Is Your Firm a Next-Generation Laggard?

Retirement Realities

A PricewaterhouseCoopers survey as covered in The New York Times (12/27/09) of more than 300 companies across 12 industries contains a graph showing that about 34% of managers and 27% of executives in 2008 would be eligible for retirement in five years. They are closer now. The percentage for all workers was about 17%. This is likely to be true of law firms as well as client organizations. This is a great opportunity for the next generation of leaders and managers, but will there be enough of them from the much smaller Generation X, and will they be ready?

Shouldn't this forecast shake up management enough to get some serious succession planning and transitioning going at all levels? Well, numerous surveys find it's not happening much, and neither is knowledge transfer.

Gen X Bottlenecks with Boomers

When the economy and investment portfolios rebound, Boomers who put their plans for “re-careering” on the shelf during the recession to hold on to what they have are expected to leave current positions for new career destinations. I am not in favor of involuntarily removing productive people, but for the sake of providing opportunities to the generation waiting in line, senior lawyers' roles and responsibilities need to shift at some point. When most firms operated on a lockstep partnership system, this was easier to arrange.

For now, the trick is to capitalize on Boomer knowledge and experience without alienating the bottlenecked Gen Xers. One answer is to pay Boomers still in place now to transition their valuable acquired wisdom, contacts and skills before they up and leave with these precious assets, or fail to pass the baton and client bonds. That will prepare Gen Xers to thrive when the bottleneck opens to their benefit, as it eventually will.

Will you or your competitors be the ones to invest and lock in these resources and be ready for the upswing?

Transitioning to Gen X Leaders

What are the potential strengths and liabilities of first-phase Generation X l prospective leaders now approximately age 38 to 48? (Note: The younger part of the Gen X cohort differs from the older half, as they were influenced by different formative events and circumstances.) Many had been left to fend for themselves or faced the job search hardships of the late 1980s recession. They are hard-working and resourceful. Their skepticism and distrust of institutions made them resilient and gave them strong survival skills. It's also given them the ability to develop many options. They are more globally aware than Boomers, and have a better appreciation of women in authority roles in general. They are also faster than Boomers when it comes to adapting to new technology. Other strengths include adaptability and openness to challenge and variety.

On the other hand, they do have certain serious liabilities as managers ' including impatience, relatively poor people skills and occasional cynicism. These attributes frequently surface in their roles as supervisors and mentors of the younger Gen Y/Millennials, and can lead to potential clashes between Generation X and Generation Y. Gen Xers tend to like to work autonomously and are proud of their independent resourcefulness. Gen Yers, by way of contrast, like working in teams, and want and need a lot of management guidance. They ask a lot of questions upfront because that is what they were educated to do and they want to feel secure that they will do things right and garner praise. Gen X finds this demand for continual attention frustrating, even annoying, and considers Gen Y to be coddled and over-protected. It's likely Gen X leaders will be substantially different from the older half of the Boomer cohort leaders who have generally been in charge until recently. Those two generations are typically different from each other. And the fast-changing circumstances require different styles and responses.

Changing the Culture with Gen X Taking the Lead

Here are a few examples to illustrate how an approach open to new ideas and succession triumphs whereas holding on to the old does not. At Cravath, Swaine & Moore, perhaps the best-known and historically conservative “white-shoe” law firm, no revolution has been necessary to pass the baton. Increasingly over the last decade (as described in a story by Gina Cron in The Wall Street Journal, May 28, 2010, “At Cravath, Younger Guns Ride Herd”), a new group of partners in their 30s and 40s (Gen X) have decided to stop waiting to be called.

They are building new relationships and taking on work and client management that historically was handled by partners in their 50s. Abandoning the deferential culture of forwarding deals up the seniority line, the Gen X partners wanted to work on those deals themselves now and not wait. They have gone after the clients and kept them. Unlike the situation in some firms, the Cravath senior partners don't mind, and they nurture the new environment.

Why? For one thing, their compensation is not affected, given the lockstep system. The younger partners' more aggressive style means they get to make a name for themselves at an earlier age ' and the older partners continue to thrive with less burden. This is essential to motivate transitioning. The Baby Boomers generally are happy to ease up somewhat and not be aggressive if their compensation is not an issue. They also think that the younger “guys” should be working with their banker peers.

The senior partners didn't want to do hostile takeovers, but the younger partners were happy to jump into the fray. The results so far indicate it's working out for everyone: the partners, the team and the clients. The firm is getting more marquee deals and the Gen X partners are getting their chance to shine without knocking the Boomers out of the way.

When It Doesn't Work

By contrast, a long-prominent Florida law firm has resisted shifting authority, and has experienced a large number of partners exiting. Some people even think it is fighting for survival. While its leading practice area, historically real estate, has been in the doldrums as it has been for any firms, that's not the long-term problem.

According to an article in The Daily Business Review (an ALM sister publication of this newsletter) by Julie Kay, “Are Ruden McClosky's Troubles Due to Its 'Nice Guys' Firm Culture?”, the firm has been criticized for failing to involve younger partners in firm management. Leadership has been in the hands of founders and partners in their 60s and 70s. In the very democratic selection system, the older partners have stayed in power.

A former partner was anonymously quoted as saying that the firm needs to reach down into the ranks, but he thinks it refuses to change. However, some current partners say they have made an effort to reach down into the younger generation, appointing them to committees to tackle a variety of management issues. Will it be enough? When will real power and strategic thinking shift to the younger Boomers and Generation X partners?

According to the article, it doesn't appear that the firm is doing succession planning, and even at the top there is no successor being groomed. That makes for a precarious situation, especially in these uncertain times when firms can't depend on what worked or at least didn't threaten stability in the past.

Are They Ready?

With the demographic phenomenon of a small Generation X cohort, firms are faced with a situation in which much of the next generation is either unwilling or may not be suitably trained to take over the demanding responsibilities of leading their businesses to the productivity standards the Boomers sought and achieved.

If your firm fails to implement succession strategies now, you may well find yourself with a leadership gap in just a few years. And what will start as an internal problem can soon escalate to a service delivery problem. Wouldn't you rather impress your clients with the kind of long-term thinking that protects business interests and serve as a model?

Brain Drain: Employers Don't Get It!

A MetLife study on employers' attitudes about the forecast brain drain when older (Boomer) workers retire suggests that employers don't adequately understand motivations. When ranking factors that would keep older workers around long enough to accomplish knowledge transfer, employers placed little value on creating an inviting, positive workplace culture and other benefits. Responses in the study indicate that only 12% of employers believe that workers' desire to maintain social contact with colleagues is an important motivation to keep working. Only 5% of employers said their workers appreciate feeling needed for an assignment. These findings reflect law firm circumstances.

So why keep working? Employers seem to think the only important motivation is money, but studies throughout this decade have indicated that is not so. The intellectual stimulation and social contact with colleagues as well as feeling valued and making a difference have been reported as significant reasons to keep working by workers themselves.

Employers need to turn serious attention to the coming brain drain and need for knowledge transfer using the following options or others they come up with: mentoring, coaching, enhanced training, developing succession plans, and exploring phased retirement scenarios as well as making the workplace a conducive place for pursuing organizational and individual goals.

Taking Succession Planning And Transitioning Seriously

The longer firms put off serious preparation for the next generation to step into the big Boomer shoes, the greater the danger. As huge numbers of Boomers near the exit in their current workplace (not necessarily out of the workforce as such), the more behind the eight ball and the less competitive firms will be as the economy picks up and competitors' innovation accelerates. The current breather many organizations have allowed themselves during the recession will leave them gasping for air. Succession planning and preparation is needed at all times. Anyone whose expertise and contacts will be missed can cause a serious business disruption and loss of clients if quality transitions are not in the works.

Start taking succession and transitioning seriously by drafting answers and solutions for your firm to the following questions:

• What will be the impact of generations X and Y on the practice of law in the 21st century? What does senior management need to know to ensure a smooth transition to the next generation?
• What is the current preparedness of the younger generation to take the reins of their businesses ' mindset, training relationship skills? Do they even want to follow in the retirees' footsteps given the demands on their personal lives?
• What are the potential professional development and human resources solutions?
• What role can technology ' and particularly Web 2.0 tools ' play in addressing the succession challenge?

What is stopping you and your firm from vigorously preparing to avert a brain drain, put competent leadership in place and be the firm your lawyers and clients want to stay with for the long term?

Phyllis Weiss Haserot, a member of this newsletter's Board of Editors, is the president of Practice Development Counsel, a business development and organizational effectiveness consulting and coaching firm working with law firms for over 20 years, Phyllis is the author of “The Rainmaking Machine” and “The Marketer's Handbook of Tips & Checklists” (both West 2009). She can be reached at [email protected]. Web: www.pdcounsel.com.

It happens every time we have a “recession” or economic turndown. But this time it is more daunting, not only given the severity of the economic situation, but also given the demographic realities. The talent crunch when the economy turns up and firms are hiring again will be magnified because so many Boomers are approaching the age when they will “retire” from current positions ' voluntarily or involuntarily.

In any case, they may be gone. And many are managers, firm and practice leaders as well as subject matter experts. Will there be enough people trained, experienced and ready to capably step into their shoes? How will the Boomers who want to stay be productively employed for mutual benefit?

The recession has given organizations a breather from brain-drain threats, and many Boomers would like to keep working for a long time more, even if they can afford to retire. Surveys in 2004 and 2005 when the economy was robust and retirement funds were healthy revealed that about 80% of Boomers wanted to keep working after age 65 in some capacity ' reinventing retirement, as the then newly coined phrase goes. But don't make the mistake of complacency.

Retirement Realities

A PricewaterhouseCoopers survey as covered in The New York Times (12/27/09) of more than 300 companies across 12 industries contains a graph showing that about 34% of managers and 27% of executives in 2008 would be eligible for retirement in five years. They are closer now. The percentage for all workers was about 17%. This is likely to be true of law firms as well as client organizations. This is a great opportunity for the next generation of leaders and managers, but will there be enough of them from the much smaller Generation X, and will they be ready?

Shouldn't this forecast shake up management enough to get some serious succession planning and transitioning going at all levels? Well, numerous surveys find it's not happening much, and neither is knowledge transfer.

Gen X Bottlenecks with Boomers

When the economy and investment portfolios rebound, Boomers who put their plans for “re-careering” on the shelf during the recession to hold on to what they have are expected to leave current positions for new career destinations. I am not in favor of involuntarily removing productive people, but for the sake of providing opportunities to the generation waiting in line, senior lawyers' roles and responsibilities need to shift at some point. When most firms operated on a lockstep partnership system, this was easier to arrange.

For now, the trick is to capitalize on Boomer knowledge and experience without alienating the bottlenecked Gen Xers. One answer is to pay Boomers still in place now to transition their valuable acquired wisdom, contacts and skills before they up and leave with these precious assets, or fail to pass the baton and client bonds. That will prepare Gen Xers to thrive when the bottleneck opens to their benefit, as it eventually will.

Will you or your competitors be the ones to invest and lock in these resources and be ready for the upswing?

Transitioning to Gen X Leaders

What are the potential strengths and liabilities of first-phase Generation X l prospective leaders now approximately age 38 to 48? (Note: The younger part of the Gen X cohort differs from the older half, as they were influenced by different formative events and circumstances.) Many had been left to fend for themselves or faced the job search hardships of the late 1980s recession. They are hard-working and resourceful. Their skepticism and distrust of institutions made them resilient and gave them strong survival skills. It's also given them the ability to develop many options. They are more globally aware than Boomers, and have a better appreciation of women in authority roles in general. They are also faster than Boomers when it comes to adapting to new technology. Other strengths include adaptability and openness to challenge and variety.

On the other hand, they do have certain serious liabilities as managers ' including impatience, relatively poor people skills and occasional cynicism. These attributes frequently surface in their roles as supervisors and mentors of the younger Gen Y/Millennials, and can lead to potential clashes between Generation X and Generation Y. Gen Xers tend to like to work autonomously and are proud of their independent resourcefulness. Gen Yers, by way of contrast, like working in teams, and want and need a lot of management guidance. They ask a lot of questions upfront because that is what they were educated to do and they want to feel secure that they will do things right and garner praise. Gen X finds this demand for continual attention frustrating, even annoying, and considers Gen Y to be coddled and over-protected. It's likely Gen X leaders will be substantially different from the older half of the Boomer cohort leaders who have generally been in charge until recently. Those two generations are typically different from each other. And the fast-changing circumstances require different styles and responses.

Changing the Culture with Gen X Taking the Lead

Here are a few examples to illustrate how an approach open to new ideas and succession triumphs whereas holding on to the old does not. At Cravath, Swaine & Moore, perhaps the best-known and historically conservative “white-shoe” law firm, no revolution has been necessary to pass the baton. Increasingly over the last decade (as described in a story by Gina Cron in The Wall Street Journal, May 28, 2010, “At Cravath, Younger Guns Ride Herd”), a new group of partners in their 30s and 40s (Gen X) have decided to stop waiting to be called.

They are building new relationships and taking on work and client management that historically was handled by partners in their 50s. Abandoning the deferential culture of forwarding deals up the seniority line, the Gen X partners wanted to work on those deals themselves now and not wait. They have gone after the clients and kept them. Unlike the situation in some firms, the Cravath senior partners don't mind, and they nurture the new environment.

Why? For one thing, their compensation is not affected, given the lockstep system. The younger partners' more aggressive style means they get to make a name for themselves at an earlier age ' and the older partners continue to thrive with less burden. This is essential to motivate transitioning. The Baby Boomers generally are happy to ease up somewhat and not be aggressive if their compensation is not an issue. They also think that the younger “guys” should be working with their banker peers.

The senior partners didn't want to do hostile takeovers, but the younger partners were happy to jump into the fray. The results so far indicate it's working out for everyone: the partners, the team and the clients. The firm is getting more marquee deals and the Gen X partners are getting their chance to shine without knocking the Boomers out of the way.

When It Doesn't Work

By contrast, a long-prominent Florida law firm has resisted shifting authority, and has experienced a large number of partners exiting. Some people even think it is fighting for survival. While its leading practice area, historically real estate, has been in the doldrums as it has been for any firms, that's not the long-term problem.

According to an article in The Daily Business Review (an ALM sister publication of this newsletter) by Julie Kay, “Are Ruden McClosky's Troubles Due to Its 'Nice Guys' Firm Culture?”, the firm has been criticized for failing to involve younger partners in firm management. Leadership has been in the hands of founders and partners in their 60s and 70s. In the very democratic selection system, the older partners have stayed in power.

A former partner was anonymously quoted as saying that the firm needs to reach down into the ranks, but he thinks it refuses to change. However, some current partners say they have made an effort to reach down into the younger generation, appointing them to committees to tackle a variety of management issues. Will it be enough? When will real power and strategic thinking shift to the younger Boomers and Generation X partners?

According to the article, it doesn't appear that the firm is doing succession planning, and even at the top there is no successor being groomed. That makes for a precarious situation, especially in these uncertain times when firms can't depend on what worked or at least didn't threaten stability in the past.

Are They Ready?

With the demographic phenomenon of a small Generation X cohort, firms are faced with a situation in which much of the next generation is either unwilling or may not be suitably trained to take over the demanding responsibilities of leading their businesses to the productivity standards the Boomers sought and achieved.

If your firm fails to implement succession strategies now, you may well find yourself with a leadership gap in just a few years. And what will start as an internal problem can soon escalate to a service delivery problem. Wouldn't you rather impress your clients with the kind of long-term thinking that protects business interests and serve as a model?

Brain Drain: Employers Don't Get It!

A MetLife study on employers' attitudes about the forecast brain drain when older (Boomer) workers retire suggests that employers don't adequately understand motivations. When ranking factors that would keep older workers around long enough to accomplish knowledge transfer, employers placed little value on creating an inviting, positive workplace culture and other benefits. Responses in the study indicate that only 12% of employers believe that workers' desire to maintain social contact with colleagues is an important motivation to keep working. Only 5% of employers said their workers appreciate feeling needed for an assignment. These findings reflect law firm circumstances.

So why keep working? Employers seem to think the only important motivation is money, but studies throughout this decade have indicated that is not so. The intellectual stimulation and social contact with colleagues as well as feeling valued and making a difference have been reported as significant reasons to keep working by workers themselves.

Employers need to turn serious attention to the coming brain drain and need for knowledge transfer using the following options or others they come up with: mentoring, coaching, enhanced training, developing succession plans, and exploring phased retirement scenarios as well as making the workplace a conducive place for pursuing organizational and individual goals.

Taking Succession Planning And Transitioning Seriously

The longer firms put off serious preparation for the next generation to step into the big Boomer shoes, the greater the danger. As huge numbers of Boomers near the exit in their current workplace (not necessarily out of the workforce as such), the more behind the eight ball and the less competitive firms will be as the economy picks up and competitors' innovation accelerates. The current breather many organizations have allowed themselves during the recession will leave them gasping for air. Succession planning and preparation is needed at all times. Anyone whose expertise and contacts will be missed can cause a serious business disruption and loss of clients if quality transitions are not in the works.

Start taking succession and transitioning seriously by drafting answers and solutions for your firm to the following questions:

• What will be the impact of generations X and Y on the practice of law in the 21st century? What does senior management need to know to ensure a smooth transition to the next generation?
• What is the current preparedness of the younger generation to take the reins of their businesses ' mindset, training relationship skills? Do they even want to follow in the retirees' footsteps given the demands on their personal lives?
• What are the potential professional development and human resources solutions?
• What role can technology ' and particularly Web 2.0 tools ' play in addressing the succession challenge?

What is stopping you and your firm from vigorously preparing to avert a brain drain, put competent leadership in place and be the firm your lawyers and clients want to stay with for the long term?

Phyllis Weiss Haserot, a member of this newsletter's Board of Editors, is the president of Practice Development Counsel, a business development and organizational effectiveness consulting and coaching firm working with law firms for over 20 years, Phyllis is the author of “The Rainmaking Machine” and “The Marketer's Handbook of Tips & Checklists” (both West 2009). She can be reached at [email protected]. Web: www.pdcounsel.com.