Leading lights

The Solicitors’ Code of Conduct 2007 came into force on 1 July, defining new minimum requirements for those with supervisory responsibilities in law firms. Directors, meanwhile, are required to demonstrate the effectiveness of their management systems. With the Legal Services Bill also heralding new legal business structures, having the right leaders in place is more important than ever.

By Richard Brent

Two recent surveys of today’s UK legal market have made for interesting reading. Legal Week found that some lawyers in the largest City firms are now charging clients as much as ₤1,000 an hour for their services. It reports that the average is between ₤500 and ₤700, but more than a third of those polled (36 per cent) said they had experienced legal fees of over ₤700. At the same time, a survey of more than 2,500 lawyers run by YouGov and commissioned by The Lawyer indicates some 24 per cent of lawyers actually want to leave the law altogether. Perhaps less surprisingly, for 70 per cent of those craving such a career change it is the prospect of a sizeable pay cut that is stopping them.

But it is not just the country’s junior lawyers that are apparently dissatisfied. Remarkably, around a fifth of those at the top of the firm – the managing partners themselves – also reported a secret wish to leave the profession. If the statistics truly reflect reality, it will send a worrying signal to those driving strategic decision making and planning for their firms’ futures. Law firm leaders are only too aware of the scale of the profession’s ‘war for talent’ – the importance of keeping their best employees from the clutches of the competition. It seems they may also need to pay attention to the prospect of that talent deserting the profession altogether – particularly the impact it may have on succession planning.

The importance of earning loyalty from employees has been one of the main lessons learnt by Kendall Freeman managing partner Laurence Harris. Re-elected to the role for a third term in 2006, he oversaw significant change in 2003, when DJ Freeman became Kendall Freeman – something he says “was a testing time for everyone”, especially the firm’s leadership. “I learnt a number of key lessons at that time. There is a huge depth of loyalty to the firm and its leadership, but that loyalty can – and never should – be taken for granted,” he continues.

Dealing with doubts

Harris says he had always been interested in how the business was run, but not all lawyers are immediately attracted to the managing partner role. Perhaps, with hourly rates hitting ₤1,000 for the most lucrative work, they would rather be focusing on clients, and the loss of at least some of this aspect is certainly a major difference inherent in the move over to management. James Holder has only been managing partner of Charles Russell for around two months at the time of writing. He says: “You have to deal with things as they come up and coming from many different directions. It’s a very different role from being responsible for client work, where you can usually plan your day according to client demands.”

Holder also thinks it is the client element that may deter some people from putting themselves forward for the position, although it is the return to fee earning he highlights as a potential problem. At 53, he explains he is not as concerned about this himself, but admits “the one thing that does make it unattractive for lawyers is the thought that after a period not doing client work, they’ve then got to get straight back into it”. Nevertheless, this is precisely what Holder’s predecessor, Grant Howell, will be doing. Currently on sabbatical following the handover, Howell is then set to return to fee-earning work.

For Victor Tettmar, managing partner of Bond Pearce, however, the idea that up to a fifth of his peers are unsatisfied in the role could not be further from his experience. “I have built up a network of managing partners I exchange views with, and I haven’t met one who isn’t motivated and challenged by what they’re doing. My experience is quite the contrary.”

Robin Linnecar, a partner at executive coaches Praesta Partners, also finds the managing partners he has worked with enjoy the job – and indeed finds they often grow more engaged over time. He acknowledges a question mark hangs over what may happen at the end of the term, but says it is still an attractive role for those who understand what managing involves. “Some enjoy the commerciality of the enterprise, and the more they get into it, the more demanding, but also enjoyable, they find it. That’s very common, and they often want to stay for a second term,” he explains. Linnecar, who has worked with magic-circle firm Allen & Overy among others, also says the second term is often the point that managing partners “can really begin to do something” in the role. “It makes sense to have someone who is towards the last eight to ten years of their career with the firm,” he admits, but “consideration of what happens after tends to be less when it’s a ‘one-tour wonder’”. Even so, he adds that either individual would probably question whether they could go back to being a head of department, probably opting to move on or possibly take up the senior partner role. At Charles Russell, a former partner has also become Legal Director; a non-fee-earning position responsible for matters of risk and compliance, such as engagement letters.

Sensitive subject

Whichever way they depart, however, the whole mechanism of succession is a subject any potential managing partner and their firm will face as a priority, particularly as all talent now moves between firms much more than in the past and wider employment trends are changing. In 2007 we have already seen Linklaters choose its youngest managing partner to date (Simon Davies set to replace Tony Angel from 2008), while in February, former Olswang chief executive Jonathan Goldstein announced he would be leaving to become joint managing director of the firm’s property client Heron International. Linnecar concludes: “Partners five to ten years ago would not have moved between firms, but they do now. Larger firms are also conscious they are mega-businesses that need to be managed. They need management and a succession of people coming through.”

Harris agrees with this. “It is never too early to begin thinking about who will be successors. Identifying the next group of talented managers and helping develop them is an important part of the role of a managing partner,” he explains. “But the key issue is that the current managing partner has to realise his or her effectiveness is reducing and it’s time to let someone else do the role. It isn’t always easy to recognise that point.”

Succession itself is always going to be a sensitive time, however, with a number of perspectives and personalities to consider. Harris continues: “It is important to have a process that produces a successor who will be accepted by the whole partnership. Then there needs to be enough handover time for the new leader to get their feet under the table, but not so much that friction develops because the new person isn’t actually being allowed to do anything.” Holder knew he had been chosen as the successor at Charles Russell for about 14 months before the formal handover, but explains that as managing partner-in-waiting, he continued to have client responsibilities. “I had to get the balance right, and also take account of the fact that my predecessor was still managing partner. It was very important not to be seen to be treading on his toes,” he says.

Harris admits it is a situation that makes the notion of support difficult. “I had a supportive predecessor, but you are always conscious of wanting to plough your own furrow to a certain extent, and there are usually quite a few people encouraging you to distance yourself from the old regime. But then others can become quite upset at any ‘distancing’”. Like Tettmar, however, Harris is also acquainted with a number of managing partners at other firms, which he describes as invaluable. “Often it is difficult to turn to people within the firm. Building a good support network outside the firm can really pay dividends.”

Olswang senior partner Mark Devereux also believes support is a fundamental issue, and often something that is not fully appreciated by firms. “I’ve seen many firms where people are almost promoted for long service, but they’ve had very little training or support to help them do it,” he says. He explains that Olswang seeks to offer as many partners as possible opportunities beyond fee earning, including in financial reporting, know-how and training. “Partners have the opportunity to engage in one managerial role or another, so they don’t find themselves suddenly elected to the top job without knowing what on earth they’re supposed to be doing,” he says

Support is also reflected in Olswang’s notable decision to have a “triumvirate” leading the firm. Although Goldstein was chief executive, Devereux explains that all decisions were made by three people with slightly different skill sets: Goldstein, Devereux himself and chief operating officer Kevin Munslow, who has an accountancy background. With Goldstein’s departure, the firm sought to replicate the model, appointing international strategy partner David Stewart as managing partner and Munslow becoming chief executive. “The triumvirate works well for us, and there’s an element of bandwidth. We don’t fall over each other or duplicate but are mutually supportive,” Devereux says.

Learning to lead

However, Linnecar says that in some firms support also has to be won. If two partners have vied for a position and one is elected, they can effectively be told to get on with it. In the larger international firms, which have an international executive and regional managing partners to co-ordinate, they also need to develop a team. “That is the responsibility not just of a managing partner, but also of a ‘leading’ partner,” he says.

The distinction between managing and leading here is an interesting one. The managing partner is not just responsible for organising, planning and budgeting, but also communicating a vision and encouraging others to adopt it – building buy-in in a world where the partnership culture, a collection of independent minds, is still alive and well. For Tettmar, after around a year-and-a-half in the job, he says one the main lessons learned is an appreciation of “the crucial importance of people”. He explains this has been something of a shift in focus for Bond Peace over the past five years – a period that also saw the firm begin sending some people to a course on leading professional-services firms, at Harvard Business School. Tettmar went on this course himself, and refers to it as a “turning point” in his desire to be the firm’s managing partner. A week-long course of case studies, the programme sets
out to teach “why professional services are different”.

For Bond Pearce, teaching strong leadership is also an essential element of succession itself – preparing lawyers for a role in which they will need business as well as legal skills. Tettmar explains: “There is an element of leadership and soft-skills training that takes place right from people joining us, if on a less intensive basis. We tell people you need to be more than a lawyer. You need to manage relationships and project-manage work, rather than just doing it.” In addition to legal training, more junior lawyers and associates are therefore taught about areas such as business planning, client development and innovation. An ‘Essentials’ course has been created for lawyers to complete in their first two years at the firm, while three ‘people developers’ are continually working with partners and associates – in individuals and as groups – as needs dictate.

At the same time, the firm has embarked on a programme to identify leaders of the future from the pool of talent available. Key to the firm’s thinking about succession, a process was designed with an occupational-psychology company to assess the partners that had further leadership potential. It has now rolled out to associates as well, aiming to pick out those who will be most effective as partners and leading teams. “There was a concern about succession going forwards, and I’m glad we embarked on this four years ago. We are building up a clear picture of those who may be leaders of the future.” Tettmar concludes.

As with the partners, Olswang also aims to prepare and polish potential partners as much as possible. When promotion itself then occurs, it is hoped associates will basically be acting as partners already. The firm’s future-partner training programme began in September 2006, and involves handpicking those senior associates it believes could feasibly achieve partnership within 18 months. Munslow spends around a year with these people, scheduling regular meetings to instil the fundamental economics of the firm’s operations, Devereux explains

At Charles Russell, while there is one-to-one mentoring for associates rising through the ranks, the main focus is still on their development as lawyers. “All lawyers are encouraged to develop their practices, but other training tends to look at the client relationships and fee-earning rather than branching out into management roles for them. I think that would be typical of the wider profession,” he says.

At Kendall Freeman, however, Harris says leadership training also starts at quite a junior level. “Even then we are working with lawyers on delegation, motivation and how the firm is run financially. It helps them in their day-to-day work, but is also designed to encourage the development of broader leadership and management skills.” Partners, meanwhile, are exposed to certain leadership and management roles as well as one-to-one coaching. “They get a taste for the work and we see how much of an aptitude particular partners have, so we can then work on developing skills,” he continues.

Embracing all talents

Encouraging lawyers to take more of an interest in the running of the business also makes sense given changes in store for the profession in the coming years. The Legal Services Bill, now expected to become law by 2010, is set to pave the way for a host of new entrants into the market with increasingly corporate structures. Those outside the profession will be able to own or invest in law firms, and a number of firms have already expressed some interest in the opportunities of this form of financing. It goes without saying, however, that the investors will be seeking serious assurances of their expected return. Demonstration of excellent business management and non-legal expertise will be crucial to convincing them.

Of course, many of the larger law firms already have directors and managers drawn from outside the legal profession. Charles Russell has directors of marketing and finance, with the finance director also attending board meetings, and Harris enthuses that he is “passionate about non-lawyers as key managers in law firms”.

“We have a superb team who run a large part of what the firm does, which takes a great deal of the burden of management away from me. We’ve also experimented with remuneration schemes that give directors a direct link to the profitability of the firm,” he continues.

When it comes to overall leadership, however, there seems to be a fairly common view that it will always be easier – and possibly preferable – to have a lawyer at the top. This is not least because of the somewhat obvious fact they know what it is like to be one. Moreover, Linnecar says a non-lawyer CEO of a law firm “does take a different role, almost inevitably”.

He continues: “CEOs I have worked with come at it from the commerciality of the enterprise – almost adopting the COO role. However, the better of those have also got involved in areas such as client management – establishing how proposals are made – and have actually made a big difference.”

Barlow Lyde and Gilbert (BLG) is one firm that is introducing a chief executive to lead the firm. Clint Evans, who has previously worked for magic-circle firm Clifford Chance, is due to take over from BLG’s current managing partner Kennan Michel in April 2008, when the managing partner role will then be phased out. Senior partner Richard Dedman said he thought law firms would “increasingly look to make this sort of appointment in the modern legal marketplace”.

Olswang, of course, has a new non-lawyer chief executive working alongside two lawyers in the top management team. It also recently held the inaugural meeting of a new strategy board that will operate alongside the firm’s management board to focus on longer-term business aims. A fairly flexible structure, this is designed to allow more partners to be involved in decision making and includes the option of co-opting other people and creating sub-boards. “It gives us the flexibility to get the best minds working on the best issues,” Devereux says.

“The whole culture of the firm is about empowering people to feel proprietary,” he continues, making it quite clear he has no time for any separation between lawyers and others in the organisation. “A fundamental core value of ours is that people are treated with the same level of respect whatever they do”.

Tettmar, on the other hand, sees “a natural advantage in a lawyer leading a group of lawyers”, describing leadership success as a question of understanding what finally motivates professionals. The idea of ‘the partnership ethos’ is still important, he says. “With non-lawyer leaders there is a danger of their seeing it as just another organisation to lead. A non-lawyer leader can succeed in a law firm, but they would have to have an understanding of how professionals operate”.

Harris agrees, and says he is “sceptical” about non-lawyers in the managing partner role. “I think partners generally respond best to one of their own when asked to do things they don’t want to do. If your managing partner carries respect as a past fee-earner and developer of business, then he or she has more chance of getting other partners to listen,” he argues. Holder feels the most effective leader of a group of lawyers is likely to be “a lawyer with a financial brain rather than an accountant with a legal brain”. He admits, however, that specification can be difficult to meet.Ultimately, however, law firms need to ensure they have the right expertise in a whole range of areas – from financial and risk management to human resources, marketing and public relations. As successor Gordon Brown said of his new Cabinet, a team “of all the talents” will be needed to cope with the challenges in store. Firms will also likely require different leadership skills and approaches at different points in their evolution – depending on the type and pace of growth and pursuit of particular markets. But motivated employees can continue to widen the talent pool throughout these phases, stimulating organic growth and hopefully averting a succession crisis.