MANAGING TALENTED LAWYERS

The Need
What is “talent?”
Preparing your firm for talent
Being attractive to talent

The need
FMRC Legal has been conducting empirical studies of law firm performance for 30 years. These studies highlight the significant drivers of profit in the Australasian legal profession. An examination of the top profit earning quartile of the sample population (200 to 300 firms in any year) reveals three primary drivers of profit. Top profit firms become so through pricing strategies, staff leverage or productivity, some through a combination of all three.

Approximately 10% of the top profit firms have achieved success through pricing. They are expensive and attract clients who are willing and able to pay their fees. Approximately 10% of the top profit firms have achieved their success through productivity. These firms have lawyers, typically partners or senior solicitors, who work extremely hard to achieve their results. Approximately 80% of high profit firms achieve through leverage. They acquire additional units of time and on-sell it at a profit, usually at two to three times the cost.

Driving profit performance through price is a limited strategy. Solicitors are reaching pricing points in the Australasian legal market that are forcing clients to look elsewhere for “value”. This is evidenced by the extraordinary growth of the “second tier” markets in Sydney, Melbourne and Brisbane. Clients are seeking out quality lawyers in smaller, often boutique firms that they feel are capable of providing advice that would have hitherto been purchased from a large, branded, national firm. We are also living through a period of significant in-sourcing with corporations building in-house legal capabilities beyond any that we have seen before.

Driving profit through productivity is admirable if it does not lead to exhaustion. Historically, highly productive lawyers have been willing to achieve 7 to 8 chargeable hours out of a 10 to 12 hour working day, often up to 6 days a week. This is not a long term strategy without significant personal cost. In my experience, fewer and fewer people are willing to incur the cost. Lawyers are demanding balanced, quality lives (thank goodness). Profit through exhaustion does not earn the respect it once did. On the contrary, firms that demand too much from their lawyers are losing them in large numbers.

Leverage through employed solicitors and paralegals remains the most frequently occurring high profit model. While less than straight forward, this strategy will endure and will enable firms to build a sustainable high profit business if they do it well. Attracting, retaining and engaging talent are the new pre requisite partner skills in progressive, profitable law firms.

What is “talent"?
Talent is not a fashionable, management euphemism for employees.

All firms have average performers, good performers and poor performers. Most populations in excess of 30, tend toward a normal distribution. This being so, 70% of lawyers in an average firm would tend to be average performers, approximately 15% would be considered to be high achievers and approximately 15% poor. I am using “talent” to describe those who are in the better half of the performance spectrum.

Managers dedicate large amounts of time striving to improve the profitability of their firms by improving the performance of fee earners considered to be underperforming. They often have little time left for their better performing staff, being content to put them on automatic. In the extreme, some lawyers become forgotten as a result of their consistent, high performance.

Correcting underperformance is most worthwhile. Significant improvement gains, however, usually come from better performers. It is usual for talent to demonstrate a greater capacity to improve beyond high performance levels already attained than it is for underperformers to demonstrate a capacity for a sustained shift to average performance.

Managers, keen to maximise the potential of their businesses, should be spending more time nurturing their talented staff (that is, the top performing 50% of any firm). In so doing, performance becomes a cultural issue. High performers, if well managed, will lift the average of the whole. Some under performers may leave, some may improve, and some may need to be out placed. Maintaining a high performance culture in which talent is recognised, rewarded and fostered will add to the durability of the business, be attractive to other talented people and assist in building a quality employment brand.

Preparing your firm for talent
High performance people want to be engaged by tasks, deals, businesses or the affairs of their clients. They respond well to organisations with clear direction, interesting work and partners with passion. These people enjoy (and expect) learning and challenge.

Firms need a clear strategy. They should have a vision of what they wish to achieve and how they wish to achieve it. The vision should be shared and lived. Firms should define their product offering, either process excellence, product excellence or client intimacy. Organisational culture should be in line with product offering. People should be recruited on the basis of their capacity to thrive in your firm’s culture.

A well thought out strategic plan compiled with staff and partner input engages all stake holders in business success. It provides a context for the performance expectations that the firm’s management will set. It provides for career opportunity and individual development. High performance people enjoy the focus that such a plan brings to any legal business.

Knowing what you want to achieve, how you plan to achieve it and who is to do what, is the first step in talent management.

The next step is to ready your partners. Partners need to enthusiastically embrace the challenge of solicitor career development. They need to become skilled coaches and mentors. They need to actually care about the professional and personal lives of employees.

People don’t have to work well these days. High performance people have options. They will only maximise their efforts if they like and are liked by their supervising partner. The firm’s HR manager can guide the process but firm culture, performance and attrition will have more to do with partner behaviour than any other factor.

Being attractive to talent

Good people like good work.
If you are to be attractive to high performance people, you must have a stable of clients that regularly require their lawyers to be engaged on interesting matters. Complexity of task, varied offerings, on the job learning and skill development are all important attraction and retention factors. The opportunity to share knowledge by working collaboratively on matters appeals to many young lawyers. This is a learning environment that they are familiar with.

Partners should be capable of sourcing quality work. They should work with their team to develop and implement a client and matter attraction strategy. Firm and lawyer image, client maintenance plans and targeting plans should all be co-ordinated and carried out. Failures should be examined and successes celebrated.

Good people like to be paid well.
There are three critical elements to remunerating talent: external equity, internal equity and performance.

External equity is straight forward. Employers of choice pay attractive market salaries. Increasingly we will be competing for talent on an intra industry basis. At the moment, good staff can be retained by paying towards the top of the legal employment market. Salary, budget, charge rate and actual performance surveys are available for your area from FMRC Legal.

Internal equity is about relativities within the firm. It is difficult to convince a young, high performer that they are worth less than an average performer who has more “experience”. Employed fee earners should be told how their salaries are determined, what attributes you value and what attributes you measure. An individual’s pay should be based on performance in a balanced array of skills and attributes. Your high performers should be paid better than the average or poor performers.

Performance pay does not necessarily have to be in the form of bonuses. Negotiated salaries based on demonstrated performance in fee generation, team contribution and client development will do more to encourage the sustainable success of the business than individual performance bonuses based on billings. The latter tend to discourage delegation, cross-selling and lawyer development.

Good people like to be involved in practice development.
I have worked with several high profit firms that encourage staff involvement in the strategic and tactical management of the firm. These firms have committed, stable staff keen to improve business performance.

Staff involvement does not mean loss of control. Partners will always be responsible for leadership and governance. Including high performing staff in the decision-making process, management communication and in change implementation helps firms get over the failure to implement hurdle.

I am a firm believer in the power of strong centralised management supported by good leadership. This should occur in a collaborative and consultative environment.

Good people like work / life balance and flexible work arrangements.
Unfortunately balance and flexible work arrangements are often packaged up as a gender issue. I am meeting an increasing number of young male lawyers who are also attracted to flexibility, the opportunity for part-time work, longer or more holidays and the need to balance personal and professional obligations.

I have a pioneering client that implemented a “4 day week for all” policy two years ago. All partners and all staff work a four day week (rotating days off), earn the same salaries and have the same performance expectations.

I am told by the Managing Partner that the firm’s productivity has actually increased as a result of the change. Their efficient people enjoy their four day week while the less efficient find themselves catching up on their “day off”. The Managing Partner believes that these lesser efficient people now enjoy a full weekend of leisure time that was hitherto disturbed by their catch up work.

This is the best example I have seen of balance in action. Too often I encounter firms who claim to give people more time away from the practice on the condition that the telephone and Blackberry remain omnipresent. Doing legal work somewhere else is not balance.

Balancing client satisfaction with flexible work arrangements is a challenge. Increasing volumes of legal work, client communication, marketing and practice development is being done electronically. Offering talented lawyers the opportunity to work from home, their beach house or the farm from time to time appeals to most people especially those of us who are so time poor.

I accept that efficiency levels are task specific when people work from home. I also accept that flexibility can not occur without trust. These arrangements are often a privilege at the moment but in the near future they will become the expected norm.

Good people like mentoring and coaching.
Presenting talented employees with a structured learning curriculum that seeks to develop both professional and personal skill sets across a five year period will contribute significantly to retention.

If people see that your firm is prepared to offer career development and learning opportunities, together with opportunities to use new skills they become more engaged, more productive and are more likely to stay.

Any investment in learning should be accompanied by partner support. Partners should act as coaches, seeking to bring out the best in their direct reports. They should take an active interest in the careers and lives of their subordinates.

Attrition is a function of the quality of the relationship between an employed solicitor and their supervising partner. It is significantly more difficult to leave a friend, interested in your career and general well being, than it is to leave a “boss”.

Modern talent management strategies have become common place in much of industry and commerce. The legal profession has been slow to embrace change in this area. Firms who are leading are experiencing strong growth in fees and profits. They are being identified by the talent market as employers of choice and are reaping the benefits that accrue to sustainable high performance businesses.