October 23, 2012

Five Questions to Ask About Your Firm’s Succession Readiness

One of the most basic and important laws in The 21 Irrefutable Laws of Leadership, by leadership guru John Maxwell, is the Law of Legacy: “A leader’s lasting value is measured by succession.” The problem, however, is that day-to-day management of a law firm tends to limit the time available for succession planning. So, even if the firm has a strategic plan that focuses on the midterm of five to seven years, planning for succession issues that will occur “farther down the road” at some undetermined date takes a back seat to more immediate objectives.

After 10 years of leading my firm as managing partner, I recently found myself asking if my firm was ready for the future. This forced me to ask some things about our succession readiness and the means by which we might, in an orderly way, transition practices and leadership from generation to generation. So, as an organization, while we’re only now grasping all the issues involved, we have embarked on a long-term process to deal with succession readiness.

Through the process of planning to plan for succession, it became clear that there are five basic questions law firm leaders need to ask themselves about their firm’s readiness. Answering these questions will, hopefully, help ensure a successful firm well after the present members are “of counsel” or retired.

1. How Do We Define “Succession,” or Exactly What Are We Planning For?
In a perfect world, succession planning would inherently be viewed as a true subset of a law firm’s overall strategic plan. This means the firm’s owners would always be concerned not only with its markets, competition and substantive talent, but also with planning for its long-term sustainability. But given the type of organization that a law firm is, and the usual means by which the members are compensated, an emphasis on shorter-term success and profits tends to take the focus off of succession issues. In effect, succession becomes an afterthought, just something that needs to be minimally dealt with to get by in a crisis.

As a result, many firms aren’t really certain exactly how to define their present “succession” issues when they eventually do decide to focus on a plan for the future. Consequently, the chance of achieving a narrowly tailored succession plan for their unique organization will likely be compromised. Properly defined, however, the resulting succession plan can become a key component of the firm’s overall strategic plan, and be subject to accountability processes and regular follow-ups.

The definition of succession may not be the same for each and every law firm, but all firms should consider the following three main categories as target areas in their planning efforts:

  • Firm growth. First, a law firm needs to know whether it should pursue a hiring plan or, instead, look for either acquisitions of smaller firms or itself become a candidate for merger with a larger firm, or perhaps a combination of these or other choices. Basically, this is all about the owners understanding the direction the firm wants to take and coming to collective agreement on the process by which it should respond to growth opportunities that arise. Inadequate planning in this area might result in the firm failing to respond to a promising opportunity, or jumping into a venture without sufficiently considering the risks involved.

  • Practice transition plans. Second, the firm needs to determine how client responsibilities and billable work will be transferred from the older generation to younger partners and associates. It might seem that this area should only be a real consideration for firms with many “older” partners, but the fact is that it’s an integral part of every successful succession plan—and this planning needs to start early. Law firm owners need to realize that each member, ultimately, is headed toward retirement (though each, obviously, on a different schedule) and that if those who leave (which eventually is all of us) fail to transition their practices, as well as their nonbillable duties and influence, it will have serious consequences for the firm. Moreover, a failure to plan in this area is simply not fair to those who’ve given their blood, sweat and tears to the firm over many years and who want—and deserve—to be able to enjoy the next phase of their lives when the time comes.

  • Management succession. Third, every firm should have a plan for transferring management responsibility from existing managers to future ones—not only at the top level, but at every level within the organization, such as practice groups. Of all the areas of succession planning, this one seems to be neglected the most. The reason? In many firms, whenever a new manager is chosen, other owners become comfortable in their control and complacency sets in—and it remains as long as management  doesn’t really lead, or upset the apple cart by suggesting change, accountability or challenges to a particular owner’s autonomy. True leadership is tough, and it’s a step outside of the norm because it causes problems with owners who want to control others, but not themselves be controlled in any way. Management succession planning is naturally all about raising up leaders within the organization, about having a vision for future management at the same time that existing management is beginning its term of office.

2. Do We Have a Succession Crisis at Hand, and If Not, Do We Need to Bother with Planning Right Now?
Many firms will likely formulate their answer to this question based largely on timing considerations. The usual view is that if the firm doesn’t currently have a void in leadership, or pending retirements around the corner, it must not have a crisis to deal with. As a consequence, many firm owners don’t consider succession planning until a crisis really is upon them—at which point something must be done but the time to prepare is limited and the likelihood of making mistakes can increase exponentially.

So, while it’s true that some situations involve a more clear and present danger than others, I would suggest that any firm that doesn’t have a succession plan in place does have a crisis at hand. Admittedly, a firm that has just transitioned to new leadership, or doesn’t have a significant leader nearing retirement, seems to have a less-immediate need for succession planning—but the fact is that none of us know what tomorrow may bring, and a retirement, death or burnout of a leader might occur at any time.

On the brighter side, an opportunity for growth also might occur at any time and be more successfully pursued with succession planning in place. Therefore, this very important question needs to be raised and discussed among firm owners, and there must be a realization that, in fact, every firm without a succession plan is operating in crisis mode. Absent that discussion, many owners will assume that they are not in a crisis until the crisis becomes critical and their ability to respond properly is limited (or even nonexistent).

3. Should We Hire a Third Party to Facilitate Our Succession Planning?
This decision will often depend on the likelihood of events occurring. If, for example, a firm has newer and younger leadership, it’s less likely a change in leadership is imminent so there may be more opportunity to address succession issues in the course of the firm’s regular, comprehensive strategic planning. In this instance, the decision may be made in connection with whether the firm wants an outside facilitator to help in the entire strategic planning process. However, first-time strategic planning (including the succession components) might necessitate hiring a consultant, at least to help put the planning routine into place.

In the event that a critical succession problem exists (or is fast approaching), then firm leadership should seriously consider hiring a competent and experienced consultant, one with as vast an experience as possible in succession planning. In times of crisis the owners need to hear the truth—even if they do not want to hear it—and they need to learn how they should make succession decisions both now and in the future. The impartial but experienced outside professional knows how to achieve that goal. In contrast, when a firm leaves the process entirely to members within, the most likely result will be that those things needing to be said will instead go unspoken. Thus, in many cases, the decision to go it alone is being penny-wise and pound-foolish about the firm’s future.

4. Who Within the Firm Should We Involve in the Planning Process?
While this is always a difficult question, the definition the firm applies to the term “succession” will influence whether leadership chooses to keep the process confidential and inside the owner group, or if it will involve non-owners, such as associates and staff, to some extent. However, determining whether to involve non-owners also requires weighing the degree of involvement that the firm already gives to non-owners in decision making generally.

A firm with a more open information-sharing and decision-making environment may damage its prospects for success if it doesn’t have the same amount of openness with its succession planning. Firms with less-open cultures, on the other hand, might be able to limit involvement without damaging the process—still, those types of firms generally are limiting their opportunity for success by not canvassing for diverse views. In the main, seeking diversity of input and wider collaboration increases the likelihood of success in important decision-making processes. So incorporating some mechanism that both explains the planning process and gathers views and information from associates, administrative personnel and practice group staff is generally the wisest course.

5. What Should Current Leadership Do to Ensure the Process’s Success?
The succession planning process should always be commenced by existing management and leadership. But on top of that, the whole process needs enthusiastic support, shared involvement and buy-in from all firm leaders. Success is not necessarily ensured with this support, but failure is guaranteed without it.

At the same time, the process should not be controlled or dictated by the managing partner, the management committee or the senior-most owners. Diverse members within the ownership group, and perhaps senior associates approaching ownership status, should share responsibility and have significant involvement in the process. A best practice is to appoint a committee responsible for making consultant hiring recommendations, negotiating a timeline for the process, and gaining owner support within practice groups. The firm should also make sure the committee includes representation from the firm’s various practice groups, those already involved in management, and both younger and older lawyers.

Succession planning is definitely one component of strategic planning where a law firm needs to spend preliminary time “planning its planning.” Be aware that the process can present a significant financial investment for a firm, but it’s an investment that is well justified. When proper definition is given to the purpose of the process, the desired results and the means by which the organization will achieve those results, the smooth transitioning of the firm’s leadership and substantive practices—along with desired growth—has a much better chance of becoming a reality.