THE ROAD AHEAD:

In all honesty, we have to recognize that the Indian legal industry is still young with most law firms not having gone through a phase of succession, with most of the founders still leading their respective firms. Some of the law firms that have been around since before Independence have in fact diluted the family equity and brought in non-family equity partners as part of their strategy for the future.

As we are soon approaching a period of growth in our industry, where the next 5-7 years will see a lot of Founding and Managing Partners retiring or passing the baton to the next generation, it becomes crucial that these firms prepare themselves for succession, either within the family or outside of it.

Although law firms are typically driven by individuals, institutionalization and professionalization is soon becoming the norm for staying ahead of the curve for all sizes of law firms. In family law firms, thisbecomes all the more relevant for many reasons, for which among others, the following steps are strongly recommended.

Document how you plan to run the firm. The dynamics of any family is subject to plenty of changes with marriages, death, separation etc. It is therefore very important to have a written agreement, documenting how the family plans on running the firm. While this may be construed as an instigator for conflict, on the other hand, a well written agreement would allow for conflict free operations by allowing fewer opportunities for arguments. In any case, if the family cannot agree on a document and vision on how they would like to run their firm, it is hard to imagine that they would agree on crucial decisions going forward.

Create CXOs functions or outsource management. This ensures that the firm is professionally managed and run irrespective of the skill, maturity and drive of the succeeding family members. This is one of the reasons why it is acceptable for other businesses to be family owned, since there is a strong support structure of Managers, CEO’s, CFO’s, COO’s etc. that ensure continuity of a professionally run business. In a lawfirm as the Founding family is also the fee earner, it becomes slightly difficult to completely separate the running of the firm from owning the firm, however professionalization is the only way to ensure longevity.

Plan for succession well in advance. Uncertainty is often the cause for failure. Thus it becomes very important for a family run firm to plan their succession and more importantly, convey the plan to both family members and non-family members. Family members must realize the value of what is being bestowed on to them; therefore there must be a plan for making them feel that they have earned succession and not merely inherited it. Moreover, it is possible for a family to still maintain the majority share in the firm, while allowing non-family members an incentive to be a part of and grow with the firm. This influx is crucial for getting the best out of non-family members and in turn creating a progressively successful law firm.

There is no right answer to the question of whether Family run firms are on their way out and if change is imminent, however one thing is clear, there is always a concentrated effort required for success.