Today’s WSJ has a front page story "Perform-or-Die Culture Leaves Thin Talent Pool for Top Wall Street Jobs," which discusses the dearth of talent—or at least, talent deemed publicly acceptable—"for the biggest jobs in finance."
"It’s a weird state of affairs that these phenomenal global companies can’t self-reproduce executives,’ says Glenn Schorr, a financial services analyst at UBS AG. ‘It is a function of the culture and the leadership or lack of leadership’ at each firm, he says."
The peg for the story is of course the departures of Stan O’Neal as head of Merrill Lynch and, over the weekend, Chuck Prince from Citigroup, leaving in their wake ad hoc "interim" arrangements while hasty searches for replacement CEOs are launched under the klieg lights.
One plausible reaction to this story is of course to question the premise that the talent shortage is actually so dire. I’m sure the situation is precisely as the omni-competent Journal describes it if you go along with the presumed, extensive, laundry list of requirements that credible candidates must be able to check off:
- Coming from a leadership position at a similarly-sized global financial institution;
- Without a black mark on their resume from having been in the neighborhood of a profit shortfall and its attendant fallout;
- Able to relate as well internally in corporate communications as externally with the analyst and shareholder community;
- Highly versed in the nitty-gritty of finance;
- And, if an internal candidate, someone who ideally is widely known outside the firm.
Few individuals are likely to possess all those characteristics, so if they constitute the height of the bar, the story is surely correct.
Now, if this doesn’t put you in mind of succession planning at your firm, I’m not sure what would. But before turning to law firm land, one additional reality of Wall Street, which you may view as charming or perverse or merely reality, as you will, is this:
"Roy Smith, a professor of finance at New York University and former partner at Goldman Sachs Group Inc., said Wall Street chiefs, obsessed by their stock price, are quick to let go anyone whose unit has a bad quarter. That may show their boards that they are aggressively managing their subordinates, but it means talented executives who make mistakes can be quickly shown the door."
We don’t have such a hair-trigger mentality, so presumably we may have some more practice group leaders or other individuals likely to be deemed Managing Partner material hanging around, but the question remains what the criteria for selection ought to be and how formalized succession planning should be.
In terms of criteria for Managing Partner in waiting (a concept I will criticize in a moment), today they are quite familiar and have been described jocularly by one AmLaw 25 firm leader as "the last man standing" decision making process. The ideal candidate:
- Will be not too old and not too young;
- Will be an equity as opposed to an income partner;
- Will be, if not "home grown" at the firm, an incumbent of long standing;
- Will have led, or had a senior role in, one of a handful of practice areas deemed critical to the firm;
- Will be viewed by his/her colleagues as a consummate practitioner; and
- Will not have obviously alienated any significant proportion of the partnership and will not have strong opinions about the future of the firm at odds with conventional wisdom.
Can you see how we, like our Wall Street brethren, begin to arrive at very very short lists of plausible candidates?
This, I’m here to tell you, makes no sense.
We are donning blinders, of our own volition, and irrationally limiting the candidate pool to those almost certain to produce negligible impact as leaders. If you think the Wall Street criteria are unduly self-limiting (as I do), how are ours any more rational?
The criteria that really matter, I suggest, are these:
- An intimate familiarity with the peculiarities of our profession and our industry;
- A larger—dare I say non-lawyerly?—perspective on business, strategy, finance, and marketplace realities; and
- "Stature," to be sure, in the eyes of the partnership, without which the collaboration, dialogue, and buy-in essential to any material initiative will be stillborn.
What is missing from this list?
- The "home grown" component. And why, again, is that so necessary given the custom and practice of corporate America of recruiting heavily outside its own four walls?—without seeming, overall, to be the worse for it. Understand that I’m not proposing or recommending that a suitable candidate would come from a firm utterly unlike yours in scale or practice scope, but if the Boeing –> Ford transition is plausible (Alan Mulally), or Hasbro –> eBay (Meg Whitman), why wouldn’t a senior post at, say, one AmLaw 50 qualify one for a senior post at another?
- The non-negotiable sine qua non that the candidate be an active practitioner. Again, it doubtless helps build the "intimate familiarity" I list as the first criterion above to have practiced, but why do we assume one still is? Might it not be more likely that someone who has already doffed the practitioner’s hat for a role in executive management has demonstrated a predilection for management?
I submit that the harder one looks at the unspoken assumptions underlying the conventional laundry list of requirements (the "last man standing" model, that is), the more irrational they appear.
I promised a word on succession planning, or having anointed a presumptive "Managing Partner In Waiting," and despite having lived most of my life believing to the contrary, this is my view today: Don’t do it. Don’t be too eager to narrow the funnel of potential heirs apparent; and don’t embark on a search, formal or sub silentio, until you absolutely need to.
Why not?
- Don’t make a lame duck out of your current leader.
- Don’t narrow the back of the envelope candidate pool until you are staring directly into the face of the competitive landscape, the firm’s inherent capabilities, and the marketplace trajectory that the successor will actually be facing—which you cannot know until that day arrives.
- Don’t foreclose the ability of people to grow and, yes, the ability of other people to shrink. Someone deemed callow or shallow when your way-in-advance planning engine kicks into gear may be the soul of statesmanship by the time the fateful day arrives. The reverse, we know too well, can also happen.
- Don’t let anyone get too cozy; don’t let anyone assume they have it locked up.
- As important, or more so: Don’t discourage anyone from aspiring to greatness. History is replete with figures, from Washington to Lincoln to Truman, who had massive responsibility thrust upon them when the smart money was still focused on their rather small-bore backgrounds and inadequate preparation. (And, infamously, it was the "best and brightest" who led us into and into and into Vietnam.)
Successor selection is, when you come down to it, more art than science. And it’s faux science to draw up a checklist of must-have’s and see who produces the most colored circles under the "yes" column.
As for what matters most, I defer to Dennis Weatherstone, former chairman of J.P. Morgan, who is given the last word in the Journal article: Granted, he says, "the number of candidates for these positions is somewhat limited" and experience is "always valuable." But he sees the key in something else: It’s more important, he avers, to find a CEO who can "anticipate change." And maybe the one best able to anticipate change is one who has less of a vested interest in the status quo. Just a thought.
Update 7 November:
In response to a few reactions by readers, permit me to clarify the difference between "succession planning" and "leadership development."
While I may believe you can have too much of the former, you can never have too much of the latter. Indeed, in my fantasy life I envision in the future the emergence of a law firm akin to GE—a corporate management finishing school seeding its vice president progeny across the economy, bringing their trial-by-fire pedigrees with them.
The distinction becomes clearer with reference to Harvard Business School Professor Joseph Bower’s new book, The CEO Within: Why Inside Outsiders Are the Key to Succession Planning (Harvard Business School Press, 2007). Over at HBS Working Knowledge, his views on succession planning and leadership development are nicely summarized in "Why Is Succession So Badly Managed," and on today’s WSJ opinion page he follows through with "Avoiding a Succession Crisis," where he writes:
"But what I found [in my research] is that many firms have not instituted a process for managing the development of potential leaders. Many have not even thought about the process of selecting a leader when the time comes for change. […]
"This situation is hardly optimal — not when global competition and technical change, in the context of an active market for corporate control, make the job of CEO about as tough as it ever has been. Companies need world-class efficiency, constant innovation and a customer orientation. This requires a group of talented, dedicated people working as a team across business units and country boundaries. To get that kind of organization you need continuity in leadership."
To "continuity" in leadership I would only add: Breadth, and excellence.
Wouldn’t it be miraculous if your firm prepared so many talented leaders that it could afford the departure of many of them to elsewhere in the industry? Now that would be fulfillment of my fantasy.
