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Law firm management

Law firm succession planning

Minimizing the risk in leadership transitions

Often a generational shift in a law firm’s center of power gives rise to an acceptance/realization by most partners that the firm needs to change leadership. What is the best way to accomplish a transition of power to a younger and different leadership group and to prevent or mitigate a wrenching shift that causes turmoil and division?

Most law firms do not have many partners who have been trained in leadership of the firm. A lawyer needs to prove him- or herself from the start as an outstanding lawyer to become a partner, and as a strong and productive partner even to be considered for a top management position. Some lawyers naturally want to be involved in recruiting and other firm tasks because they want the firm to function well and be successful; but they often are not paid as well for firm work as for client-paying work, and the hours they devote to firm work may cut into the time they could spend developing a strong practice and business base. Therefore, in a law firm, there is a more limited pool of partners who are powerful enough to be considered for leading the firm and who also have demonstrated some management skill in the firm.

This phenomenon can be addressed by the firm deliberately cultivating its future leaders by assigning young partners to roles such as serving on an associate evaluation committee or recruiting law students and junior laterals to the firm. This gives young partners a chance to participate in the management of the firm and to demonstrate their aptitude for and interest in management. Developing a pool of trained younger partners to lead the firm is even more important for a law firm than another business, because rarely can a top leader of a law firm be recruited from another law firm; whereas, that is often how new leaders of large businesses are chosen.

Another way to prepare for natural succession and to prevent a possible struggle over succession is to include a number of partners in the management team.

If only one or two members of the management team turns over in a succession of leadership, continuity is enhanced; and if strong younger partners are included in the management committee or as professional department leaders, they get exposure to management and they are likely to introduce new ideas and policies. Therefore, change will evolve, and there is unlikely to be a need for a dramatic shift in direction.

Setting fixed management terms of office is a device which is meant to force change in leadership, but  that structure is no more successful in forcing orderly succession in a law firm than in the Senate or House of Representatives. Incumbency is a great advantage, particularly when the task of leading a firm means developing consensus behind every major decision. Also, many partners with strong practices are likely to be as well or better paid than partners in management, and their strong practices may give them the leverage to move to another firm laterally if they are not happy with their current firm or their compensation, which is bound to be affected by the success of their current firm.

A useful device for implementing succession planning is a Nominating Committee or Governance Committee which is independent of management but made up of a cross-section of influential and respected partners, including partners in diverse practices, age groups and geographical locations. Existing management can meet with the Nominating Committee to brief them on management’s own ideas of a good succession plan, but the independence of the Nominating Committee  (if it is credibly independent) enables the Committee to survey the partnership somewhat objectively and listen to other voices. A recommendation by the Committee is not a self-serving one by management and reflects the balanced views of the partnership if the Committee has done an effective job. Of course, if the existing management team has performed well, and the firm is prospering professionally and financially, the views of existing management are likely to be given great weight. The establishment of a Nominating Committee without management representation (and seen as not dominated by management) is an orderly way to get a sense of the partners’ views while not encouraging partners to undermine and campaign against management.

Firm culture and traditions are central to the strength of some firms, which have a distinctive character and reputation which many people have built over the years. These firms are generally not dependent on any one leader and have an institutional strength and stability that renders the succession of leadership easier. Such firms have an enduring institutional profile from which all partners benefit and which all partners support. Essentially, in strong institutional firms, a succession plan is much easier to implement because the generational tensions are not so great. Younger generations of partners recognize the value of what previous partners have built and share in some of the benefit of that reputation and prosperity. Older partners and leaders in management are more likely to view their mandate as preserving the institutional brand, which involves grooming the younger leaders to manage the firm successfully in the future. Often their retirement packages under unfunded retirement plans are dependent on the firm’s future financial success.

Establishing an effective succession plan is difficult work, but failure to do so risks the success and reputation of a law firm. Ideally, a firm can build institutional strength and traditions that diminish the risks of succession, because the firm is not overly dependent on a few partners for its reputation and professional standing. If the generational conflict is never allowed to rise and prosperity reigns, the possible destabilizing effect of a struggle over leadership can be prevented and continuity of leadership can be encouraged.

About the author

John (Jay) Westcott served for more than 30 years in the management of Hale and Dorr and WilmerHale, as the firm’s assistant managing partner and a member of the Executive Committee and the Management Committee. His first book, Fundamentals of Law Firm Management, was published by Thomson Reuters in 2013; his latest, Dividing the Pie: An Analysis of Law Firm Compensation Systems, was published in 2015, also by Thomson Reuters.

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