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The Disruption in Transitioning to a New Firm Leader

For some time now I have been personally appalled at the incredibly short time period that some firms allow for any incoming firm leader to properly orientate themselves to the magnitude of their new role. In some firms, it is as though we met on Saturday to discuss the ongoing management of our firm (perhaps as part of an annual partner retreat), voted for a new leader and then informed that fortunate individual that they should expect to start in their new role on Monday!

By Patrick J. McKenna  
on

Legal Revo Purple_300x250For some time now I have been personally appalled at the incredibly short time period that some firms allow for any incoming firm leader to properly orientate themselves to the magnitude of their new role. In some firms, it is as though we met on Saturday to discuss the ongoing management of our firm (perhaps as part of an annual partner retreat), voted for a new leader and then informed that fortunate individual that they should expect to start in their new role on Monday!

It is doubtful that any firm contemplates the replacement of its firm leader with enthusiasm, even when the departure is expected. Quite apart from the human drama involved, there may be significant direct financial costs to be contemplated.

When a firm leader’s departure is predictable, as in the case with their term reaching an end — there are numerous uncertainties (such as the identity of an appropriate successor) that, if handled poorly, can have a major negative impact on the firm’s performance. It is important to understand that overall performance of the firm can suffer, sometimes spectacularly so, during any transition from an outgoing leader to a new one — and I have witnessed examples of this diminished performance extending for as long as a year.

I believe that firms need to be aware of this phenomena so that they can take appropriate steps to ensure a controlled and effective process that minimizes the inevitable ‘disruption time.’ As a starting point, it should be understood that the transition process for any leadership change will involve at least three sequential phases.

  1. The ‘Best Before’ Date Becomes Apparent

The first phase occurs when a firm, for whatever reason, begins to speculate about the continuity of its leadership. This may happen when the leader is coming to the end of his or her acknowledge term in office, is reaching a logical retirement age, is simply perceived to be less enthusiastic and visibly committed to the position, or begins to suffer a lack of partner confidence.

The early warning signs are usually apparent to selective partners, while members of the Executive Committee or board may start to act in such a way as to indicate they are concerned. Meanwhile, top officials or board members may pose questions, apparently innocently at first, to the COO and key administrative professionals such as “How are things going around here?”

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In some instances, there may be other signs — perhaps frustration, directly expressed amongst the partners, over financial results. Some may even become openly resentful of the firm’s management team. Often, I have seen such difficulties occur in firms that have relatively long-serving managing partners.

Sometimes the issues that might lead to the unplanned replacement of a firm leader make legal news and for a time become the subjects of lateral headhunting efforts. In other instances, the situation is barely noticed outside the firm until it is announced that a firm leader is stepping down “to return to their practice.”

To the extent that any firm leader is aware his or her position is under threat, diminishing performance under stress may mean the speculation becomes self-fulfilling. Similar circumstances arise when it becomes widely known that an existing leader is likely to retire at some time in the not too distant future.

Such speculation, as is associated with such warning signs, inevitably diverts the attention and time of individual partners to unproductive activities like ruminating over what actions the firm is likely to take and why it is taking so long. Key rainmakers can also become progressively distracted and unsettled. This all simply compounds the disruption at the firm.

  1. The Lame Duck Syndrome

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The second phase commences immediately upon any announcement that a firm leader is officially stepping down. This is the “lame duck” period that lasts until the selection of the new incumbent.

During this period, the influence, authority and motivation of the outgoing firm leader gradually, if not rapidly, wanes. Amongst both partners and administrative professionals, attention and interest is now directed to the activities of the Nominating Committee, as well as speculation about who the possible candidates might be, and when the new firm leader is likely to be selected.

The precise timing can often be uncertain, even for those directly involved with the nomination process. Certain of partners may, not unnaturally, begin to focus more on the politics of the situation and on positioning themselves to best curry the favor of any new incumbent. Or alternatively, the announcement may set off an undesirable competitive dynamic amongst numerous partners through the firm as they compete for attention.

In one unhappy example, a very long-serving managing partner unexpectedly announced in January that he would be stepping down at the end of that year. The ensuing disruptive politicking caused two senior rainmakers to jump into the open arms of a competitive firms, whose Chair confided to me that, “We would never have been able to attract this talent had it not been for their dysfunctional transition process.”

In discussion with David Morley, the retired Senior Partner at Allen & Overy, he explained:

We have had our current election system since 1998 and never lost any unsuccessful candidate as a result of not being selected for the position they aspired to hold. I don’t say it would never happen. However, we go to great lengths to try to avoid that outcome. Three key steps we take include:

  1. Our elections are conducted by secret ballot, one partner-one vote (these days all online) by an independent body — the Electoral Reform Society — who specialize in conducting elections to high standards. They have standing instructions only to tell us who the winner is, and, specifically, not to tell anyone the number of votes attributable to any candidate. That was designed to avoid any sense of humiliation, etc.
  2. It is accepted that the first call any successful candidate makes — even before his spouse — is to the unsuccessful candidates to thank them and to emphasize they have a bright future in the firm.
  3. We ‘show the love’ to unsuccessful candidates with many partners going to see them and tell them they want them to stay with us.

I think it is also a factor that our elections have never been acrimonious, polarized or conducted by way of personal attacks. That would be a fatal election strategy that partners would reject. So there is limited damage done to personal relationships between the candidates.

Also, in this second phase firm leaders need to define the future challenges facing the firm and the qualities that any new firm leader will need to address those successfully. Depending on the culture of the firm this can be very beneficial to improving morale, commitment and partner relationships (“Someone is listening to us.”)

If this phase is handled well it can be a very positive experience for the firm and immeasurably helpful to the new leader. Handled poorly, however, this period of hiatus may become an extended one, possibly allowing the firm to drift, if not become immobilized.

  1. Getting Resettled

The third phase begins when the new firm leader takes up his or her position. Research suggests that, typically, this phase may last for 100 days to six months or more. This is the time it takes for firm partners and administrative professionals to settle into a productive routine after getting oriented to a new leader’s style and approach.

It is also the time when a new leader takes time to assess the firm, its strategic direction and the competencies of the management team. If, as a result of his or her assessment, the new incumbent feels obliged to seek significant change in the direction of the firm or to introduce changes to the leadership team, this phase may extend even longer while these key changes are made. And, it can extend even later, while the new management team finds its feet.

Going Forward

While each of these three phases may not occur in each firm, this period of transition from one firm leader to the next might easily last for at least 12 months and sometimes longer. In our increasingly competitive world most firms simply cannot afford to risk substandard performance for this length of time. The damage can be substantial and the recovery — even with an outstanding new firm leader — long and slow.

Part of the reason is that this transition does not just impact on your board, partners and administrative professionals. Other important stakeholders (e.g. bankers, key clients and strategic alliances, etc.) can find the process similarly disruptive to their relationship with a firm. Even without assessing these, it is of the utmost importance that all possible steps be taken to minimize the length and negative impact of the transition period.

My experience — strongly supported by academic research into the organizational processes involved — has led me to see that the transition process can and should be managed with as much deliberation and care as the selection process itself to ensure less disruption and a smoother path for the firm forward.

Patrick J. McKenna is an internationally recognized author, lecturer, strategist and seasoned advisor to the leaders of premier law firms. He is the author of eight books, most notably his international best seller, First Among Equals, and most recently, Serving at the Pleasure of My Partners. His consulting expertise was acknowledged in 2008 when he was identified through independent research compiled and published by Lawdragon as “one of the most trusted names in legal consulting” and his three decades of experience led to his being the subject of a Harvard Law School Case Study entitled “Innovations in Legal Consulting” (2011). He can be reached at patrick@patrickmckenna.com.

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