We expect to see an unprecedented number of law firms go through their first "generational transition" of leadershi between now and the mid-2020s, as founding partners retire and the "next generation" assumes leadership of the firm.
This will not be a smooth transition for many small and midsize law firms, especially in emerging and recently emerged legal markets in Asia, Africa, and Latin America.
In fact, a significant portion of these "first generation" firms -- perhaps as many as 30% -- will not survive more than five years after the last founding partner leaves. Even some strong, highly successful firms will struggle with their first experience at managing the profound changes that a leadership transition can produce.
Of course, having an up-to-date partnership agreement or operating agreement that is more than the minimum required for registration in your jurisdiction certainly increases probability of a cost-effective sustainable change in leadership. But it is not enough.
Even in well-managed firms, my colleagues and I frequently see succession planning and leadership transitions badly distracted, if not crippled, by subtle implications arising from the transition. These are issues that the partnership agreement might not address and that the partners might not have contemplated. For example:
- What will be the impact of the changes in executive responsibilities on the assignment of leadership roles and management responsibilities with practice groups?
- What knowledge, skills, and behaviors will produce the best leadership results for our firm?
- What changes do we need to make to our client relations policies and practices in order to manage the risk of losing the clients that were served by the departing partner?
- How will the change in leadership affect the partnership culture?
- Will there be roles for retired equity partners who want to remain actively affiliated with the firm?
- Do we have the ability, individually and collectively, to lead and manage changes in leadership?
These are not "soft" issues, nor are tangential or remote. They describe the major challenges facing major leadership transitions, even in well-managed law firms. Handling them well, or otherwise, has direct, measurable consequences.
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