As law firms grow, two distinct facets of their operations emerge. While the practice of law refers to the core professional activities of lawyers, the business of law involves operational and strategic activities aimed at ensuring a law firm’s profitability and sustainability.
The business of law consists of numerous activities such as financial management, marketing, branding, client-relationship management, and human resources management. Among these, succession planning is an often overlooked area of the business of law that ensures that a firm remains operational and profitable even as the incumbent leaders retire or move on.
Succession planning is usually associated with law firm leaders as they approach their retirement years. However, the lack of a fixed retirement age in India makes it unclear when to initiate this process. The concept’s association with death or infirmity may also add to the taboo around this difficult yet essential activity. The COVID-19 pandemic demonstrated the need for proactive succession planning, as it highlighted the vulnerability of law firms to unexpected events and the importance of having a clear plan in place.
A PRACTICAL POINT OF VIEW
A notable example of effective succession planning recently unfolded at Luthra & Luthra Law Offices. Following the passing of Mr. Rajiv Luthra, veteran corporate lawyer and founder of the law firm Luthra and Luthra, Mr. Harminder ‘Harry’ Chawla merged his firm, Atlas Law Partners, with Luthra & Luthra Law Office. He was deputed into the role of Managing Partner at the newly merged entity while keeping the legacy of Mr Luthra. This indicates a seamless leadership change that maintains strategic direction while embracing new opportunities for further growth and development.
This amalgamation significantly enhances the firm’s service offerings, offering clients an enhanced range of services, in-depth industry insight, and a distinct competitive advantage, positioning them as market leaders. Following this development, Luthra & Luthra now comprises 62 partners and 215 counsel, operating across four locations. The integration marks a pivotal moment for the firm, blending decades of combined legal expertise with a dynamic and forward-thinking organizational culture.
THE ART OF STRATEGIC SUCCESSION PLANNING
India houses many iconic law firms that are strongly associated with their founder and promoter families that garner substantial personal brand value. Law firms may search for competent individuals from within or outside the firm to take on the leadership roles. Due to the uncertainties of careers and life, it is clear that succession planning is not a one-off decision. Rather, it is a continuing process.
Additionally, succession planning must never be construed as merely a contingency plan or a retirement plan. It is a business strategy with high stakes, and failure to implement it would lead to loss of revenue and clients. If done correctly, succession planning can ensure the sustainability, stability and growth of the firm. Endeavouring early to do so can also allow law firm leaders to precisely define the context of their transitions – allowing flexibility between stepping back completely or assuming advisory roles. Early planning can also aid in preserving the firm’s long-term financial and operational stability, something imperative to law firms of all sizes.
Good succession planning not only involves the identification of potential future leaders to replace the incumbent; but it also involves the transfer of institutional knowledge along with the preservation of the firm’s legacy along with continuity of business and growth.
Another facet of good succession planning involves inclusive and transparent communication of the succession plan to all stakeholders, including not only the firm’s clients, but also its team members.
Early engagement and clear communication with clients about this can ensure that the trust, loyalty, and relationships cultivated arduously remain unaffected by changes in leadership.
THE 7 KEY ESSENTIALS
By its very nature, succession planning is a staggered process involving difficult decisions and heavy emotions. Thus, it can be difficult for law firm leaders to start and continue succession planning. Let us take a look at some essential steps across the way:
1. Commitment to Change and Support from incumbents
Any efforts towards successful succession planning should start with the leaders acknowledging and committing to change. Addressing the incumbents’ future financial security can alleviate some concerns and ensure that the succession process is supported when the time comes.
2. Identifying Responsibility Centres
With time, law firm leaders can assume numerous responsibilities. A good plan recognizes that it isn’t necessary for one single successor to assume the responsibilities. The leader or a specific team or committee can dedicate an effort to identifying the set of responsibilities that need to be allocated to others.
Management committees can be established to help gradually shift leadership responsibilities from founders to senior partners. Involvement of multiple partners in key-client relationships can reduce the effect of the departure of some partners.
3. Identifying Key Positions
The identification of key positions critical to the operations of the firm can be carried out in conjunction with the identification of responsibility centres; which can help in identifying other positions that could require succession planning.
4. Developing a Skill Matrix
After identifying the responsibilities and positions, the skills and competencies required for fulfilling the position can be identified; providing a useful yardstick.
5. Recruitment, Grooming, Upskilling, Development
Considering the skills identified, a pool of potential candidates can either be recruited from outside or chosen and groomed from inside the firm. Potential leaders so identified can be upskilled by training, coaching, mentoring, or shadowing experienced leaders, equipping them with the required expertise.
6. Regular review and improvement
The succession plan should be regularly reviewed to identify gaps. Making the necessary adjustments regularly ensures that the plan is improved continually.
7. Focus on Relationships and Long-Term Success
The meaning of “successful” can differ from person to person and from firm to firm. Therefore, it is important to ponder what success means for the firm. The succession plan should be made according to the long-term goals while prioritizing relationships – with and among clients and partners.
While competitive spirit is good for growth, sustainability is an important parameter in measuring success. Good succession planning can be an important factor in a law firm’s life cycle, whether retaining client confidence amidst changing leadership or maintaining stability in unexpected circumstances. While it is a step towards aiding the success of the next batch of leaders, it can also help incumbents ease into retirement by gradually scaling back their responsibilities.
Thus, law firms of all sizes and practices should undertake succession planning as early as possible to facilitate the seamless transition of key leadership positions from time to time and ensure that the management of the affairs remains in competent hands. After all, failing to plan is the same as planning to fail.
