Unfortunately, I’ve seen, up close and personal, law firms that suffered serious setbacks-or even failed outright-due to what could only be called “failure of succession planning.”
What brings this to top-of-mind prominence is of course everyone’s obsessive issue namely The Great Reset we’re still experiencing, with an environment unlike anything current managing partners and senior leaders have ever seen before. If your firm is soon to be looking towards a new firm chair (by clicking of the term limitation clock or otherwise), you would be extremely well advised to think about succession planning.
A word about term limits: First, I’m of mixed mind about them. Second, I’m against them. Yes, I see and understand the attraction of wanting an institutionalized way to instill fresh blood, and sclerosis is an organization-killer second to almost no other. I have also seen more than one firm blessed by a gifted leader who had to step down after the allotted eight (or whatever) years, only to be succeeded by a relatively inept compromise-choice who at best oversaw a period of treading water for the firm and who at worst led to its actual implosion (no kidding).
But if the incumbent is doing a great job, knows how to do it, remains fresh and energized and challenged by the job, and finally and most importantly continues to maintain the good will and enthusiastic endorsement of the partnership, why stop a good run short? Ultimately, the cure for a super-annuated leader is for someone to challenge them and win. When the time has come, my prediction is reliably that it won’t be that hard.
Back to succession planning.
McKinsey has now stoutly weighed in on this evergreen topic, hanging their story on what journalists like to call a “peg”: Ken Lewis’ announcement that he would be stepping down as CEO of Bank of America, with no remote plans for an actual successor in sight. And if you’re feeling defensive right around now that your firm has no concrete succession plans in place, McKinsey reports that while 84% of directors believe such planning is more important than ever, only half actually have a plan in place.
Here’s the diagnosis and, to some extent, the prescription:
So why doesn’t succession planning get the attention it deserves? For CEOs, spotting the talent that will eventually replace them can be an unwelcome intimation of executive mortality. For boards, bringing up the succession can feel awkward when things are going well. When they are not, it can feel like a threat. But these are excuses, and not particularly good ones.
When CEO succession is a regular, structured process that forms part of the board’s agenda, it becomes a matter of routine, no more sinister than the annual compensation review. In fact, boards should view CEO succession as a strategic process intimately related to corporate performance. To that end, succession planning should include not only the CEO’s job but also all mission-critical positions in the organization.
Now, you don’t have a “board,” but presumably you have an Executive Committee or the functional equivalent. And de-fanging the process by extending it to include all “C-suite” executives and practice group leaders should also help.
The next question is: What are you looking for?
Let’s start with your firm’s strategy.
You need someone, to state the obvious, who buys into the espoused strategy. With a vengeance: Lip service won’t cut it. And you might even want to think about bringing in an outsider for a dispassionate view:
The board and the CEO must therefore agree on the company’s future strategy and the competencies it will require and then agree on how they will be assessed and evaluated in the candidate selection process. If succession planning reveals a fundamental misalignment within the senior leadership team, that discovery can be a blessing in disguise if it happens early on.
One Fortune 500 company, for example, engaged an independent third party to interview each of its directors as part of the succession process. It learned that there were diverse opinions among the directors on whether the company should continue to pursue an aggressive acquisition strategy, which had been the primary vehicle for growth, or focus during the next few years on integrating the most recent acquisitions. This finding resulted in an open discussion between the board and the incumbent CEO. In the end, they jointly agreed that while a near-term focus on integration was critical, the company also needed a measured M&A strategy for future growth, and therefore a CEO with proven competence in M&A.
The McKinsey piece goes on to describe whether it’s optimal to only look inside the firm (never!) or to explore another option altogether:
The second component requires looking outside the company to map and benchmark the talent market. How do our people compare? Who might be available? Companies that fail to ask these questions can become myopic, thinking that they have the talent they need when they don’t.
The day a law firm does this, of course, will be the day we all know that we have truly grown up as a professionally managed and sophisticated industry. Or else we will have lost our souls. Uncharacteristically, I remain on the fence about that. But those of you following at home can think about it.
Lastly, how about a dose of reality about how this is all really done today? And how would that be? By process of elimination, of course. Our next Managing Partner needs to be:
- Not too young and not too old;
- From a significant practice area in the firm;
- From a major office in the firm, if not historical headquarters itself;
- Exceptionally well regarded as a practitioner;
- With a high record of billable hours, origination credits, and business generation;
- Who has mentored some associates who have become successful;
- And who doesn’t have significant cohorts of the firm aligned defiantly against him/her.
Once you eliminate folks not able to slip through all of those gates, you generally find yourself with a very short list indeed. Actually, it often has just one name on it.
Scientific it ain’t, but that seems to be how we typically do this.
Could we do it better?
Need we do it better?
The next few years will test firms, I submit, as they have never been tested before in living memory.
Succession planning deserves a bit more respect. Just a thought.
