Issue 18, Spring 2007
The legal profession is in the midst of a revolution. To serve clients in today's competitive legal market, law firms seek large numbers of lawyers willing to work brutal hours for years on end. But lawyers are rebelling. They are willing to work very hard, but within limits. The historical model of the young associate devoting most of his time to the firm and rising through the ranks of a single firm to become a lifelong partner is now the exception rather than the rule. Lawyers today are "free agents," and their readiness to walk away from their jobs is changing law firms in radical ways. Many firms are resisting or ignoring these changes. Resistance, however, is futile, and firms that disregard the changes do so at their peril. Only those firms that join the revolution will be primed to win the war for talent.
The revolution centers on lawyers' changing attitudes toward work. In survey after survey, huge numbers of lawyers (e.g., 84.2% of 2,377 respondents in a February 2007 ABA survey) state they would gladly take lower salaries in exchange for lower billable hour requirements. The younger generation of lawyers – junior partners as well as associates – wants more balance in their lives. They do not want to labor 24/7 for years on end, are not willing to sacrifice their personal lives for partnership, and expect that technology should let them determine when, where, and how they do their work. These lawyers do not hesitate to leave if they are dissatisfied. Associate attrition is at record levels: about 20% each year, with 78% of associates gone after five years (compared with a fifth-year attrition rate of 53.4% in 2003).
Even law students are pressuring firms to change. A group of 125 students at several top-ranked law schools has issued a "Statement of Principles for a Renewed Legal Profession," arising from their concern about "billable hour escalation and its impact on personal and civic life." These principles focus on the need for new models of practice that:
The students have sent a letter to 100 large law firms asking them to sign on to the principles. They are also making presentations at law schools, preparing questions for other students to use in job interviews, and distributing examples of law firm best practices. (For more information, see the students' website, http://refirmation.wordpress.com)
The increasing number of women in the profession is also a major driver of change. With women comprising half of all law school graduates, law firms cannot ignore the fact that these lawyers' career paths often differ from the traditional linear model. (See Management Solutions, Issues 16 and 17.) Significant numbers of women (and many men as well) need to work reduced schedules or leave work temporarily for family obligations or personal pursuits at various times during their careers. In fact, one recent study found that 47% of lawyers who are mothers have worked part-time, and another study found that 42% of women lawyers take some time off from their careers. Those who work part-time often find themselves stigmatized and their careers stalled, so they quit. The vast majority of women who leave practice for a while want to return but have difficulty finding suitable work. When they do find jobs, they face severe financial and career penalties, so many stay out of the work force. This represents a huge loss of talent to law firms.
Law firms are facing considerable changes at the partner level, too, as firms try to increase profits per partner by reducing equity positions. Indiana Law School Professor William Henderson has determined that between 1995 and 2005, the number of equity partners in large firms increased only 31.7% while the number of non-equity partners increased 234%. Moreover, de-equitization of partners is no longer unusual. Within the last two months, Mayer Brown Rowe and Maw de-equitized a full 10% of its 450 equity partners. One consequence of these changes is that partners leave their firms almost as freely as associates. According to Hildebrandt, partner attrition in large firms has averaged 2,321 partners per year for the past 5 years.
The inability to retain engaged, committed lawyers is placing the old law firm model in jeopardy, and it is not just law firm lawyers who see it. In a January 2007 speech discussing changes in law practice, Mark Chandler, General Counsel of Cisco Systems noted, "Upending one's life to support inefficient means of communication, driven by a billable hour system, to maintain a relatively slim chance of making partner, just doesn't cut it. And when the next generation heads for the exits, it's a sign of a business model under stress."
Law Firm Responses
Law firms whose economic model is based on maximizing billable hours rather than efficiency, who limit (or shrink) the number of partners in order to maximize profits per partner, and who equate "face time" with commitment and loyalty, scoff at younger lawyers as being naïve and unrealistic. They point out that the intensifying competition for business and talent demands that they keep profits high, which means lawyers must work longer and harder.
To reinforce the point, law firms have responded by increasing salaries. They state that they must do so to keep associates from defecting to more lucrative jobs at investment banks and hedge funds. Firms realize that money may not halt the exodus, but reason that even keeping associates a little longer is financially advantageous. Moreover, some associates who get accustomed to exorbitant salaries may succumb to "golden handcuffs" and stay long-term, perhaps becoming partners . Firms may be able to absorb steep raises for associates so long as partner profits continue to swell, but this approach is misguided. Most associates who leave do not go to hedge funds, but to more amenable law firms, corporations, or government agencies. They still work hard – but those employers offer them more flexibility at work and greater control over their lives.
In order to survive, much less thrive, in the marketplace of the future, firms need more incentives than money for the best and brightest associates to become the firm's future partners and leaders. Law firms that rigidly adhere to traditional patterns and practices will discover fewer and fewer takers for the long-term. Firms that want to keep top talent must embrace new ways of thinking, not resist them. Only in that way can they develop more creative and flexible approaches to jobs and careers that will appeal to younger lawyers, fulfill the firm's strategic objectives, and still be highly profitable. As the philosopher Eric Hoffer said, "In a time of drastic change it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists."
Firms that are becoming more flexible and innovative are instituting many new practices and policies. Below are some examples that focus on three areas: individualization, career paths, and work schedules.
The suggestions listed above are in no way revolutionary. In fact, all of them are currently being employed or under consideration by law firms around the country. Those firms understand that the market for lawyers, just like the market for clients, is undergoing radical changes. By adapting to those changes, and using them to their benefit, those firms will have a distinct advantage in the fierce competition for legal talent.
Baker & McKenzie offers a good example of how adapting to associate expectations can improve associate retention. The firm's Chicago office was able to reduce associate turnover by more than half within 18 months. How did they do it? The main thing they did right was to tackle the problem strategically and comprehensively. The effort was led by the Chicago Office Management Committee but associates and partners at every level were integrally involved in the effort. Instead of focusing on any one issue or program, they addressed associates' experience in the firm on many different fronts.
The office began by having the Associates Committee survey all associates and ask them to list everything they would like to see changed, large and small. Associates were then involved in coming up with solutions to the problems that were identified, ranging from the compensation policy to the selection of better coffee. As a result of these efforts, the following measures were implemented:
Through these changes and the process that led to them, Baker & McKenzie has been able to demonstrate improved retention in a relatively brief period of time.
Lawyers' work is necessarily grounded in reality. So it is not surprising that many lawyers find relief in fantasy. Technology is giving lawyers fascinating means for indulging in a fantasy life without losing their concentration on the real-life issues they face in practice. One of these new media is a hybrid of video game technology and social networking programs that allows users to create and "live" in virtual worlds where people work collaboratively, combine learning with play, and generate business ideas and transactions. These sites allow participants to simulate real life experiences, and also to experiment with alternative versions of the real world.
One of the most popular of these sites is Second Life, where participants download software that enables them to create, and operate in, a virtual world. Once they join Second Life, they choose and customize a graphic animated character called an "avatar" to represent them in the virtual world. As members of Second Life, they build communities and simulate all aspects of daily life, from throwing virtual parties to trying virtual court cases.
Although Second Life looks like a game and provides a fun outlet for daydreamers, lawyers are using it in serious, edifying ways. They are building virtual cities that have new forms of governments, constitutions, and legal codes. They are offering virtual legal services and establishing bar associations, law schools, and training programs. They are even engaging in virtual litigation and mediation for disputes arising from virtual Second Life transactions. For further information about Second Life and its possibilities, go to www.secondlife.com, or read a recent article about it in the ABA Journal at http://www.abanet.org/journal/redesign/03flife.html.
The College of Law Practice Management has launched the 2007 InnovAction Awards. These awards honor lawyers, law firms, and other providers of legal services who are engaged in extraordinary innovative efforts. To learn more about the awards and how to enter the competition, see www.innovactionaward.com.
One of my articles, "Diversity Challenges in Global Law Firms," was published in the NALP Bulletin, April 2007
I was quoted in several recent articles, including:
Malaika Costello-Dougherty, "We Quit: Why Women Are Leaving Law Firms," California Lawyer, February 2007
Stephanie Francis Ward, "The Ultimate Time-Money Trade-off," ABA Journal, February 2007
Shelly Garcia. "Why It's a Man's World at Many Valley Law Firms," San Fernando Valley Business Journal, March 19, 2007
April 27 and 28, NALP Annual Education Conference, Keystone, CO. On April 27, I will co-present with Linda Marks on "Building the On-Ramp: Helping Women Lawyers Return to Work," and on April 28, I will present on "Mentoring Across Differences."
May 17, New York City. Women in Law Empowerment Forum
May 22-23, New York City. American Conference Institute's Premier Conference on Retaining & Promoting Female Attorneys
June 12, Boston. Advancing Women in the Profession: Action Plans for Women's Bar Associations, Conference sponsored by the MIT Workplace Center, the Project for Attorney Retention, and the National Association of Women Lawyers