Creating a successful leadership transition from law firm founders

Issue March 2014 By Susan Letterman White

Recently, I assisted a law firm in beginning a leadership transition process. The firm consisted of one founder, additional lawyers, three offices, professional support staff and secretarial support staff. In a small firm, such as this one, leadership transition often means an ownership transition too. When an ownership transition changes the balance of power from vesting fully in one or two founders to others, the firm's identity is put into flux. When identity changes, changes in responsibilities for making the business model continue to function effectively usually follow.

As a law firm owner, be aware of what you want

Changes in identity and decision-making authority for any organization force the currently empowered owner or leaders to consider their personal vision for success and goals. This means first asking a very personal question: What do I want?

Seven months before the firm's annual retreat, the founder and I first discussed a leadership transition. Between then and October 2013, the founder, after conversations with his spouse, expressed the desire to transition ownership within the next three to five years. Identifying this SMART goal was an important first step. SMART goals are Specific (ownership transition), Measureable (owner to non-owner), Actionable (possible to identify action steps to reach the goal), Relevant (to vision of a successful and happy future with spouse and no management responsibilities for a business), and Time Bound (three to five years).

During the next six months, he began thinking about what that really meant. He was forced to consider the control he was willing to give up. The firm's name might change. New owners might manage the firm differently or might even change the firm's vision and strategy. Perhaps they would decide to aim for a different target market. Perhaps they saw the firm's value differently. Although he wanted to transition ownership, it also was possible that none of the six possible attorneys, identified as possible new owners, would be interested in the responsibilities that are tied to ownership.

When a business is generating adequate revenue and not facing any significant changes, lawyers rarely think about what they want from their business. When faced with a "felt need" for a change or an impending change, they are forced to address the question. Regardless of whether you know or not, your state of mind will affect what you are willing to do. When you do not know what you want, you avoid making intentional decisions about what to do and tend to do what is easiest or what holds your attention at any moment.

Face your fears and create an action plan

It was decided that the annual retreat would be used to test the possibility of an ownership transition. This meant facing a nearly unspoken fear and finding out whether any of the six attorneys would be interested in taking ownership of the firm. If the answer was "yes," the rest of the time at the retreat could be used to begin an ownership and leadership transition process. In this case, all six attorneys expressed an interest in ownership. Had they not been interested, this would have been critical data about the available opportunities for purposes of attaining the founder's vision and goals for his happy and successful future.

Ownership and leadership transitions raise strategy issues

The following strategy-related issues are common in any ownership or leadership transition:

  • Do the attorneys to whom ownership and leadership is to be transferred have the requisite skills to be effective? If not, what skills are missing and what is the plan to develop their skills?
  • What is the current organizational business model and strategy? Who is responsible for doing what to bring in business, do the work and collect revenue for delivering the work?
  • What do the incoming owners and leaders want for the future business model and strategy?
  • How will you create a shared understanding and language about the business model for the current and future owners so that coordination of efforts necessary for the transition of roles and responsibilities becomes possible?

Create a shared understanding of and language for discussing strategy issues

In the capacity of law firm consultant and retreat designer and facilitator, I was able to introduce a three-pronged "Open System Business Model" to explain the law firm dynamics, roles and responsibilities. (See Diagrams 1 and 2) The intention was to get the attorneys thinking about what roles and responsibilities, beyond doing good legal work, are necessary to generate clients and revenue in any law firm. This is a significant difference in thinking between partners and associates or owners and employees of a business.

After hearing an explanation of how law firms generate clients and revenue and seeing the business model, they examined the actual data collected on the current state of the marketing and sales roles and responsibilities in the law firm. Review and discussion of the data identified two significant gaps in the marketing and sales activities. The first gap was a complete absence of any attorneys publishing to build lawyer reputation. The second was a weakness in developing and adjusting marketing messages to sell individual lawyers and the firm. This "reveal" was the first step in beginning to answer whether the attorneys had adequate skills and how efforts could be coordinated for the business model to be effective.

Make immediate process changes that will drive information sharing, skill development and future behaviors needed to support the business model

Once the group shared a language and understanding of the business model, they could discuss new behaviors to support the effectiveness of the business model. Academic and anecdotal research has repeatedly demonstrated that the best way to learn how to lead and develop marketing and sales skills is by leading and engaging in marketing and sales activities with specific goals. Leading and engaging in marketing and sales activities in small groups is the ideal process design for the shared goals of learning the skills and achieving sales goals.

Five separate marketing and sales teams were formed after identifying key clients and potential clients, discussing the best opportunities and deciding on the top five opportunities. Each team identified a team leader. I provided a list of team leadership responsibilities and team marketing and sales tasks. This small change also planted the idea that there will be a need for or an organization redesign.

Organization redesign: What is it and why does it matter?

As mentioned in the introduction, an ownership transition often changes the balance of power, puts the firm's identity in flux, and changes roles and responsibilities for making the business model effective. It changes the organization dynamics. Organization dynamics refers to the interaction of strategy, structures, processes and resource allocation.

When we talk about organization dynamics, we are talking about how the different parts of the organization interact to drive the organization's revenue generation strategy. Important questions to review are:

  1. Are the revenue generation centers supposed to be individual attorneys or groups of attorneys? Once centers are identified, what is the strategic action plan that is intended to enable the centers to reach their revenue targets?
  2. Which of the organization's structures ensure that the right people are interacting as needed to reach assigned targets for: revenue generation, work production and revenue collection? Which structures impede such behavior? "Structures" refers to the formal and informal groupings of people.
  3. Which processes are supporting the skills and best practices necessary to reach those targets? Which processes are obstacles? The term "processes" refers to the Open System Business Model processes for generating requests for legal work, creating the legal work and delivering work and collecting fees.
  4. Are resources being allocated as needed to support revenue generation strategic plans?

In closing, prepare for an ownership or leadership transition and increase your success. It's that simple.

Susan Letterman White, JD, MS (Organization Development) is a consultant, trainer, coach and retreat facilitator for professional service providers. She designs and delivers data-based culture change solutions for leadership development, improved work-flow, diversity and inclusion, and business development. Susan is the immediate past chair of the ABA Women Rainmakers (2011-2013), was an employment law litigator and trusted advisor to her clients for more than 20 years and a law firm managing partner before she was awarded her M.S. degree with Academic Distinction in 2008. She is also an adjunct professor at Northeastern University.