In The Lawyer of 18 November 2019 the headline of one of the articles read: “Skadden and Weil will need more than a couple of magic circle hires to fix their succession problems” While the article focused on the upcoming lateral hire spree, the real issue is why neither firm has been able to groom internal successors. This question resonates strongly with what we at TGO Consulting see in our day-to-day practice: The last of the baby boomers who are now towards the end of their career find it really hard to transfer, power, practice, clients and profit to the next generation. Succession will become an issue because there will be no natural successors.
Time has been incredibly generous to baby boomers
When we work with our clients, we often do a TGO Power Curve© analysis. In order to do that we have developed a clever algorithm that calculates a value for each of the partners based on the size and quality of their practice and their reputation in the market. The result is plotted on a base line, representing the age distribution of the partner group. The graph below represents two different situations. Figure-1 reflects a partnership where revenue and market reputation are concentrated with partners who are now in their late fifties and early sixties (the last of the baby boomers). Figure-2 represents a law firm where the strongest and most successful partners are in their early fifties. As you can see, in Figure B, partners are transferring their practice towards the end of their professional career.
Time has been incredibly generous to the baby boomers. The last baby boomers, who are now in their 60-ties have during their professional career been part of a seismic shift in the legal profession. At the time when they became partner, they could not imagine what the legal world would look like 25 years down the line. They also could not imagine, even in their wildest dreams, how much money they would end up making. The legal profession has been professionalized during this quarter century. Law firms became professional businesses, hourly rates exploded, clients became more professional and the world became more legalized. One could say that the baby boomers became rich and successful without too much effort. They just had to tag along with the developments.
Santa's little helpers
Even though they were riding the wave of the economy, the baby boomers are in a way self-made men and women. They developed their practice along with their clients. Strong partners create weak offspring. Their associates were not trained as potential new partners, but as lawyers who had to be the diligent executors. All the associates were in a way “Santa’s Little Helpers’’, Santa needs them and can not do without, but they will never be the next Santa. Even Santa likes to stay in the limelight of power. The baby boomers are no different, they cling on to power.
In a law firm power comes with having a great practice. From the power perspective law firms are a fragile ecosystem. If you want status in the firm, want to be a thought leader and opinion maker, it is more important that you bring in a large amount of revenue, than having a vision. Those who have the most revenue must be the best partners and we should listen to what they say and obey them. So, if revenue is more important than content, it comes as no surprise that I will want to keep as much revenue in my name as I can. If I create new partners who are better than me, I will lose power and become obsolete. The same will happen if I transfer some of my clients and contacts.
Some baby boomers cling to power and wealth
It is a natural tendency wanting to be loved, admired and relevant. Powerful partners are addicted to standing in the center of attention. They cling on to power. It goes against human nature to step aside and let someone new be the new star. It happens to politicians, to business leaders and captains of industry. It is so hard to let go. That is why the economy and society have been ran by old people for so long. Not because they are better suited for the job, but because they refuse to transfer the power. Why would lawyers be an exception? Once people have power, status and influence, they cling on with all their might.
When we work with our clients doing the TGO Power Curve© analysis, we typically also do a risk assessment. In situations that are represented by Figure A, one of the more prominent risks for the firm is the fact that a number of powerful rainmakers will be retiring over the next 3 to 5 years, without there being adequate replacement. Law firms who are in a Figure A situation have neglected to work on developing real home-grown talent. The associates they trained to be “Santa’s Little Helpers” may have become partner, but they generally lack the entrepreneurship and personality to be rainmakers and opinion leaders. Strong partners created weak offspring because it served them well. The retirement of rainmakers is a major risk to the firm, but the risk will only materialize after the baby boomers have left. Why bother?
The next generation needs to be stronger, not weaker
Obviously, this is a situation that the best and most ambitious law firms would never allow to happen. The most successful of our clients are in a situation that is reflected by Figure B. In these firms the strong partners systematically strive to create offspring that will be the better version of themselves. They know this is needed because the demands of the markets will always go up. Their pride and satisfaction are not in retaining power, but in seeing their protegees become tremendously successful. Such partner will always trust his protegee and will find pride in transferring their practice to the next generation. This type of law firms will be better with each new generation. They will still be the winners in tomorrow’s market.
The transition from a Figure A situation to a Figure B situation, is not an easy one. It can be done only when the baby boomers recognize their ‘mistake’ and care more for the firm than for their own position. It is our experience that some exceptional great lawyers and law firms can navigate through such fundamental cultural transformation. Be it potentially at the cost of the weak “middle generation” …
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