All of a sudden, succession planning seems to be on almost every professional service firm’s management agenda. In part, this interest in succession planning results from baby boomers (the largest segment of our society and the generation of most firms’ management) reaching an age where they are confronting their own mortality. In part, it may result from firms having grown, and often investing increasing authority and management responsibility in individual partners while relying less on committees than in the past. Perhaps it is that they have seen first-hand, with their clients, the disruption caused by the sudden loss of a leader in a closely held company, or that they remember when much of Dow Lohnes & Albertson’s (a successful Washington/Atlanta law firm) management died in a tragic plane crash.
For many firms, the sudden loss of a leader could be devastating. And the loss need not be death. Each year, we see firm leaders step down due to disability, or accept a management position with a client or even move laterally to another firm. Being able to rapidly identify a qualified successor may determine a firm’s survival.
Yet, is it even realistic to believe that succession planning can work in a professional service firm? The classic corporate model of succession planning — having a designated successor for each position — is certainly unrealistic in the partnership setting. In most firms, leadership is elected by the partners who notoriously insurrect against any action viewed as disenfranchising their prerogatives. So strong is this defense of partnership discretion that many firms have found the label of “designated successor” to be the kiss of death for anyone aspiring to firm management. It is difficult to envision a firm with an emergency backup leader already in place – one capable of stepping into a managing partner’s shoes on a moment’s notice and in a way where partners barely notice and the firm scarcely misses a beat.
Perhaps the limits of succession planning for professional service firm leaders really lie in what many successful firms have done instinctively for years — creating a pool of people who have the basic skills, abilities and knowledge to be considered for a leadership position. If so, then succession planning involves understanding the basic traits necessary for leadership, identifying people with those traits, and providing them with the necessary skills and knowledge to assume a leadership position.
For most people, leadership is a trait that must be observed. That is, they know it when they see it but have difficulty describing the specific traits that comprise a good leader. We know that effective leaders tend to be articulate, yet some highly effective CEO’s are horribly inarticulate. Conventional wisdom tells us that leaders tend to be empathetic, but many strong leaders are aloof. Logic would dictate that the best leaders would possess experience in a lesser position. Yet, we often see new managing partners and practice group leaders plucked from obscurity and still marvelously successful from day one.
What New Leaders Say
To better understand succession planning, we decided to interview people who have lived through the process. We spoke with 21 law firm partners and three accounting firm partners who became the managing partner (or equivalent title) of their firm within the last five years and asked them what features would have most helped them as part of a succession planning program. Their answers were remarkably similar.
1. Relationship-Building. A major role of leaders in most professional service firms is the ability to build consensuses. In all but a few firms, partnership decisions are really made through consensus rather than majority vote. In fact, many firms take pride in rarely, if ever, taking actual votes and, if they do vote, the result is always unanimous. This means that, in order to lead, managers must be able to identify and sell courses of action the entire firm can accept. This is a political process based on relationships between the managing partner and individual members of the firm who can influence other partners. Relationship-building takes time, and a managing partner who has failed to create at least a base of strong relationships prior to ascending to a management position will have difficulty succeeding.
2. Vision. Leadership and vision are virtually synonymous. In order to perform the functions of a leader, a managing partner must have a clear picture of where the firm is going and be able to communicate the vision to others. Experienced leaders explain that the vision does not have to be new or innovative. In fact, it is often easier and more powerful to convey a consistent vision with that of the prior manager. But many managing partners warned that a new leader doesn’t have time to cobble together a vision after they are elected, and a “fuzzy vision” threatens to make the leader ineffective in every other area of their management responsibilities.
3. Cultural Appreciation. One of the biggest surprises to new managing partners was that they failed to fully understand and appreciate the importance of the firm’s culture. One of the difficulties is that most new managing partners enter their position from other areas or positions within the firm, such as practice group chair or office managing partner. As such, their understanding of the firm’s culture is based only on a single segment of their organization, which, like the blind man touching an elephant, can be deceiving. Several of the managing partners we spoke with felt that some of their biggest mistakes resulted from a misunderstanding of the culture or from assuming that every practice group or office shared the same culture.
4. Electability. In talking about succession, one common theme among managing partners is that sometimes good candidates for management positions exist within the firm but are simply unelectable. Electability is difficult to identify and in many firms is constantly shifting. In part, it is based as much on the absence of a negative image as it is on the presence of a positive perception in the minds of most of the partners. As one managing partner said, “A partner who wants to be managing partner can’t be too much of a reluctant bride but yet can’t seem to be overly eager for the job either.”
5. Personal Issues. Almost every managing partner, upon entering their position, was plagued with uncertainty about three issues:
Compensation. Most often, newly elected managing partners are paid the same compensation they received prior to their election. But even though the managing partner is expected to give up much of the practice on which his or her compensation is based, there are rarely any clear objectives established or bonus criteria set. As a result, successful attorneys, accustomed to controlling their compensation destiny through their performance, become, as one managing partner put it (paraphrasing Blanche DuBois) “dependent upon the kindness of strangers.” This causes anxiety, especially in situations where the new managing partner’s compensation history is significantly higher or lower than his or her predecessors.
Practice Transition. A second area of anxiety stems from what will become of the attorney’s practice. In slightly more than half of the firms we spoke with, the managing partner’s roll is expected to be full-time. In the other half, the managing partner is expected to maintain some practice. Frequently, the mix was anticipated to be 50/50, but most managing partners say that a one-third/two-thirds mix is more realistic. For a partner with a significant practice, the transition of handing off their practice to others without losing the client is difficult and stressful. Making the process even more complex is the fact that many new managing partners attempt to maintain a connection to the client as a security blanket for future uncertainties.
Exit strategy. Closely related to both the issues of compensation and practice is what will happen to the new managing partner when they eventually voluntarily or involuntarily leave the position. This is especially difficult in a firm where the managing partners have traditionally been older when elected and retired out of the position. As younger partners enter management, the reality of having to re-enter their practice becomes an important personal issue, involving not only compensation guarantees but also the ability to update rusty practice skills.
Commonality Among Firm Leaders’ Backgrounds
In the process of our conversations, we could not help but notice some areas of commonality among the managing partners with whom we spoke. All of the managing partners were in the age range characterized as baby boomers (age 40 through 59). All but two were male, yet when we raised the question of whether a woman would be disadvantaged in the pursuit of a management role, most believed that there was a better-than-even chance that their successor would be female. Several noted that women might possess better temperament and stronger group dynamic skills than men. All but one had served in a significant management role prior to their election, and three had served in a designated successor type of role. All of the accounting firm managing partners and all but four of the law firm managing partners were “lifers” with their firm or with a firm that merged into the current firm. The four who joined the firm as laterals, did so as associates.
A Workable Succession Plan
It does not take a great deal of study or observation to conclude that the only effective means of creating a succession plan for professional service firms is to create a pool of partners from which to select future leaders. Creation of this pool involves three steps:
1. Early Identification of Leadership Traits. If it is true that recognition of leadership is observable (people knowing a leader when they see one), there must be a means of communicating that recognition. In most firms, the best, if not only, means of such identification is the associate evaluation system. There is at least anecdotal evidence that successful managing partners began demonstrating leadership as an associate. As one said, “I was always the spokesman for the disgruntled associates.”
2. Create Leadership Opportunities. Regardless of whether one believes that leaders are born or made, certainly leadership skills are honed. Simply identifying future leaders is insufficient. Potential leaders need the opportunity to build leadership skills, to be tested and observed by the partnership and to build self-confidence in their own leadership and management abilities. It also cannot be assumed that every attorney who displays leadership characteristics has the desire to be involved in the management of the firm. An early leadership role gives the individual the opportunity to test their own tolerance for “herding kittens.”
Often, the best leadership training ground comes not from the formal administrative committee system many firms employ. Instead, ad hoc committees designed to study and eventually sell a specific initiative provide a better opportunity for new leaders. Using a mixture of associates on these committees gives firms the advantage of early live-fire demonstrations of the associates’ capabilities, as well as opportunities for the associates to observe a variety of leadership techniques and applications.
3. Provide Skill Development. The basic blocking and tackling of management and supervision involves some basic skills that are applicable to all forms of business. Probably all of these skills could be acquired by observation and the trial and error of experience, but some formal training can shortcut the time required for observation and experience. To provide necessary development for their potential leaders, a surprising number of firms have created internal management training programs under local business schools.
The world business community recently saw the importance of succession planning with the sudden death of McDonald Corporation’s CEO. Shareholder and franchisee confidence and market value were maintained by the company’s ability to name a fully qualified successor within hours. But as comforting as this level of planning would be, experience seems to dictate that the classic forms of succession planning used by corporations — having a designated successor for every management position – don’t work in the real world of professional service firms.
This does not mean that firms can or should avoid succession planning. However, it seems clear that firms need to both create a cadre of leaders capable of being considered to assume management tasks, and remove the concerns and barriers that might cause professionals to avoid participation in their firms’ leadership.
Succession planning is not a quick fix that a firm can decide and implement. It takes time to develop an effective leadership program and even longer to be able to benefit from the results. That’s all the more reason to get started immediately.