Law Firms and Succession Planning
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1 Law Firms and Succession Planning Jeff Gillingham, Senior Partner of SSG Legal August 2008 Organisations, by definition, have structures. These structures are not to curtail initiative but simply to ensure people do their own jobs and use the skills for which they are employed. If we accept that organisations have structures then we accept that there are managers and leaders in the structure. If there are not then the organisation is probably dysfunctional. This is not an argument that managers are more important than others, just that they do a different sort of job. Their main responsibilities include managing and leading people and this means managing culture. This is probably the main reason why succession planning is so important for management positions. Law firms are organisations and they have structures, managers and leaders. Furthermore they have strong cultures that are often physically tangible and are cherished and encouraged. These cultures have normally developed over many years, cultures that are special and founded on partnership principles. An often repeated mantra is that culture eats strategy for breakfast. Appoint a successor who is counter-culture and you are heading towards trouble. In this environment succession planning takes on a whole new meaning. Almost exclusively this means that managing partner and other senior appointments must come from within the partnership in order to maintain continuity of culture. This is not an easy task especially when a charismatic leader is retiring as managing partner; one who has led the firm to success and high profitability. Conversely it is probably easier to replace an incumbent who has not been so successful. 1
2 Succession planning is part of overall strategy and must be agreed and understood by all. Strategy planning, and therefore succession planning, is part of the responsibility of the managing partner, supported by department heads and others. A succession plan must be in place for the key positions in a law firm. In a small firm the managing partner should have an identified replacement. In a larger firm various department heads should be included in the plan and don t forget the practice director. Incidentally succession planning is also a big issue for sole practitioners and small firms. Here business continuity and exit strategies are at the forefront of practitioner s minds. It is often argued that decisions can be delayed until months, or even weeks, before the retirement of incumbents but this does not work consistently enough to protect partners investment. Besides culture protection there are lots of common reasons to have succession plans continuity, focus and stakeholder buy-in are but a few. However, law firms have additional complexities that add further dimensions. They have partnership tensions where owners and executives work and function together in the same operating model. So is succession planning an impossible task? Not if done properly. In this era of change and reforms a move towards a corporate structure will help. Empowering executives and encouraging equity holders to think like shareholders will provide a more precise management structure. Adapting and ratifying job descriptions are important. Planning should start as soon as possible and involve as many people as possible. It should follow a process, use a senior partner to guide the stakeholders and have HR involved. Firms should recognise that the legal industry is changing. They need people who are going to adapt and manage change. They might not be the best lawyers or fee earners but they will be the people who have a vision for the firm so it will flourish in the new world. Managing partners have five key responsibilities, and should expect to be held accountable for all of them. Firstly, and foremost, managing partners must ensure that their firms satisfy the clients, provide good service, give correct advice and at all times act in an ethical fashion. They should have rigorous mechanisms that ensure this is happening. Secondly, managing partners must be responsible for adding to the human capital of the firm. Law firms sell skill and talent, not time. Thirdly, managing partners must have a responsibility to contribute to the economic success of their firms by running profitably and by implementing continuous improvement disciplines to improve the economics of their work. They need to ensure that they have information systems that provides usable management information. Fourthly, all managing partners must be responsible for developing their practices by attracting and winning quality new business that is challenging and profitable. This is not to 2
3 say that they are solely responsible for business development just that they should be the inspirational leader of such activity. In these days of constant change and tightening market pressures it is also the duty of the managing partner to look at non-organic growth opportunities. The next decade will see rationalisation by merger and in certain cases firms will get left behind if they do not join with others. Last, but not least, every managing partner has a responsibility to contribute to the success of others. Law firms are partnerships, they depend on being up to date with law, they need master/apprentice relationships and they need to be collegiate. The managing partner needs to lead this effort and be a guiding light to the partners and staff. In working to define the responsibilities of the managing partner the eventual documentation and agreement of the succession plan becomes much simpler. The following structure is worth following and using as the basis for the final plan and submission to the partners for approval. There are seven elements of a succession plan for a managing partner. 1. Job Definition Even if there is a job definition in place it is worth revisiting and revising. The job description will give everyone a clear idea of the job requirements, the skills that are required and the expectations for the position. HR should coordinate this work, making sure that the whole partnership signs-off on the end result. The following components should be included in the job description: A paragraph offering an overview of the position. A paragraph about accountability and reporting lines. A list of the major duties and responsibilities that will be assigned to the managing partner. The knowledge, experience, and skills required of the managing partner, including degrees, certifications, and number of years in the firm. The motivation, desires, and qualities that are required for the position. The way the managing partner will work within the firm, including level of vision, processes and detail within the position. 2. Expectations The job description is fine as a written brief for the job but what do the partners really expect of their managing partner? Some will want a visionary leader, one who can see opportunities for the firm and inspire others to make the changes necessary to obtain those 3
4 opportunities. Some will want the best and proven rainmaker and expect their managing partner to continue to bring in lots of business. Others may have expectations that the managing partner to be more cautious and conservative in their approach to firm leadership. What happens when the expectations of the group are not the same? Obviously, dissent will occur in the group and the partners will not make the progress they are looking for as they elect their leader. So, the first step is to have the current managing partner or a senior partner canvas the entire partner group and discover the true expectations for the position. These expectations should be added to the job description. 3. Operating policies and procedures The next area of work to be ratified is the operating policies and procedures as they relate to the managing partner position. The areas that should be included are: Term of office and election guidelines Managing partner and client responsibilities, including specific guidelines outlining chargeable hours and percentage of time spent on firm management Management restrictions, including decision-making authority and capital spending authority Executive committee workings and how they pertain to the managing partner position 4. Measurements On the basis that law firms are businesses then the leader of the business must have measurable guidelines that help focus the delivery model on common goals. These guidelines originate in the strategic plan, are manifested in the vision statement and eventually appear in tactical plans for the firm. The following list would be the foundation for most situations with a plethora of other measurement that should be considered valid according to strategy and focus. Income and PEP Talent retention and attraction Client retention and new business 4
5 Utilisation and Recovery Leverage Partner s Capital 5. Pay and Reward This should include the total compensation package, including a general formula that will be used to determine the managing partner s compensation. This package should be fair and motivating to the managing partner. According to the circumstances the structure of the package can range from simple to complex. Obviously the main drivers are financial but these days people talk of balanced score cards that include the many different aspects of running modern practices. These could include client satisfaction and retention, staff satisfaction and retention, outside recognition etc. Obviously there is a need for such measures to be developed together with the managing partner so that there is an understanding of what the partners want from the position. Also included in the package should be the transitional compensation when leaving office, including guidelines for the period of time when the managing partner is working back into a production position for the firm. This also might include complete retirement or moving to another position like senior partner. 6. Training It is likely that the incoming managing partner has been a department head. If this is the case then management skills will be evident. Even so it is worthwhile considering a programme of training. These days it is not unusual for incoming managing partners to undertake formal management training such as part-time MBAs and other structured learning methods. It is absolutely clear that managing partners must be numerate and must understand the business model of a law practice. They should also be aware of the partnership agreement and all of its ramifications. A managing partner who is not focused on partner outcomes is going to lose creditability very fast. If these skills are not evident they must be taught before the incoming managing partner takes office. 7. Hand-over plan The actual moment of the hand-over of responsibility from the existing managing partner to the incoming managing partner should be painless and merely a formality. The real work should have been completed weeks and months beforehand. The content of this piece indicates the main precursors to the handover and they should be documented in a plan. HR should coordinate this work. 5
6 8. Communication plan The essential aspect of change programmes like replacing senior people is to recognise that such change effects people in many different ways. It can change their internal relationships and have long-term effects. Bearing this in mind, the first rule of communications is to ensure that everyone involved knows what is happening. They should be told as soon as possible. The communications should be truthful and straightforward with no potential for misinterpretation. Work should be focused on designing and leading communication programmes that carry the message. Someone, like the Senior Partner, should also act as a sounding board to anticipate and deflect people issues before they become a problem and help the management team understand stakeholder needs and concerns. The plan should be a roadmap for how the communications will occur, who will do what, with whom and in what way! It should be in writing and signed off by the management team. This is very important, as everyone needs to be on the same page of the book. The communications plan must have defined objectives, recognised stakeholders, time schedules, media to be used, nominated spokespersons, feedback process, expected outcomes and, most importantly, a way of measuring effectiveness. A final word or two succession plans are part of strategy plans. They must be in place and they must be agreed with all stakeholders. We hope you have found this white paper useful. For further information regarding law firm Mergers please go to our website at or call Jeff Gillingham, in complete confidence, on This content can be accessed, printed and downloaded in an unaltered form (altered including being stretched, compressed, coloured or altered in any way so as to distort content from its original proportions or format) with copyright acknowledged, for personal study that is not for a direct or indirect commercial use and any non-commercial use. Any content printed or downloaded may not be sold, licensed, transferred, copied or reproduced in whole or in part in any manner or in or on any media to any person without the prior written consent of the SSG Legal Ltd 2008 Jeff Gillingham 6
The Art of the Law Firm Merger
JEFF GILLINGHAM PUBLISHED BY IN ASSOCIATION WITH SSG Legal is published by Ark Group UK/EUROPE OFFICE Ark Group Ltd 266/276 Upper Richmond Road London SW15 6TQ United Kingdom Tel +44 (0)20 8785 2700 Fax
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