Law firms today and in the future must deal with a shifting legal services market that makes succession a more formidable task. Succession is not simply finding a way to deliver the gold watch with dignity and promoting firm-wide acclamation for the new leader. No, it is a lot more as recent reports and analyses affirm.
The Altman Weil 2015 Law Firm in Transition Survey noted that while revenue is up for 2015, demand growth for legal services generally is down. Citi Private Bank Law Firm Group’s 2015 third quarter report had a similar take on law firm demand growth, observing a downturn in demand as compared to the same period of 2014. Although the AW and Citi surveys present just a snapshot of the industries’ year-to-year performance, they address trends the industry is seeing. The AW and Citi studies should make law firm leadership think about the future.
One law firm leader that has done just that is Seyfarth Shaw LLP’s Stephen Poor. As he writes in his Amid Mounting Pressure, Law Firms Must Change; Mr. Poor thinks the AW and Citi reports indicate that Big Law is in the throes of structural change. This change, Mr. Poor suggests, is fundamental. While he does not expressly say so, it is reasonable to conclude that any fundamental change experienced today won’t end in 2015-it is destined to continue and evolve long into the future.
If Big Law and the relevant market forces are in a state of change, how is succession at law firms impacted? For one, simply having a system or culture that transitions leadership smoothly to the next generation will not be enough. If the coming changes alter the fundamentals on which law firms will operate, future leadership will face new challenges they must be prepared to confront. But how?
Understanding how to manage through change is a start. And while it can be a fool’s errand to try to predict the future, enough is known to offer five management principles that can help future leaders tackle the change they may see:
Leadership Must Be More Strategic. For the health of the firm today and for the benefit of future leadership, the firm’s strategic thinking needs to recognize that past tactics, as trusted as they may have been, may be outdated. Because service, value and judgment never lose their luster, strategic thinking must be unyielding in finding new tactics that will deliver those three indicia of success.
Growth and Sound Strategy May Not Be the Same. Mr. Poor provocatively asks whether growth by merger and acquisition is the panacea some firms seem to think it is. Growth makes firms bigger, but not always better. In the future, growth as a strategic solution should be questioned if is viewed as an initiative and not an outcome.
A Need for Lawyers May Decline. If demand growth is falling as AW and Citi reported, it could be that demand itself will go down in the future. Couple that possibility with how technology could reduce the role lawyers play in the delivery of legal services, and the number of lawyers a law firm needs may drop. Accept that as a possibility and be prepared to respond.
Success Will Depend on Innovation. Just as the firm’s strategic plan should not assume that the “old way” is the “best way,” today’s leadership and that which follows must be innovative. More and more general counsel approach legal services in new ways and will be looking for outside counsel to do likewise. If your client is asking you to do something innovative that was its idea, you are simply a follower. For tomorrow’s client, that is not impressive.
Demographics Will Change. Over the last 40 years demographics at law firms have changed. For most law firms, the “triangle” is gone. Today’s geometric shape depicting the make-up of the firm’s workforce will change yet again. Doing things like incurring long-term obligations when demographics could change even more may create burdens that in later years you’d much rather not have.
While much of the coming changes will be addressed by a law firm’s next generation, preparing future leadership to handle fundamental change is the responsibility of current leadership. Teaching the management principles needed to address the coming change are key elements to a good succession plan. As your firm addresses succession, are you engaged in that kind of forward thinking and teaching?