ANATOMY OF A FOUNDER

“It’s a love that lasts forever, it’s a love that has no past”. DON’T LET ME DOWN. THE BEATLES.

When people talk about founders, founding fathers or similar concepts there is a special spark attached to it. It refers to the beginning of times. Something that was not there before and suddenly appeared; something completely new. Sort of a small Big Bang. When time goes by, those initial moments become stories, sometimes even legends. Knowing how we started is an important part of who we are.

The case of law firms is a special one. The personal element attached to the legal service makes that law firms are named after their founders. In the initial years, law firms and its founders are about the same thing. It takes time -and a lot of work- until the market accepts that the law firm is a separate and independent entity from its founders. It is this transition between founders and their offsprings where a big part of the future of the law firm rests. Too many Latin American law firms have failed to make this transition properly and doomed its future for this reason.

The nineties were a turning point for the Latam legal market. Most of the current leading firms were either created or changed completely during that period. The legal landscape became bigger, more international and sophisticated. A group of exceptional lawyers lead that process, either as founders or leaders of deep turnarounds in their firms (I will name leaders in both groups as founders). Thirty years later, many of those leaders have recently retired or are about to do so in the next few years. Looking at recent experiences, it is obvious how difficult this process is and will be for law firms in the following years. It is important to look at this situation with deeper lenses.

Idealizing and demonizing founders

Like little babies, law firms depend completely on its founders in the first years. A complex system of relationships among firm members is developed during this period. Strategy, culture, client relationship and development, decision-making, etc. are molded by the special features of the founders. When founders are hard-driven, smart and successful, there is tendency in the system to extend their influence. Founders like control and power; and the rest benefits from their skillful leadership. As this organizational format stays long enough and people get used to it, all responsibility for what happens in the firm stays with the founders. Both for the good and the bad things. Nothing important seems to get done without their input and, of course, they are the ones to be blamed for failures, problems and inefficiencies.

This system is both approved by founders and other partners, either consciously or not. In the short term this tends to work quite well. Successful founders are smart people so it’s hard to find replacements in the short term and improve firm’s performance. In addition, many founders are not very keen at reducing their influence and relevance, so a vicious cycle is created where nothing is changed and everyone is happy with that.

The “Founder’s Trap”

It is difficult for law firm members to clearly identify when this initially successful scheme becomes the seed of future problems. The natural tendency to avoid change is even stronger in this transition challenge because it might jeopardize the existence and identity of the firm. When in doubt, founders and others might prefer to extend the moment of transition.

The problem is that evidences of firm deterioration come normally too late, and damage to image, culture and relationships have already started to occur. The blessing of having great founders have turned into a trap, and nobody noticed that.

Anatomy of a Founder

So what makes founders so special? The first thing is that they were there when everything started. That gave them the opportunity to shape the firm according to their style and values. Both the good and the bad things. In successful firms, those founders have remarkable qualities. Those would typically include:

1. Exceptional knowledge and strategic thinking of the market
2. Remarkable skills for attracting and servicing clients
3. Leading ability for attracting and developing talent necessary for the firm

These and other superb abilities many times come with some shortcomings, such as:

1. An exuberant ego that tends to increase the perception of their strengths over their weaknesses
2. A similar but inverse perception of other members of the firms, when they may compete with founders in influence and relevance
3. A tendency to maintain the status-quo and reject changes that could jeopardize their power
4. A difficulty to accept an open dialogue where partners can express their opinions freely without the fear of negative consequences

In some cases, founders show toxic behaviors that make their shortcomings equal or maybe bigger than their strengths. If so, the transition crisis tends to accelerate and present harsher features; founders’ transition from being the biggest asset of the firm to a severe liability occurs in a shorter period of time. The environment grows weaker and the firm deteriorates fast. I will call members of this group the “Stiff Founders”.

However, when you look at the group of leading firms in the region what you find is that many of their leaders over the last three decades score pretty high on the pros but their shortcomings are less obvious. One reason is that their egos are more under control and therefore are more flexible to criticism and open to other’s ideas. The second reason is that normally they have a genuine wish to develop a firm’s legacy and successful future. But here is where the situation becomes quite complex. These leaders will be called “Flexible Founders”.

Stiff Founders and Flexible Founders

In a way, Stiff Founders are the easy group to analyze. They are christal-clear in their goods and bads. People in the firm know what to expect of them. They may like them or not, stay or leave, but the rules are clear. The firm can hardly stay unharmed from them in the long term but a crisis can be forecasted with anticipation.

On the other hand, the issues with Flexible Founders are harder to deal with. First, because the issues are not as acute as with Stiff Founders. Remember, they add significant value to the firm. Their biggest drawback is, in many cases, that they resist their succession much longer than it is “advisable”. But “advisable” here is not related to their individual capacity or skills, but rather on the need to avoid the “Founders’ Trap”, which is a trap about dependency. In other words, the problem with “Flexible Founders” is not their ability to do their job efficiently -they probably could continue to do it more efficiently than others-, but the dependency they create around them because of that reason.

It is important to note that the “Founders’ Trap” is not created unilaterally by Flexible Founders” but by all partners at the same time. It is the system that maintains the situation and resists change, to avoid risks and all the work a transition requires. This systemic behavior is what makes transition of Flexible Founders so tricky and difficult.

A road less traveled

In order to conduct a healthy and safer transition of founders to next generation partners, some actions are recommended:

1. Founders should make an honest soul search of what are their interests in relation to the future of the firm, and if they want that future to take priority over their individual interests.
2. A clear strategy should be discussed and put in place to balance the direct value a founder provides with the need to make partial transitions to other partners well in advance of the formal retirement schedule.
3. There should be a constant dialogue between founders and partners to make sure the succession process moves forward and productively. Flexibility on the details and consistency in the vision are two key elements of the process.
4. All individual interests -and not just those of the founders- should be postponed for the larger benefit of the firm. It is easy to loose track of what that interest really means. That is why genuine and strong leadership is so important for this process to succeed.
5. Make all key partners champions of the cause. There are too many tricks and risks in this process. The only way to succeed in the long run is to have all critical partners supporting this strategic objective.

All these “common sense” recommendations are very hard to make them happen. That is why an optimal founders’ succession is the road less traveled by law firms in our region. I have been a founder myself in my previous professional life and can attest to the complexities of the role. Dependency on successful and competent founders is a normal outcome of that success. When you look at those leaders, their role is so important and their dedication so intense that the Beatles’ words (“it’s a love that lasts forever, it’s a love that has no past”) look very much applicable. Law firms will need to change that reality if they want to stay equally successful in future decades.