Posted by Nigel Wallis, a partner at Legal Futures Associate O’Connors
“I have noticed even people who claim that everything is predestined and we can do nothing to change it, look before they cross the road” – Stephen Hawking
Managing lawyers is never dull. And managing change within a law firm is as far from dull as it gets. Balancing the conflicting drivers and aspirations of professionals, as change is being brought about, can take the Wisdom of Solomon and the deftness of a music-hall plate-twirler.
Changing a law firm to a business structure that properly incentivises and rewards the people who generate the value is one of the trickiest and most important challenges that a managing partner can face.
So what emerging options are there for the Mick Jagger Generation, who can still write the hits but no longer relish three-hour sets on a six-month tour? Or for members of Generation X, who want to build a law firm, but as part only of a wider portfolio of legal and non-legal business interests?
Corporate vehicles and alternative business structures now offer significant opportunities.
A few law firm partners we meet view incorporation of a partnership or LLP purely as a device to extract capital value from the firm. But more and more now see it as a genuine commercial opportunity to pass some ownership and management control to others, whilst staying closely involved as a shareholder to continue contributing towards, and benefiting from, the firm’s future growth and success.
For those further down the track, it seems inevitable that retired lawyers with majority or minority equity stakes in law firm companies will become common-place within the next few years. Dividend pension planning, you could call it.
And for the entrepreneurs in the sector, who see their legal career as part of a wider business agenda, they won’t even need to retain a practising certificate now that alternative business structures allow non-lawyers to own law firms. Their business ambitions are becoming more achievable by the day.
From what we are seeing, the profession is taking a completely fresh look at what ‘succession’ really means. The game has changed and, by recognising the distinction between management succession and ownership succession and that succession planning does not have to mean retirement planning, and potentially exciting options are opening up.