Will Danny Gilbert’s succession be a train wreck or triumph?

The full text of my opinion piece first published in the Australian Financial Review on 31 March 2022. It was #2 most viewed article on afr.com's Companies section on that day.

For law firms, a leader stepping down can be a moment of vulnerability. Most partners know succession done badly can have significant cultural and financial consequences.

So, it’s no wonder?the?announcement at Gilbert + Tobin?that managing partner Danny Gilbert is stepping down is being closely watched across the legal industry.

I suspect the interest is less about the welfare of Gilbert and more about watching a potential train wreck in slow motion. Or, perhaps learning from a best-practice study in leadership transition.

Succession management in law firms is different to major public companies or government agencies.

It’s usually partners at large, not the board, who vote for their preferred leadership candidate. They can also fire them at any time.

The candidate pool for managing partner is usually much smaller, with a strong preference for those in the existing partnership.

‘Home-grown’

Only two of the top 30 firms in?the latest Australian Financial Review Law Partnership Survey?don’t have “home-grown” leaders. The country’s largest law firm, Minter Ellison,?are again in that boat after having two external CEOs from the large consulting firms.

In larger firms, the candidates may have to give up practising law and take on a new career with poor employment prospects after their tenure ends.

In my view, law firms run into succession issues when there is a major power imbalance across the partnership.

Power in a firm is about:

• Decision-making: who can make or significantly contribute to key decisions such as setting direction, allocating resources, recruiting new staff, resolving conflicts and setting reward and remuneration;
• Information: who has access to what information and when they receive it; and
• Relationships: who has sway with key clients and figures inside the firm.

It is usually concentrated in three areas: directed power from the office of the managing partner or executive leadership team; individual power held by specific partners and practice team leaders; and collective power which is held by the broader partnership operating as a whole.

Shared power

To work effectively over time, a firm needs to ensure a sense of shared power.

In other words, the partnership needs to be directed with an agreed strategy led from the top; individual partners need to feel empowered and have the autonomy to build their practices; and at the same time, the partnership feels part of one firm and involved collectively in making critical decisions.

Problems arise when there is a major power imbalance.

When a firm has too much directed power, it may succeed while the “dictator” is in control. However, their departure can result in a massive power vacuum characterised by infighting and wheel-spinning.

Firms with too much collective power become paralysed democracies. Endless meetings to resolve trivial issues mean less partner time on the things that really matter – clients and people. Most collectives also seem to do poorly in building a pipeline of future leaders.

Fly or fail

When partners have too much autonomy, sub-cultures or silos can emerge. If each partner is only looking after themselves, the firm merely becomes a shared office or a hotel for lawyers.

The construct of shared power can be a useful lens to analyse why some firms fly or fail.

From the outside looking in, Gilbert + Tobin appears to be addressing the potential succession risks with an extended process of selection and baton passing.

To avoid this issue repeating, Gilbert + Tobin would be well served by ensuring it has the right power and governance model rather than looking for Danny Gilbert mark II.