Many of the businesses we meet with talk in general terms about their future plans, but few have a written succession plan in place.
One factor impacting business leaders’ succession planning relates to wariness about competitiveness for increased seniority distracting the tier of emerging leaders from revenue generation.
But we also see reluctance when leaders don’t feel they have a natural successor already in place — or whose mid-tier associates are less interested in traditional paths like partnership.
So, what are the options for firm leaders looking to set the stage for succession?
Looking beyond professionals ‘like us’
While gender diversity continues to improve, senior ranks remain the domain of men.
It can take 12 to 14 years to rise to the level of partner, and two-thirds of women have been admitted for 14 years or fewer.
Out of 50 firms considered by The Australian in its ‘2023 Partner Survey’, just three had 50% or more representation of women among equity partners.
One critical step for firms looking to pick the next generation of leaders, therefore, is to consider talent that might need to be developed — not just those who have already achieved a seat at the table.
This goes beyond gender as well.
Asian Australians account for less than 5% of the law firm partners — an anomaly that has been coined the bamboo ceiling.
Indigenous Australians are under-represented, as are other key groups in our multicultural society. Still, there is some evidence that ethnic diversity as well as gender diversity is improving — a positive shift that widens the talent pool for everyone.
Considering pathways beyond partnership
The journey to partner has long been the path to leadership, but there is increasing evidence that mid-tier lawyers are looking for alternatives.
Some see the concentration of hours worked by partners, and the intense pressure to retain and grow clients, as outside the scope of their ideal career.
Others would rather be well-remunerated as general counsel than navigate seeking leadership roles through partnership, particularly if there’s a large team of more senior partners.
Financial burdens are also a barrier to becoming a partner. Increasingly, the idea of potentially taking on more debt as part of an equity-buy in as a new partner is a daunting financial commitment, especially if there are existing leaders with whom you may not share the same strategic direction.
With the changing attitudes towards partnership, some firms are finding other ways to ensure that talent sticks around as future decision makers, including employee share and firm ownership schemes.
Considering different industry professionals as an option
Most firms remain led by those who specialise in that industry (law firms led by lawyers, accountancy firms led by accountants), but some have tried to balance the demands of business and practice by appointing other professionals in CEO roles, or by appointing managerial teams to support the managing partner.
This has the advantage of widening the pool of potential leaders, to include those with business backgrounds or senior experience from other professional services organisations.
Sam Nickless, CEO and Partner at Gilbert + Tobin, has a law degree but built his career working in banking and with consultancy McKinsey.
Sumith Perera, COO at Hall & Willcox, has a background in accountancy.
CEO of Mills Oakley for nearly 20 years is John Nerurker, who also trained as an accountant.
Looking outside the profession can not only bring in significant experience and commercial acumen but it does remove the pressure on high-fee earners to switch their focus to management, marketing and other business needs.
Poaching or coaching?
If a firm does decide it wants to keep its leadership based on the traditional model, a final question is whether to bring in lateral hires who can progress to leadership roles or coach long-term senior associates to develop their leadership skills.
Poaching seems to have become slightly less common in 2023 than in recent years, but it is still common to see whole teams captured by the competition.
This approach also extends to bringing in high-performing, experienced partners who can hit the management track running.
If internal development is the preferred option, then good firms are investing time and energy in supporting team members to progress up the ladder, helping would-be partners become more rounded and build their business insights, while recognising their technical prowess.
This can still be a difficult path to negotiate; but firms can help address the coaching challenge by supporting high performing juniors and keeping conversations open about their expectations and future plans.
How to put out the fire
- Start the succession discussion early and use this to inform discussions about the firm’s future direction, talent mix and retention strategy.
- Consider the skills you believe are needed for leadership and look beyond legal qualifications.
- Consider the value of diversity — of gender, ethnicity, experience and background.
- Work with emerging talent and lateral hires to understand what career progression looks like to them, so you can help tailor a path to keep the best leaders engaged.
