For years, there has been a steady stream of articles and books that describe the characteristics of great leaders, most often focusing on specific traits like diligence, vision, communication skills, and the ability to inspire and motivate. Oddly, one other trait is rarely mentioned, yet is perhaps the most important leadership skill of all – the ability to identify and groom other, highly talented leaders.
Successful businesses rarely thrive solely due to the efforts of one individual. While one person can have a significant impact on how well a business does in the short-term, organizations that perform well over the long term (decades; generations or longer) succeed because they are led by people with the foresight to recognize, develop and promote members of a very small percentage of the population who can actually lead. For these businesses, strong, empowered, multi-layered leadership is a core, differentiating factor. It is a fundamental reason why certain businesses consistently outperform their competition, regardless of the business cycle, industry dynamics or competitor moves.
Given that there is not an overabundance of great leaders in the general population, the leadership challenge is partly a matter of numbers. Taken a step further, while there exist the positive attributes of very high academic achievement and raw intellect within the population of lawyers, neither of those traits is a prime indicator of leadership skills. In fact, among the most intellectually gifted, the actual percentage of great leaders tends to go down. So, from a basic leadership standpoint, law firms start from a more challenged position.
In the legal profession, a number of well-known (and not so well-known) leaders have taken firms from obscurity to prominence. Unfortunately, not all of the once-obscure firms maintained their elevated position long-term; some faltered and some disappeared altogether. But, there are some bright spots where firms rose from obscurity and, today, are solidifying their positions as market leaders for the future. What determines the winners and losers from this group? Quite simply – consistent, high quality (at times, extraordinary) leadership, up and down their ranks. These firms have built a virtuous cycle of choosing and grooming great leadership that is strengthened during each leadership transition.
This raises a question – if leadership is a key driver of long-term success, why don’t all firms select and groom great leaders? Too often, the issue is that the firm – or more likely, the current leader – failed to find, develop, tolerate or promote great leaders. As a result, the firm flounders, or worse, over time. Oddly enough, the presence of one dramatic, visible leader can actually be a trigger of future problems, particularly if the leader’s ego result in the leader having no faith or confidence in anyone else. While such leaders may be able to temporarily push and cajole the organization to greatness through the strength of their personality, such greatness is often short lived.
Of course, not every organization lasts forever and some extremely well-led businesses fail. A common characteristic of great leaders who have watched their organizations struggle after their departure is a deep and lasting sense of responsibility; they believe they failed the people and business that they cared so much about. Other former leaders – the most egocentric – think differently. These people assume that a follow-on failure after their departure is testimony to just how great the quality of their leadership really was. In reality, such a result is an indictment of their (often self-centered) focus and limitations, and a clear signal that they nurtured the failure.
How do leaders – many of whom may be well-intentioned, but poorly guided – foster an environment of leadership dysfunction?
- First, by not understanding what great leadership is in the first place. While it may seem counterintuitive that a leader doesn’t know how to identify great leadership, or groom this in others, this is actually a much more common phenomenon among those who are naturally talented. As was noted in the book, The Extraordinary Leader, “Most highly skilled performers in any activity, whether it be music, sports, or violin making, cannot accurately tell you what makes them so effective. Their behavior is often highly intuitive.” This concept extends to almost every skill, industry and profession. So many leaders instinctively know how to lead, but they can’t recognize it in, or teach it to, others.
- A related and common problem in law firms occurs because law firm leaders are often chosen on the basis of something other than true leadership skills. The classic example is a leader who is chosen primarily because of rainmaking skills. While it is true that most law firm leaders have rainmaking skills, it is more true that among rainmakers only a small subset have great leadership skills.
- By surrounding themselves with “yes-people,” who both compromise themselves within the partnership and fail to develop actual leadership skills. While insecurity, in and of itself, tends to be a common trait among all leaders, uncontrolled insecurity drives malformed leaders to surround themselves with others who never question and never object. These firms typically suffer from the dubious trifecta of bad leadership, weak leadership development and a long string of bad strategic decisions.
- By avoiding tough decisions, so picking and grooming the wrong supporting cast of leaders. In these firms, those in leadership roles are typically picked for all the wrong reasons – because they have a big book of business, because they are a friend or are just popular, because they won’t rock the boat, or because they want/need/demand to be recognized.
- By “earning” the leadership role because they are a compromise leader, chosen as a reaction to a bad predecessor or because factions within the firm cannot coalesce to support and empower one individual.
In order to avoid falling into one of the categories above, it’s helpful for firm leaders to consider the leadership dynamic they are building. So, assess objectively the following:
- Are the leaders you have chosen to work with unpopular and/or the subject of complaints that “they aren’t doing anything?” Do you constantly resist or reject those claims, even though they are widespread?
- Do you find yourself having to explain the great value of the leaders you have chosen because people just don’t seem to get it?
- Are you afraid to change leaders due to your fear of change?
- Are you constantly defending your leadership team, especially those who have been in their role for some time?
- Do you argue that the firm has a history of having leaders in place for long periods of time and/or that it is too destabilizing to have change among leaders?
Unfortunately, answering “yes” or “maybe” to any of the questions above means that you are probably failing the “great leader test.” And, the longer your firm goes without great leadership, the less likely it will ever allow future great leaders to emerge. For many law firms, that was not a problem for much of their history, because regardless of what leaders did, the profession was sufficiently lucrative and uncompetitive that most law firms did just fine. Those days are rapidly coming to an end, if they have not already passed.
In order to avoid having your firm falter now or perhaps after you step down, it is important that time be spent assessing and investing in the firm’s leadership dynamic. Weaker firms … those stuck in obscurity … relentlessly follow the path of least resistance and choose “leaders” who are, at best, “personable managers.” The fact is, law firm leadership is a massive responsibility and an extraordinarily rare skill set. Successful firms – and the best leaders – understand this and choose the correct people to lead.
W. Johnston Associates, Inc., (www.wjohnstonassociates.com) is a management consulting firm that specializes in strategic, financial, organizational and leadership issues within law firms. The firm’s client base ranges from focused boutiques and U.S. regional firms to AmLaw 100 firms with national and international networks.
By William G. Johnston
W. Johnston Associates, Inc.
Earlier this year, I wrote an article* that focused on some key characteristics of successful law firms. Two of the topic areas – having an external focus and partner willingness to invest – relate clearly to strategic positioning and are essential drivers of long-term, competitive advantage. So, it is not surprising that law firms spend many hours and significant dollars developing externally focused, long-term strategies geared toward achieving greater success. Unfortunately, much of this effort and expenditure results in strategies that ultimately fail to launch. In an attempt to change this dynamic, I think it is worth spending a bit of time considering effective strategies and, as important, best practices in implementation.
As a starting point, effective, firm-wide strategies should reflect the aspirations of the partners. This is not to imply that every partner must have the same goals. Clearly, different individuals have different aspirations – and those can change during the course of a career. That said, there should be significant common ground in the goals of the “partnership body” as a whole. Firms comprised of partners who have similar views about things like desired client types and industries, geographic markets and service offerings are far more likely to have effectively implemented strategies than firms where partners operate individually and lack commonality on clients, industries, markets and services.
Effective strategies require common goals. That seems reasonable and should be easy to accomplish, right? Not exactly. To reach a point of common goals, a successful firm makes hard choices and regularly says “no” to concepts and initiatives that are incompatible with or unrelated to the firm’s overall plan. At the end of the day, if a firm is willing to do everything for everyone, it has no discernible strategy and a weak market position. How well a firm manages the “no” discussion with those who may disagree with the decision can have a lasting impact on the firm’s ability to implement the final plan. Unfortunately, some firms still take the “do anything” approach, often due to a lack of understanding of market dynamics, an unwillingness to tell a partner or a group of partners that the firm is not going to pursue an idea or because the firm is simply pursuing growth above all else.
Of course, strategic growth can be beneficial and, during the process of strategy development, firms often identify growth needs. Most will be forced to consider the “build vs. buy” issue – should the firm pursue its strategy using existing talent or is it better to hire laterally (or even merge) and thereby shortcut the process? As with most things, there are pros and cons to both. Building organically an existing platform helps the firm preserve autonomy (particularly when compared to a merger) as well as control hiring standards and processes. The drawbacks, which can be significant, include the fact that it could take years to develop the depth needed to achieve the strategic goal and current client needs may exceed the firm’s capabilities in the short-term. Of course, as has been well documented, lateral success is hit or miss and pursuing growth via laterals or merger is also risky. Given the number of lateral and merger discussions that take place and ultimately collapse, firms may choose to look there, but should assume they are on their own when it comes to developing the talent required to achieve strategic goals.
In sum, effective strategies reflect the aspirations of the owners, are based on saying “no” more often than “yes” and, finally, rely on a cautious approach to growth. A firm that sticks with these three attributes is typically a more cohesive, focused partnership that can truly succeed in its pursuit of market advantage.
Once a firm defines its overall goals, the focus turns to implementation. This is truly where the rubber meets the road and major obstacles may get in the way, including:
- Ineffective Leadership – Some person or group needs to “own” the strategies and push them forward. Choosing the wrong people to lead the implementation effort dooms most initiatives.
- Insufficient Buy-In – In order to implement effective strategies, partners have to buy-in to the message and the goals. If they don’t buy-in, the effort will fail.
- Resistance to Change – For some people, new or revised strategies can be both empowering and invigorating. For others, they can be uncomfortable and even encourage sabotage. Beyond communication and buy-in, the best way to overcome resistance to change is to ensure that every partner (in fact, every lawyer and employee) understands well where they fit into the strategies and how they can contribute to the firm’s success. Having a clear sense of your important role in advancing the business can go a long way toward replacing resistance with assistance.
- Short-Term Mentality – Generally, I recommend that firms create strategies that look out three years and roll forward as time passes. Naturally, in a three-year plan, some successes may not be fully realized for years. If partners are unwilling to commit to investing in initiatives that span multiple years, you probably need to question where they see themselves in the future.
Given the requirements for effective strategies and the obstacles described above, how do successful firms actually do it? I believe there are a few key steps:
- Identify the fundamental drivers – In essence, define clearly the target clients and industries, the service offerings and how services will be provided. Regardless of firm size, failing to do this will result in a firm that looks like many others – essentially indistinguishable – and is forced to compete based on price, not value.
- Institutionalize the strategies – Many law firms enjoy the benefits of having long-term clients who rely on the firm as much as the firm relies on the clients. Your strategies should be treated much like you’d treat important clients – in successful firms, strategies and supporting initiatives are as important to the success of the firm as the most highly-regarded clients.
- Formalize planning and stress accountability – Firms often prepare interesting strategies, but fail to take the simple step of detailing what is required. While it may not be necessary to detail, week-by-week, what is being done on implementation, it is important to define clearly “who will do what by when.” Failing to take this step usually results in firms preparing strategies, everyone going back to work and then dusting off the plans a year later.
- Align internal systems – Quite simply, does the firm have the correct leadership, governance and operational structure/policies required to support effective implementation? Are the proper people serving in the right places? And, does the firm’s partner compensation system provide a means to reward those who help advance the firm’s efforts? While it would be nice to believe that all partners are altruistic and simply work for the benefit of the greater good, we know that some people will only do something for something. So, it is important to ensure that the firm’s performance management and compensation system supports strategy implementation. If they don’t – for example, if a firm’s strategic goals require team-based business development, but its partner compensation system only rewards individual behavior – this misalignment will impair implementation.
Finally, successful firms maintain in-depth knowledge of the state of strategy implementation, are well aware of client and market dynamics and actively adjust strategies when needed. For those firms struggling with strategy development or implementation, there are good lessons that can be taken from those firms who seem to have gotten it right.
* See “2017 Check-Up: Is Your Law Firm Positioned For Success?” Law360
William Johnston is founder and president of W. Johnston Associates, Inc., (www.wjohnstonassociates.com) a law firm management consulting firm. He can be reached at (203) 364-0293.
Transitioning Client Relationships
By William G. Johnston
W. Johnston Associates, Inc.
High on the list of things that keep law firm leaders awake at night is the potential loss of revenue due to client departures. While most leaders are well-equipped for their critical role in guiding firm operations and strategic decision making, it seems that far fewer have the tools needed to enact comprehensive client succession programs, particularly for senior partners. Unfortunately, firms often realize too late that the path to successful client succession is fraught with obstacles and, without proper preparation, at risk of falling wildly off track.
This year alone, the ABA projects that roughly 40,000 lawyers nationwide will reach age 60. While turning 60 certainly does not signal the sunset of a lawyer’s career, it is hard to disagree that many these lawyers are closer to retirement than not. Consequently, for the sake of both the firm and the client relationship, firm leaders need to ensure a sound process exists to transition client relationships, ensuring a smooth transfer from one generation to the next. Understandably, this process does not — and cannot — happen overnight. Instead, it requires strategic thought, analysis and focused implementation over a multi-year period.
It is natural to resist change and uncertainty. In the case of succession involving an important client relationship, both the client and the lawyer(s) involved may resist the transition. Given that a client entrusts its law firm not only to serve it well, but to protect its interests, it follows that an orderly transition that protects the client must take priority. Done well, the transition should appear seamless in the client’s eyes. Failure to make this happen can push a client to transition to another firm that offers a “safer,” more stable relationship.
So, how should firms approach succession? For the law firm, there are a handful of primary goals:
- Ensuring client retention as partners phase down/retire or unexpectedly leave the firm, seamlessly moving relationships from one partner to the next;
- Protecting the firm and limiting the ability of competitors to establish relationships during partner transition periods or immediately thereafter;
- Avoiding service gaps or last-minute transitions by identifying early on potential hand-off problems or expertise/training needs;
- Formalizing succession planning as a firm-wide priority (rather than an individual responsibility) and removing the potential stigma of being in “phase-down” mode; and
- Enhancing the professional development of younger partners by raising the level of client exposure and by providing opportunities for younger partners to manage and expand relationships with existing clients.
Analysis and Planning
With the goals in place, firms can move to analysis and planning. Naturally, this requires examining existing relationships, assessing client “teams” and evaluating team members in regards to demographics, experience and expertise.
An important aspect of this stage is carefully identifying and effectively addressing any succession roadblocks. Is a senior partner unwilling to transition or support a younger partner? Are there incompatible personalities between client and chosen successor? Either of these scenarios (and many others) can throw a wrench into the process. The key is to be prepared for them. During this stage, you must assess the ability of younger partners to take on important leadership roles and identify future client team leaders.
When analyzing and planning, focus on:
- Prioritizing relationships to be transitioned based on each client’s importance in helping the firm achieve its strategic goals;
- Distinguishing between clients that can be transitioned easily and those who cannot;
- Evaluating referral sources; and
- Assessing succession within the client (e.g., planned retirement of existing GC) and considering the opportunities to transition the client relationship as the client transitions.
Client Involvement: A Key Aspect
At far too many firms, senior partner phase-down and client transition are done almost in secret. Involving the client in the succession process isn’t taboo. In fact, encouraging client involvement in the choice of successor can be a huge step forward in ensuring a good fit. After all, who better to truly understand the client’s requirements than the client itself?
Take the time to listen to the client’s needs to ensure your firm chooses the appropriate successor. At the same time, help the client understand the benefits of the transition and ensure the client understands that the succession effort is not related to an immediate phase down or desire to offload a client. One big caveat: once the client becomes aware of the firm’s plan and expresses a wish to support said plan, your firm has no choice but to execute.
Enhancing, fostering and building upon the foundation of this agreed-upon collaboration is a crucial step. Whenever possible, require senior partners to attend meetings with appropriate younger colleagues, even if not all time can be billed.
Actions and Initiatives
Most successful client transitions take place over many years, not months or weeks. As a rule, law firms should start the client transition process at least five years ahead of a planned phase-down or retirement, laying the groundwork for the ultimate transition down the line. During this period, and particularly for newer clients that do not have “institutional” connections to the firm, it is important to maximize the number of relationships between firm and client. In other words, develop layered relationships, comprised of senior advisor, successor and support cast for each client.
By following this approach, when the time comes for the senior advisor to step back, the change won’t be an abrupt, disruptive or unexpected one. As such, developing a strong, client-level demographic model with reasonable age/expertise gaps (e.g., senior partner, mid-level, young partner) that may mirror the client structure can be beneficial.
A word of caution regarding senior lawyer efforts to expand the profile of other firm lawyers: the promotion of younger partners to the client must be based on high confidence, rather than false praise. There are many ways to raise the successor’s profile and to make this transition easier:
- Expand the younger partner’s role with the client;
- Develop relationships at the 2nd tier of the firm/client structure (e.g., younger partner/assistant general counsel);
- Encourage younger partners to take an active role in succession, rather than a passive approach just waiting for it to happen;
- Raise the public profile of younger partners, expanding public relations efforts to promote them; and;
- Invest in business development training and coaching for younger partners, as well as identify opportunities for non-legal (board, charitable, etc.) leadership roles and/or transition of senior partner leadership roles to the younger partner.
Senior Partner Planning
Over the years, I have seen firms of all sizes experience the gamut of challenges in dealing with client succession. Some partners take an ownership interest in the process and work tirelessly to help the firm and the client. In other instances, there is inertia or resistance. To help make succession planning a firm “process,” it is helpful to require partners to prepare annually a succession plan. While there is no magic age or level of seniority when partners should first plan, firms need to recognize that this is a multi-year process, so it is best to not wait until the last minute. That said, in every case, it is important for the firm to have some flexibility regarding the succession process, recognizing that each partner – and each partner’s situation – and each client relationship is somewhat unique.
The best annual succession plans:
- Are in writing, detailing specific transition goals for each client relationship; the plans serving as informal “contracts” between the partner and the firm;
- Focus on spreading existing relationships among multiple lawyers to ensure that the firm does not recreate an existing issue (albeit with younger partners);
- Formalize a future role for the senior partner (e.g., business development leader with a younger partner).
- Experience shows that nothing will happen if the senior partner does not buy in to the program or if the partner feels he/she is not being supported by the firm; and
- Empower a firm leader to ensure that the succession plans are implemented.
Transitioning a client relationship is both challenging and time consuming. Succession is a process that requires careful planning, open communication, sensitivity and execution. Over the years, I have seen firms excel at succession planning and others struggle to take even the smallest steps toward handing off a client relationship. The firms that fail often take a passive approach to client transition, hoping against hope that some magic will make it happen. The magic rarely, if ever, works. As a law firm leader, one of your key responsibilities is to ensure smooth, seamless client transitions as partners approach retirement. In the end, taking an active role to protect the client’s interests and the firm’s position can help minimize what keeps you awake at night.
William Johnston is founder and president of W. Johnston Associates, Inc., (www.wjohnstonassociates.com) a law firm management consulting firm. He can be reached at (203) 364-0293.
Newtown, CT (January 27, 2016): Legal industry veteran William G. Johnston announces the formation of W. Johnston Associates, a management advisory firm focused on strategy development and implementation, operational and financial analysis, merger and acquisition, and governance guidance for law firms and other professional services firms.
Johnston, who has 20 years’ experience in the legal industry, most recently spent eight years as the Director of Strategic Planning at preeminent law firm Cravath, Swaine & Moore LLP. In that role, he worked with firm leadership to develop and implement the firm’s strategic, long-term and annual business planning objectives and initiatives. Prior to Cravath, he spent 12 years at Hildebrandt International (later Hildebrandt Baker Robbins) where he provided consulting services to domestic and international law firms on strategic planning and implementation, mergers and acquisitions, financial management and a broad range of internal and partnership issues.
“This new firm provides an ideal platform to continue my work with law firm leaders as they seek to improve their firms’ performance,” said Bill Johnston. “As the business of law continues to undergo tremendous change, well-run, strategic firms have excellent opportunities to differentiate themselves and separate from the pack. I look forward to using the expertise gained with a leading consulting firm and a top-tier law firm to help clients reach maximum, long-term success.”