It is often said that succession is the key issue affecting law firms today. Whilst there might be more pressing issues for senior partners to deal with, such as cash-flow management, cyber security and PI renewals, finding a solution to the succession conundrum should be a priority.
Many of the leaders of small and medium-sized legal services firms that I speak to have come through the recession successfully and are undeterred by Brexit, but when it comes to planning for their own retirement, they are desperately under prepared. They often don’t realise that the solution rests in their control and is closer to hand than they think. There is a saying that the best managers make themselves redundant and this should not be a fear but a mantra for the owners of law firms for a couple of reasons. Firstly, it frees them up to focus on very worthwhile and growth-enhancing business development activities and, more importantly, it proves that the firm can run without them.
This ability for any business to run without its owner(s) makes it more valuable. To achieve this there needs to be a culture of respect and transparency, and a positive attitude to involving other key staff in the practice - both fee-earning and finance and support teams. As part of Menzies’ advisory role, I have worked with many law firms to help instil this way of working and most have found it very rewarding. However, these changes aren’t something that can easily be implemented a month before any impending retirement; they need to be considered much more in advance.
The thinking is that firms need to add a layer of succession planning into the practice by changing behaviours and encouraging others to step up. Transparency is often key so that all those involved understand their role within the business and how they can develop their own careers, to mutual benefit all round. The process can sometimes involve some challenging conversations and look to change behaviours on both sides.
A useful way to get this started, especially in multi-disciplinary practices, is to encourage collaboration between teams and service lines as this ensures managers of the future gain first-hand experience of cross-line-of-service and cross-team collaborations. If they can work effectively as a team on client affairs, then working on internal strategies will be easier and hopefully more effective. It will also help clients to feel more like clients of the firm, rather than simply of individuals. These relationships become stronger, which enhances the ’capital value’ of the firm, obviously to the benefit of all senior-level stakeholders. By now the penny should have dropped and senior and managing partners realise that the effectiveness of their teams is likely to have a direct influence on the size of their retirement pot.
Both senior stakeholders and talent coming through the firm will want to understand the targets and measurables expected. Current senior and practice managers may have to give away equity share to encourage their successors perhaps earlier than they would expect. However, as long as talented individuals are engaged and motivated to generate additional profit, the slightly smaller share of a bigger pie makes sense.
Failing to engage with talented individuals, who are the firm’s future, is to ignore your own succession solution. This will not happen overnight but to actually have a vision of your end game and a strategy to achieve value out of the practice that you have worked so hard to develop must surely be a worthy ambition. It will also allow you to leave a positive legacy too.
The solution to your firm’s succession conundrum is on the payroll and in the building. Senior and practice managers just need the vision to recognise this and the strategic insight to lead the firm to a successful future, both with and without them.
Peter Noyce is partner and legal sector specialist at accountancy firm Menzies LLP. He is the author of ‘Brighter Thinking for Law Firms’.