton agrees it is now predominantly a strategic role: “It is important not to get sucked in to the minutiae of administration. The managing partner needs to be looking at high-level strategy – where the business should be heading, and what competition they now face from both legal and non-legal sources.”

There is also the challenge of finding a candidate who has the more enterprising and bold traits of a chief executive in a group of typically risk-adverse lawyers. Additionally, the candidate has to be skilled in furthering client relationships, know when to consult and when to use their authority, and be able to motivate.

Conversely, such a strong candidate might not be universally approved by the partnership – some see a threat to their autonomy and are hesitant to elect a new managing partner that might actually wield some power.

Making the role attractive

Once a perfect candidate has been identified, how do you actually make the role attractive enough for them to want to take up the challenge? After all, it can be lonely at the top, particularly for the managing partner.

“There is a belief that the role of managing partner brings the holder power – but this isn’t so. It brings an enormous amount of responsibility to get things right. There are an awful lot of people whose livelihoods depend on what that person does,” says Knowles.

They will have to sacrifice a good proportion, or all, of their client-facing work. They are expected to pretty much stop doing what they spent years training to do, and take on a role with either little or no training.

That said, the position offers plenty of rewards to motivate partners into management, but it shouldn’t be underestimated how much a firm should do to support the incoming, and outgoing, managing partners.

The scope of the role needs to be defined, and they must be given the power to act where necessary. It is not an autocracy – and there must be a feeling that decisions can be challenged – but ultimately their judgement must be supported and trusted.

Remuneration is also key. Some partners hold the view that management is a good deal easier than fee-earning work. In the corporate world, the chief executives have the most responsibility and their salary reflects that.

Training and support is paramount. Although asb law’s Clinton has received a good deal of general management training, he is currently looking at what kind of specialised training he will need in the role. “You can’t just go on a management training course and hope you’ll learn all you need to know. We’re looking at something more tailored and dynamic that is directly related to the business.”

Smooth transitions and future prospects

How a firm handles outgoing managing partners after their period in office will have a bearing on whether the role remains attractive for prospective candidates. It should therefore, be managed with care.

Former managing partners may wish to go back to fee earning, in which case, support will need to be given while they rebuild their client base, and any re-training or updating of skills provided. It is also essential that their remuneration arrangements are protected while they do this. Many firms are allowing at least a two-year period for this protected re-integration.

And while such a transition back into client practice will be hard to manage it is by no means impossible. “For those managing partners who have been 60 per cent management and 40 per cent fee earning, it is not usually too difficult. For any who have been full-time, it is increasingly difficult,” says Jarrett-Kerr.

“The former managing partner may feel they have ‘moved on’ from client work, or perhaps all or most of their former clients have formed attachments to other partners – indeed they will usually have to re-enter their fee-earning department lower down the partner pecking order than when they left it to become managing partner. There is also the potential problem that they have become quite out of date with the law – this however can be easily overcome.”

The exit package should recognise that the former managing partner may no longer wish to return to full-time fee earning. “Some become senior partner either in name or with some senior-partner like portfolio of responsibilities, says Jarrett-Kerr. “Those with a corporate-lawyer background may manage to take up non-executive directorships in industry, some choose to retire. But there are also those who are really badly treated by their firms and become bitter and twisted.”

Knowles believes there can be a potential issue to consider if a former managing partner becomes a senior partner. “They could be seen as a nuisance by the new managing partner,” he says.

For some, there is the option of management consultancy, as Jarrett-Kerr himself has done: “I found after eight years of full-time management [as chief executive partner of Bevan Ashford] that I just didn’t want to return to fee earning even though my firm offered me a generous package which would have enabled me to reskill and build a client base.”

Knowles, too, does not feel he could return to client practice: “After doing this job for over ten years I couldn’t go back to fee earning. It wouldn’t be good for me or the firm. I don’t intend to retire from this role for a long time but if I did need to work elsewhere I’ve been joint chief executive of a highly successful professional-services firm so these skills are definitely transferable outside the legal industry.”

Those in the role long-term need to make sure they are continually pushing the firm forwards: “Never allow things to become stale. At DLA we’re reinventing every two to three years so there is no danger of getting stuck in a groove,” says Knowles.

The non-lawyer manager

It is sometimes argued that an insider learning how to be a manager is far easier than an outsider having to learn the dynamics of a firm, the culture, the politics, the market and the clients. There are also issues over power, with partners reluctant to hand over such authority to an ‘outsider’.

Yet, an external appointment has many advantages. First, the cost of losing a fee earner to management can be tough, particularly for the smaller firm. Some estimates put the cost of replacing a fee earner as high as £150,000.

Firms should also consider indirect costs. “The intangible costs at partner level should not be underestimated. Core skills, knowledge and experience can be difficult to replace, and a team losing a key partner can threaten stability and morale,” says Jarrett-Kerr. “The newly appointed managing partner will have to be trained and will expect to still be rewarded as a senior equity partner – often a much higher figure than might be paid in the open market to an external manager with professional non-legal qualifications. The ultimate cost of re-integrating the managing partner at the end of his term of office must also be factored in.”

However, there are potential issues to consider with the appointment of an external chief executive. While they can bring advanced management skills, they will have to gel with the culture of the firm and earn the respect of the partnership.

Asb law is seeing both sides of the coin. Until recently, Christopher Honeyman Brown was the firm’s non-lawyer chief executive. But as the firm has evolved, so has its management structure, and in the past few months the chief-executive role has been replaced by a new managing-partner post, filled by Andrew Clinton.

Clinton explains: “Christopher was brought in after our merger in 1999 as he had the skill-set to knit firms together post-merger, and it was a very successful appointment. However, we decided we’re now at a stage where we have the managerial know-how [in-house].”

Clinton believes that the lawyer manager is important as he/she has practised law day-to-day and is in tune with client relationships and the demands that they entail.

Doing nothing is not an option

As growing competition puts the pressure on law firms to behave more like corporate businesses, succession policies will be higher on the agenda than ever before.

Some firms will choose to go down the route of appointing outside the legal industry; others will choose to develop in-house skills and leadership qualities. Above all, firms must be continually assessing their strategic goals and looking at the resources they need to achieve that. “Firms can’t afford to stand still and they should always be looking out for talent and how they can nurture that, whether internal or external,” adds Clinton.

Firms will need to look at what kind of people will best suit their needs – which may change over time – and not only make sure that these people are suitably equipped to take on the challenge but are motivated enough to do so.

As far as future managing partners are concerned, they will have to fulfill more requirements than ever before. The position is no longer about managing a firm, but delivering strategic objectives in an increasingly tough market. To do this, someone abreast with the latest in management theory is needed, combined with in-depth knowledge of the legal industry to spot the threats and opportunities, and take the firm forwards accordingly.