There is a crisis brewing in law firms. In an era of volatility and transformation, law firms are now, more than ever, reliant on their culture, vision and operational approach to drive performance—all of which, at their core, rely on effective leadership. Multiple recent longitudinal analyses of the AmLaw 200 illustrate this connection, repudiating that size alone creates an advantage. Few firms, however, have the processes, tools and structure in place to develop and select the best leaders for their organizations. Moreover, the most revered leaders in law firms may not be those who have significant, positive, long-term impact on their firms.
The reasons for this crisis are many and varied, but perhaps the most salient is in the qualifications partners look for when electing representatives to lead the firm. Primary among these is an individual’s prowess as a rainmaker and overall smart lawyer. Compound this with election cycles maligned with financial performance trends, little to no formal experience running a complex business and poor transition and succession planning, and it sounds somewhat miraculous law firms have made it this far. Yet they have; and perhaps it is less surprising in context.
Rainmaker, Entrepreneur, Change Agent, Visionary
Up until the last decade, what the job of managing partner, chair or CEO required was more linked to being an outstanding lawyer and business generator than a purveyor of change. Storied law firm leaders of the past typically rose to glory on their groundbreaking legal skills. Marty Lipton, John Quinn, David Boies are exceptional lawyers whose efforts on behalf of clients won them recognition and respect. They are also entrepreneurs, as were many law firm leaders of the last century. Today’s law firm leaders face a different challenge—somewhat more daunting, and different.
Circumstances today dictate law firm leaders be change agents and strategists. They require vision, a deep understanding of competitive dynamics and a keen sense of how to create a culture that motivates all members of the firm. However, the business of law and leadership skills are still not taught at law school. Even fewer are formally developed through the course of one’s legal career. Furthermore, what makes one successful as a partner in a law firm, especially a firm emphasizing productivity (aka billable hours), is often the antithesis of what a successful leader will embody.
Marshall Goldsmith is a renowned executive teacher and coach. In his book, “What Got You Here Won’t Get You There,” Goldsmith details 20 habits of successful people that they must abandon to rise to the level of being a great leader. Among them are No. 6, “Telling the world how smart we are”, No. 8, “Negativity, or let me explain why that won’t work”, No. 13 “Clinging to the past”, and No. 1 “Winning too much.” This last one is particularly tricky as, according to Goldsmith, it is the most common and underlies almost all the other behavioral challenges. It is also, notably, a pronounced trait of lawyers (and, coincidentally, analysts … ) who are trained to debate and defend a position. Similarly, demonstrating “smarts” in the form of expertise, poking holes in others’ arguments or work product and being guided by precedent are all encouraged (or required) in the delivery of legal services; but, per Goldsmith, are not the types of qualities one wants to emulate to run a business or lead others.
Challenge one and two, then, are lawyers not having the qualifications or not getting the training, coaching and professional development required to steer a multimillion (or billion) dollar business.
Leader Selection/Election and Transition
Related but distinct from these challenges is a third hurdle: the process by which law firms select and replace leaders. Though the exact machinations vary from firm to firm—whether by nominating committee, partner voting, designation by an executive body or, gulp, contested election—a typical large or midsize law firm selection process entails promoting an existing firm partner into a position of authority. Many elected managing partners/chairs have held previous leadership positions at an office, practice or committee level, though not always. Few have had positions providing a comprehensive perspective on firm-level operations, finances and people prior to taking the helm.
Once elected, some leaders require reelection every few years. Their reelection is partially performance-based, of course, with the partnership making a judgment call as to whether the firm or the leader is doing well. The metrics by which partners are most often making this decision—profits per equity partner, revenue per lawyer, year-over-year growth—are in and of themselves skewed toward the short-term and the interest of partners (neither of which necessarily reflect the best interest of the firm or its long-term prospects).
During their term(s), many leaders retain an active practice, thereby performing two jobs simultaneously. This practice is, in part, intended to allow for a smooth transition back into the partnership once their term is complete. Many former leaders retain some position of power in the firm subsequent to being replaced. The frequent lack of clarity around expectations of these leaders and how best to transition them can be a source of frustration and consternation both for the former leader and for the individual coming up to replace her or him.
In recap, the selection process for law firm leaders is fraught with conflicting interests and built-in obstacles:
- Time-based, rather than performance-based, transition periods;
- Selection by a group of partners whose interests are largely individually oriented and short-term;
- Compounding demands with dual role as firm leader and practicing attorney; and
- Vague transition and expectations of former leaders with no job description.
Outside of the legal industry the trigger for replacing a CEO typically results from one of three common situations: retirement of the current CEO; poor performance, financially or otherwise; or changing market dynamics and positioning (e.g., merger/acquisition, disruption, etc.) The CEO is selected by an independent board or investor group with interests squarely situated in support of the best interests of the company over the long-term. The CEO’s sole responsibility is to lead the company. And, for the most part, with the exception of closely held or family-run organizations, former CEOs step aside upon relinquishing their title.
Ram Charan, who advises CEOs at some of the world’s largest corporations, maps out four best practices for CEO selection in his Harvard Business Review article, “The Secrets of Great CEO Selection.” Among them is the delineation of the characteristics and qualities needed to perform well at the job of CEO at that given point in time. In describing the approach of board members who do best at CEO selection, he writes, “They start by understanding the current and future requirements of the job, zeroing in on the critical capabilities that will make or break the company.” He goes on to suggest the outcome of this exercise is “not a laundry list of leadership traits … it’s a strand of two or three capabilities that are tightly interwoven and required for the new leader to succeed.”
What this looks like for each individual law firm will be unique. Conceptually, putting the right leader in place at any law firm demands a shift in mindset—a willingness to reframe perspective beyond the short-term, ditch antiquated selection practices, put in the hard work to truly understand what makes a great law firm leader in today’s environment and maybe, just maybe, look outside the firm for answers.
For inspiration, look to Dentons’ recent hire of a legal operations executive from client Royal Bank of Scotland to serve as managing director of the U.K. and the Middle East; or to Sun Tzu, the consummate leader, who wrote “Don’t depend on the enemy not coming. Depend rather on being ready for him.” What better way to prepare a law firm for the future than to properly equip those who will lead it.
Marcie Borgal Shunk is president and founder of The Tilt Institute, a firm dedicated to unveiling new perspectives on law firm growth through intelligence, innovation and intuition. She specializes in helping law firm leaders make better, data-driven business decisions. Shunk is also a member of the ALM Intelligence Fellows Program.
More information on the ALM Intelligence Fellows Program can be found here.