Issue 20, Fall 2007
Retaining associates remains a major challenge for law firms. Firms spend a fortune to recruit talented lawyers and they hope that those who perform well will stay. They do not expect to achieve 100% retention, which is unrealistic. Some associates will be asked to leave because of sub-par performance or a decline in available work, as in structured finance practice today. But firms will also lose associates they would like to keep. Lawyers' changing attitudes toward employment and careers, the diverse aspirations of young lawyers, and the leveraged law firm model limiting slots for new partners means that many talented associates will leave despite the firm's best efforts.
Does this mean that firms should give up trying to keep associates? Not at all. But their focus should shift to keeping associates engaged in their work instead of thinking just about keeping them in the firm. Engagement is a state of emotional and intellectual commitment. That commitment determines how hard lawyers work and how long they stay. In a workplace where lawyers are fully engaged, they are likely to remain longer than they would otherwise, and to perform at the highest levels while they are at work. If and when they leave the firm, they do so on good terms, speak well of the firm, and refer it business. Sometimes they even return.
What is Engagement? Engagement can be demonstrated by three primary behaviors 1:
Engagement should not be confused with satisfaction. Satisfied associates may feel good about their job, the people and the firm, and do what is expected of them. Engaged associates feel committed to the firm and want to be a factor in the firm's success. They exert discretionary effort, i.e., the voluntary effort above and beyond what the firm requires. They work harder, stay longer, and add more value to the firm.
Why is engagement important? Numerous studies have shown a definitive connection between employee engagement and high performance, financial results and retention. In a study of 50,000 employees worldwide, the Corporate Leadership Council, an organization of human resources executives, found that the most highly engaged employees perform 20% better and are 87% less likely to leave the organization. 2 The 2007 Global Workforce Study by human resource company Towers Perrin found that 40 global companies with the most engaged employees collectively increased operating income 19% and earnings per share 28% year to year. In contrast, those companies with the least engaged employees showed year-to-year declines of -33% in operating income and -11% in earnings per share. 3
The Towers Perrin study also found a direct connection between engagement and retention. 85% of those who were disengaged planned to leave the firm and more than 25% of them were actively looking for another job. In contrast, less than 5% of the engaged employees were looking for other jobs.
Are law firm associates engaged? Clearly some are. A recent study of associate motivation by Hildebrandt International found that about one-quarter of associates have "traditional aspirations" toward partnership and are willing to sacrifice their personal life to get there. 4 They appear to be highly engaged.
But two other recent studies show that many associates are so disengaged that they plan to leave their current employers – even though they are generally satisfied. NALP's 2007 monograph, Women in the Profession: Findings from the First Wave of the After the JD Study, found that associates are generally content in their jobs. 5 However, they also found that 34% of women and 29% of men expected to leave their current employer within 2 years. Moreover, 16% of women and 11% of men were actively looking for other jobs. (The report notes that more men than women had already changed jobs at least once at the time of the survey.) Similarly, a British survey by Legal Business of lawyers in large US and UK firms found that some firms are losing up to 30% of their lawyers each year, and that fewer than 20% of junior lawyers expect to be in their current jobs in five years. 6
Engaging Associates. Associates are smart, hard working, and highly motivated, with the potential to be excellent lawyers. What they want most is to achieve that potential. They expect this will happen through the work they do and the teaching, mentoring and opportunities they receive from those around them. Even if their perspective of the future is relatively short, they are eager to be engaged.
Unfortunately, law firms do not do enough to nurture and sustain their engagement. In fact, many law firms de-motivate associates. They take individuals with great talent, energy and a desire to succeed, and crush their ambition by focusing on billable hours, ignoring the quality of their work experience, and failing to address the various factors that engender loyalty and peak performance.
What can firms do to increase associate engagement? Here are ten areas where firms can direct their efforts:
While all of these areas are important, increasing associate engagement requires an individualized approach. People are motivated by many complex factors that change over the course of their lives. We may generalize about younger lawyers, women, minorities, and other groups in order to create policies and programs, but efforts to increase engagement must take into account each associate's individual motivators, development needs, personal circumstances, and career goals. This is a major undertaking that requires substantial resources. One consulting firm, Deloitte, has initiated a highly innovative pilot project that attempts to do it.
Deloitte's "mass career customization" (MCC) model lets employees control their career trajectories by selecting options in each of four core career dimensions. 9 (See Box) Within each dimension, the employee chooses along a scale. Each choice comes with specified tradeoffs, and employees may change their choices over time. Managers work with each employee to customize careers while taking into account the firm's business needs.
This is a bold innovation in collaborative career management. Deloitte is confident that its MCC model "has the power to inspire greater employee productivity, reduce the costs of turnover and generate greater loyalty."
3 2007 Global Workforce Study, http://www.towersperrin.com/tp/jsp/hrservices_html.jsp?webc=203/global/gws/gwshome.htm
6 Frances Gibb, "Lawyer loyalty hits rock bottom," 10/22/07
I was fortunate to be invited to speak at the Australian Legal Practice Management Association Conference in Melbourne last month. (www.alpma.com.au) The conference explored many of the same management issues facing law firms in the United States: how to retain talented lawyers, especially women; the resistance to – and growing importance of - professional management for law firms; and different generational attitudes toward life and work. Here are a few highlights:
Retention: Australian firms are struggling to retain their associates. The attrition rate in large firms is high: about 70% of associates leave within five years. They leave for many of the same reasons that American associates leave, but Australian firms must contend with an additional factor: experienced associates are being lured to American and UK law firms where the deals are bigger and the money is better. American and UK firms are actively recruiting associates from law firms and starting recruitment campaigns on law school campuses.
Retention of women lawyers is a particularly serious concern for law firms. Women are 70% of law school graduates and constitute more than half the lawyers in private practice, but they are leaving law firms for more conducive work environments and better career opportunities in corporate and government positions. 10
Professional management of law firms: Australian law firms are grappling with the challenges of law firm management in an increasingly complex, competitive, and changing marketplace. Lawyers' resistance to professional management and the lack of time and training for lawyers to manage a practice is a common dilemma. Australia has instituted a few measures to address this problem, both to prepare lawyers better for practice management and to generate respect for and acceptance of professional management. For example, aspiring lawyers must demonstrate evidence of competence in work management and business skills before they can be admitted to practice; experienced lawyers must take three days of training in law practice management as a prerequisite for becoming law firm partners or opening their own practices; and current and aspiring law firm managers may obtain a Diploma of Practice Management customized for Law Firms. (http://www.alpma.com.au/objectlibrary/288&filename=practice_made_perfect_brochure.pdf)
One especially noteworthy development is that Australian law permits outside non-lawyer investors to acquire ownership interests in law firms. Earlier this year, Slater and Gordon became the world's first publicly traded law firm. When firms are accountable to public investors, firm management must focus on ensuring long-term value and profitability. Partners lose much of their control over the operation and management of the firm, including decisions about compensation.
Outside investment in law firms will soon be permitted in England and a conference on the implications of public ownership of global law firms is scheduled at Georgetown University Law School next April. (http://www.law.georgetown.edu/legalprofession/sympGlobalFirm.html) While not yet on the horizon in the US, once law firms elsewhere become publicly held, the impact on US firms will be significant. Among other things, the focus on creating and capturing shareholder value will undoubtedly lead to greater emphasis on more business-like and professional management of other Australian and British firms – and their American competitors.
Generational differences about work: Australian firms are dealing with exactly the same issues as US firms in trying to cope with generational diversity. Senior lawyers in Australia complain that the younger ones do not want to work as hard as they should, and young lawyers complain that they receive insufficient training and mentoring from partners and see few partners who are positive role models. The pressure to bill hours is strong, and while the expected number of hours is significantly less than in the US, I did hear of one firm that has a celebration to welcome into the "3000 Club" each associate who reaches 3000 billable hours a year. While many Australian firms are embracing flexible work schedules and other strategies to appeal to younger lawyers, they appear to be no more innovative than American firms - and no more successful.
10 Women In-House, Lawyers Weekly Online, May 1, 2006 http://www.lawyersweekly.com.au/articles/Women-in-house_z67987.htm
In the Winter 2007 edition of Management Solutions, I described the Hastings Leadership Academy for Women, a leadership development course for women law firm partners. The 2007 Leadership Academy was a huge success, and participants found it to be extremely valuable. We will be conducting the Leadership Academy again this year on May 29-31 and July 17-19, 2008, at University of California Hastings College of the Law in San Francisco. Registration will be limited to keep class size small. Preliminary information about the course is available at http://www.pardc.org/LAW. Further details will be posted in January.
The lead articles in Issue 19 of Management Solutions, "True or False: You Are What You Bill" and "New Approaches to Time and Performance" were reprinted in the August 2007 edition of Law Practice Today. http://www.abanet.org/lpm/lpt/articles/mba08071.shtml
LexisNexis Women in the Legal Profession Summit: Rainmaking, Negotiating and Collaborative Development, San Francisco