Janet Stanton co-authored this article.
Corporate endurance should not be an end in itself. That said, in a very real sense, survival is the ultimate performance measure.
–Ian Davis, Managing Director, McKinsey, writing in Reflections on Corporate Longevity.
Perhaps thanks to our work with a number of firms face-to-face with the awkward challenge of succession planning unattended-to, or perhaps thanks to the increasingly noisy rumblings of real serious change in Law Land, we’ve been thinking a lot lately about one generation firms.
Corporations pay lots of attention to succession planning, both for senior management of the firm and with respect to transitioning key client relationships to the next generation of team members. Law firms, by contrast (certainly if you judge by how they behave as opposed to what they might say), tend to shy away from both forms of succession planning, perhaps because they could involve awkward conversations, or because those being targeted for being “succeeded” out are often the same people who are in sufficiently senior positions to initiate the conversations, or perhaps because too many lawyers don’t honestly-truly care about the future of the firm after they step out the door for the last time.
Corporations invest senior management time and often generous resources on cultivating and grooming the next generation of leadership, rotating promising mid-rank executives through a variety of geographic and/or product line responsibilities, and two professional service industries adjacent to law, management consulting.and accountancies, impose fixed-duration tenures on key client relationship partners, making it clear that the senior leaders of today will step back in favor of the rising stars of tomorrow at regular intervals. When that’s an open and transparent premise of the client relation, nobody’s surprised and clients often appreciate fresh blood.
Need we mention that it also goes a long way towards institutionalizing clients?
Law firms are very different.
How deadly it might be to ignore succession challenges depends, first and foremost, on how large your firm is. As with a diversified investment portfolio, larger firms are better able to withstand the loss of a few players, even a few critical players; they have other investments on the table, as it were. For small firms and boutiques, failing to plan for succession is, as they say, planning to fail–utterly and completely, as in going out of business.
In many small and mid-size firms, the challenge is aggravated by the reality that the senior leaders in management of the firm and the rainmakers with the major client relationships are often one and the same individuals; losing one is a kind of two-fer, in the most unwelcome and damaging way.
Insight into how and why comes from Prof. Laura Empson’s just-published book, Leading Professionals: Power, Politics, and Prima Donnas, which distills her 25 years of research into elite professional organizations, primarily law firms. Consider this opening salvo:
One ‘rainmaker’ in a global law firm responded to my questions during a research interview as follows:
Empson: Does anyone have power over you?
Partner: Not as far as I’m concerned, no.
Empson: Does anyone think they have power over you?
Partner: I don’t think so.
So if you think you’re going to impose a “succession plan” on a figure like this, our condolences. Actually, it can be done, but not frontally and not in short order. (For sage counsel on how to do that, read Dr. Empson’s book. For the implications for law firm longevity, read on right here.)
Based on years of cumulative experience with law firms, they largely prefer to avert their eyes from the distasteful issue of succession. Now, we hasten to add that this is our assertion, albeit one grounded in cumulative decades of experience across the globe. Alas, data on how many law firms last but a single generation–for want of the next generation of management or the next generation of key client connections–is nonexistent. As luck would have it, however, my partner Janet Stanton came across an unsourced assertion that the average period a law firm stays in business is forty years (one generation of leadership, if you assume the founding group spans an age range of say, a decade).
This begs the question of whether organizational longevity is a desideratum in itself, or not? We can all admire Freshfields for its longevity, which has counted the Bank of England as a client since 1742, when the population of the still-nonexistent United States was less than one million people (and believe us, we do admire them!) but we’re not all Freshfields. What about the rest of us?
Contrary to the case with corporations, which all stoutly proclaim their desire (if not their nimbleness and flexibility) to build an enduring organizations, for law firms, longevity itself may not be a priority. Maybe there’s nothing wrong with one-generation firms:
- They can provide a respectable career and a handsome livelihood for many people while they exist
- And, if they can’t or far more likely choose not to evolve into the future, what’s wrong with that?
- Often it really is the case that “the world will little note, nor long remember” the former firm.
- What is irresponsible and personally and professionally offensive is not being clear-eyed about your intentions.
What, after all, is lost when a law firm shuts its doors? Partners and, one hopes, most associates move on to other firms or go in-house. Business professionals and staff with transferable skills have a sympathetic tale to tell the job market, and, assuming the total volume of legal work is not diminished by the disappearance of the old firm, clients will shift their demand elsewhere and lawyers and staff will need to expand to meet it. Call it conservation of demand for legal services, or some such.
What is really lost, then, when the organizational form goes away, but the people and the client base are left standing?
I’m put in mind of a Prof. Kingsleyesque exchange from my law school bankruptcy class. When a student voiced sentimental reservations about the finality of liquidation, the professor interrupted:
“It’s not as though the people are taken out and shot and the buildings and equipment dumped in the Pacific Ocean! The economy puts them to use.”
So it often is with one-generation firms.
Whether it’s because “succession” “planning” around our rainmaker friend quoted above is a herculean management challenge, whether it’s because lawyers strongly prefer avoiding awkward conversations, whether it’s because the press of daily client deadlines makes it challenging to come up for air, or whether it’s because (our suspicion) lawyers at most firms honestly don’t give a fig about the firm’s future starting the day after they last walk out the door, many law firms fail for want of effective–meaning timely, purposeful, systematic, uncompromisingj–succession planning.
Lou Gerstner, famously unsentimental, took over as CEO at IBM in 1992 and served until 2003, during which time he resuscitated and revived the iconic firm, which was among the walking dead when he took the post. In one of his many post-mortem interviews discussing his approach, he observed that the 1992 IBM had “no products, no pipeline, no vision,” and offered this harsh but realistic diagnosis::
“There was nothing that said American Express [where he’d also been a senior executive] or IBM couldn’t go out of business, and IBM very nearly did.”
Two cheers for One Generation Firms?
In August (Aug 1) 2014, Bruce prepared a post on Leadership that strikes me as well worth recalling in context of the one-generation firm. Here is a key passage:
“The longer I study, meet with, advise, and deal with law firms of all sizes and shapes, the more I’m coming to believe in the power of stewardship: The core belief that most of us walked into an institution created by our forebears and which we have an obligation to hand down to the next generation stronger, more powerful, and more vibrant than we found it.”
It is very well worth re-reading in its entirety, and you can find it in the ASE archive under leadership.
To be fair – law firms themselves know this. Often the firms go after a prospective lateral partners so the book of client business would follow. If firms know (or believe) that clients transfer as easily as the lawyer’s briefcase, the firms also have known (or have not tried or failed) to make their own client base stick beyond that key set of lawyers.
Effective succession planning would make clients not only stay around for two generations, but also stop them walking out the door with the next lateral departure.
Thanks as always for your reflections.
I have written several times about my view of the insanity of the lateral partner “arms’ race,” which is bad enough insofar as it contradicts anything management might say about building an enduring firm (people watch what you do, not what you say) but, to your point, helps train clients that they might as well move with their marquee partner to another firm because, after all, law firms seem to expect that will happen.
This is not the only, but I believe it’s a major part, of the reason why there’s a high degree of correlation between firms that lose lateral partners very rarely and firms that have an “institutionalized” client base.
Another key point is that succession is an even greater issue at smaller firms where the founders are (generally) the key rain makers as well as management. When the founders approach retirement, the firm has to grapple with both transition of clients and management responsibilities simultaneously.