Successful succession

by 16 Sep 2008

Succession planning is a particular challenge in the professional services and legal sector, as firms face a plethora of challenges on this front. Kate Gibbs looks at solutions to these succession planning problems and how to guarantee the future people viability of professional services and law firms

Some recent high profile examples of bad succession planning provide excellent lessons in what not to do. The best came from Citigroup, where a lack of a succession plan for the top job in New York led to public sniping between its former chairman and chief executive, and his successor, via the Financial Times. The top man admitted he would not give himself “very good grades” on the matter of succession planning, a mistake that led to some very discontented top managers and the eventual resignation of the person picked to the do the job.

The problem of who will take who’s role if and when they leave, and how to give each individual a clear sense of where they are heading, is one that falls more and more to human resources professionals. And nowhere is this a more complex job than in professional services firms – where partnership is the career ambition of most employees; where the loss of a key player can see create chaos across an entire practice area and the loss of major clients; where highly ambitious and motivated professionals want to know where they are heading; and where view vary on how stringently traditional promotion and succession models should be adhered to.

Making things more complex for the professional services firm over other types of organisation is the fact that these firms are people centric. In professional services, where consultants and professionals do technical and unique work on an ad hoc basis, the firms sell people – be it via client service, business advice, financial advice, legal advice. Without the people there is no product. So how do you protect the product, while people within the firm come and go, quit, resign and are fired?

Professional services are starting to see the importance of funding future leadership, especially while talent is in such short supply. “[If you’re not careful,] now you’re going to find yourself with empty benches, and no one is going to take up the reigns,” says Lisa Barry, head of Deloitte Consulting’s human capital practice.

If it is to be successful, succession planning has to take into account this unique characteristic within the professional services industry says Andrew Kesik, partner at PKF Chartered Accountants and Business Advisers. The trick is to build a strategy that can accommodate the various idiosyncrasies of people, while being very clear about where everyone is heading, he says.

“It’s about growing the business and passing the baton to have a sustainable practice. The nature of professional services is that the practice lives on, the brand lives on, but the proprietors come and go. Succession has to be one element of a broader strategic direction of the practice,” says Kesik, who advises law firms and other professional services firms on building successful succession plans.

“It’s about the strategy. Where are we going, how do we get there, what do we need to get there, what sort of values should the practice have, and what are the reward metrics to support those values.” In order to drive an efficient succession system in the business, human resources must work with senior management and the partners to develop this strategy,” says Kesik.

Directions, please?

Giving career direction is relatively simple at Egon Zehnder International, a global executive search professional services firm where everyone is on the track to partnership. In a unique arrangement, the language of titles within the firm includes ‘pre partner’, ‘equity partner’ and ‘partner’, as well as ‘principal’, which means you’re just a two-year step away from partnership. “We don’t have any non-partner tracks and we have no part-time models. Everyone is hired on the premise that they will want to become a partner,” Jane Allen, managing partner of the Sydney office.

At Egon Zehnder, partners go up for election every year. It’s a rigorous system where training people for partnership is central to their professional success and the future of the firm. For more than 40 years, every person who has gone up for election succeeded, a result of a stringent regime by which pre-partners are assessed and guided to pave the way for their success in the internal elections.

But partnership is taken very seriously, and a rigorous vetting system eliminates people before they get in the firm. “I think we’re extraordinary in the time that we spend on potential candidates. We put people through 25 interviews globally. If two people have issues with them, we don’t hire them. We invest an enormous amount of energy in hiring the right people,” says Allen. Once it has hired the right people and put in the training, succession falls into place, she says.

At Deloitte, succession is done on a “micro-market”basis, which means all professionals are not heading for a few partnership positions but are gradually prepped to be successors via smaller leadership opportunities in smaller business units. This model was introduced to make sure the firm was progressing people at the rate they would expect to be progressed, and harmonising that with what the business will need from them. Professional services face a unique challenge in satisfying their staff, says Barry at Deloitte. She argues that firms need to think very carefully around how they cater to the needs of these “highly talented achievement oriented people that are on the move”.

Most professional services firms would be suffering from the fact that these people want to head in a certain direction, quickly. “They want to go as far as they go at the pace that suits them. But invariably you’re going to get a lot of people who are qualified for the one job,” says Barry. She recommends firms “avoid that crusty layer by innovating their practices and introducing more layers to their promotions and successions. That way, if someone leaves, there is a host of people who can replace them, not just a handful. “So growing out the top line and creating a whole new business layer by creating the extra granularity. They can make their way up the business lines and then a whole new layer.”

Entry level to partner, quick

Swaab Attorney’s CEO Bronwyn Pott believes that employees who want to move quickly towards partnership must be allowed to do so. Pott says the nature of a law firm allows people to grow their own opportunities, and leverage that to fill partnership roles. As talent is hard to find and harder to keep, this prepares any organisation for eventual succession.

Succession is made easier when professionals are keen to accelerate their career development. The net can be cast further when it comes to replacing people in top positions. A lot of law firms, at least, are fast-tracking their younger lawyes to satisfy their ambitions (and therefore retain this talent) as well as prepare these younger lawyers for positions up the professional ladder, says Pott.

“So you might have said that someone had to spend three years on this before they progressed to the next level, and now you’re finding it’s 18 months or so. They are spending a lot of time training people,”says Pott. She believes that HR must accommodate, and accept that firms must move with the needs of their employees to retain them, and to prepare the firm from any losses in the top ranks. “The policies are still in place, but they are being stretched a little.”

On fast-tracking arrangements, Pott warns HR that standards must be maintained, even if the timelines are altered. Someone shouldn’t be moved into a position unless they are ready for it, she says. The challenge is in prepping them for the role ahead of the actual succession. “I have had people who want to promote someone and I have said ‘no’, because these are our criteria that we sweat and bleed over, and this person can’t meet the criteria yet. You have to stick to the standards, but the timeframes are being pushed.”

Talking about my generation

Baby boomers are learning and adapting, says Pott at Swaab Attorneys. Gone are the days when a person could climb the ranks at a pre-defined pace, gone are the old attitudes to mentoring, gone are the prejudices around gender and age when it came to who could take on a role.

“[Baby boomers] are looking at new ways of treating people. They know that to get the best out of people they have to mentor. Young lawyers are smart, they are quick. Older lawyers are happy to encourage them. They are not threatened by it, they think it’s fantastic,” Pott says of succession best practice. More experienced members of the team must mentor in order to ensure successful succession, she says.

Swaab Attroneys has had to completely change its culture in order to lure new talent as well as ensure a smooth succession line. The model adopted by the firm meant new lawyers, predominantly younger ones, could work flexible hours and leave work when they liked, as long as they backed themselves. This revolutionary system sees a trade-off around profitability: “we were asking these people to back themselves. OK they may get a salary somewhere else, but they would be working until 10pm every night,” says Pott.

But the old-school model of succession, whereby your promotion depends on what school you went to or who your father is, is no longer sustainable for the professional services anyway, says Deloitte’s Barry. The costs, and the risk, are too high for organisations in today’s market to maintain, she argues. “The old school model costs a lot of money. You’re basically hiring people who are not guaranteed revenue generators. You’re basically adding risk to a highly competitive industry that is also very visible. In a high performance culture you live and die by your performance,” she says.

“In the old days reporting was less frequent, competition wasn’t as aggressive and you could get away with some boys’ club calls. It would take years for those situations to be ironed out, if at all. At our firm and others, this change in culture is driven by the sheer economics of having a strong partnership model. There is no room for free riders.”