Effective Retention of Your Best Talent

The current recession has forced law firms to focus on talent management, an exercise they were able to play down during preceding decades when demand for legal services exceeded the capacity of law firms to supply services. Back then, it seemed that the greatest challenge facing law firms was how to fill the incoming class with graduates of leading law schools; how to retain them beyond their initial training into the years of greatest productivity for the firm; and at partner level, how to deflect highly productive partners from the allure of higher compensation and a “stronger” platform.

New challenges spring from the excess, for the time being, of supply over demand for legal services. Law firms are responding by reducing capacity (5,259 lawyers laid off by the NLJ 250 in 2009); this may alleviate short-term problems but, as we discuss in this article, smart firms are using this as an opportunity to reshape their model and to attract and retain lawyers, not merely by paying more, but rather as part of strategic planning to compete more effectively in the future.

Adding Scale

During the good times, many firms added scale to match expansion of their clients and desired clients, first nationally and then internationally. These scale firms are constructing networks, typically by assembling portfolios of high-value, specialist capability, deployed to meet the needs of clients in many locations across jurisdictions. Specialists are attracted as laterals or by acquisition of/merger with other firms. Successful firms assemble and manage portfolios of talent to provide distinctive service to clients and a high return for all partner/owners with exceptional return for the most productive.

The Internal Labor Market

The internal labor market of scale firms is organized to support delivery of specialist services across a wide network. Academic excellence, though valued, is not paramount. As important are attributes such as willingness to specialize early, teamwork, leadership and client-pleasing skills. Some firms have started to define “competencies” individuals must display at different stages of their careers. Outstanding performers are rewarded by exceptional pay (compensation can exceed pay of comparably senior associates at other firms) and even early election to partnership. Adequate performers are paid less, but still well, while underperformers are managed out. Partnership is a reward for demonstrating the ability to attract desired clients, or for servicing clients within the network, but carries no promise of continued tenure if there is disappointing performance or a turndown in demand for the partner's specialty.

Providing Specialist Services

These firms promise associate talent: “We will train you to provide specialist services; to cooperate with other specialists across our network; and eventually to sell services to existing and potential clients. Passage to partnership will depend not only on mastery of specialist legal skills, but also on demonstrating mastery of the competencies that we require at different stages of an associate's career, including self awareness, teamwork, leadership and rainmaking skills.” These firms do not promise their partners tenure. Instead they say: “Deploy your specialist skills to attract clients and create distinctive, high value capability across our network and we will reward you handsomely. But understand that if you no longer command high value, we reserve the right to turn you loose.”

Downsizing

Scale firms have reacted to the recession by downsizing, or exiting legal service offerings for which demand has declined. Retention of partners and associates is an economic decision. If there is excess capacity the reaction is to reduce the least productive economic units ' typically junior associates. These firms are not troubled by the traditional social contract under which the first employer of law graduates assumed the burden of providing the practical training that elite law schools eschew and that partnership represented tenure.

What Firms Must Do

All firms must develop a clear idea of what is important to their talent and then deliver it. This is never only the money. It is about attracting the right recruits; frequent and constructive communication
of expectations and training to reduce deficits; having role models to reinforce expected standards; adequate reward dependent on performance and keeping pace with an increasingly competitive environment. Effective steps to retain the best talent are more related to firm strategy than to palliative measures to improve the lot of particular partners and associates.

Can your firm answer the following questions?

• Do we have a clear message for incoming associates?
• What do we promise incoming associates? Is it to train them “at the elbow of experienced lawyers” or something else? Do we live up to our promise? Occasionally? Always?
• What feedback do we give to our associates?
• Do we establish clear guidelines for associates to understand the competencies we expect of them and to judge how they are progressing? Do we tell them how they are doing? Annually? After each important engagement?
• Who provides the feedback and are they trained to do it?
• How do we help associates overcome performance deficits?
• Do we attain consistency of performance and feedback across jurisdictions and offices, large and small?
• How do we ensure that work opportunities are equitably distributed? To women? To minorities?
• Do our partners participate fully in training associates?
• Are our partners fully aware of our policies insofar as they relate to attracting, retaining and training associates?
• Do we expect them to participate fully in the development and delivery of these policies? Are they trained to provide timely, honest and consistent feedback to the associates with whom they work?
• Do we have a system to evaluate partner performance on this dimension? Are they incentivized to be fully and effectively engaged? Punished if they are not?
• How does the firm treat associate compensation? As a fixed cost dictated by the market, or a tool to incentivize desired behavior among associates, and hence with a variable cost component?
• Do we distinguish in payment to associates who have demonstrated mastery of expected competencies and those who do not? If so, how do we do so? Do we send the correct messages to those associates we pay more? To those we pay less?

What Do We Expect of Our Partners?

Do we allow partners complete autonomy in the way in which they service their clients or do we establish a code of expected partner behavior that requires them to adhere to standards, including rules in relation to the deployment of associates? Do we allow partners to “nobble” talented associates and reject others? Does partners' compensation reward those who display good behavior or does it tolerate almost anything, so long as the partner concerned is productive?

What Do We Tell Our Clients?

Do we expect our clients to trust us totally in our selection of associates to staff their matters? Can we clearly explain the different capabilities of different attorneys who might be available to work on a file? Can we therefore justify the difference in their charge out rates?

Conclusion

If you cannot answer these questions, this article should serve as a “heads-up.” The game is no longer about loading up on lawyers and selling their hours. It has become far more competitive. Every firm should have a clear idea of what its clients want and need, what its talent wants and is able to deliver, and a plan to bridge the gaps. Every plan depends on retaining key players to deliver service.

Retention of talented lawyers depends on establishing clear expectations and living up to them. “Talented” can and should mean different things to different law firms. A holistic talent retention policy starts with attracting lawyers who are a good fit for the firm, not any firm. It continues by establishing clear mileposts for progression over time, informed by feedback and supported by training, role modeling and performance related compensation. Expectations for partner performance are clearly set and partner compensation aligned to performance.

A successful firm depends on its ability to attract clients and to deliver consistent, predictable and valuable service. No amount of firefighting or special deals with high producers can produce this; it takes a clear strategy, supported by a rigorous and consistent talent policy.

Authors' Note

A small number of firms are organized around a traditional model that has a consistent and unchanging mantra of “excellence.” What distinguishes these firms is their deserved reputation as “go-to” firms for high value transactions and litigation; their migration away from commoditizing legal “products”; restrained growth, typically in a single or few locations; recruiting at a level just sufficient to produce a deep bench of outstanding partners and associates; recruitment policies designed to attract law graduates of outstanding academic achievement; a competitive path to partnership; and high though not always the highest compensation somewhat mechanically spread across the partnership. There are very few of these firms and we chose not to discuss them in depth in this article, though for some of them, the challenges of retaining talent will be just as great as for the firms discussed above.

David Barnard and Mark Shapiro are partners at Blaqwell, a management consultancy firm that specializes in providing strategic advice to law firms and legal departments. Before joining Blaqwell, David was a partner of Linklaters. He is also a lecturer in law at Columbia University. Prior to joining Blaqwell, Mark was a Director (senior partner) in McKinsey & Co.'s New York Office, where he served clients in the financial services and professional services sectors. In some 20 years of consulting, Mark has developed a special interest and expertise in strategy and organization for professional service firms

The current recession has forced law firms to focus on talent management, an exercise they were able to play down during preceding decades when demand for legal services exceeded the capacity of law firms to supply services. Back then, it seemed that the greatest challenge facing law firms was how to fill the incoming class with graduates of leading law schools; how to retain them beyond their initial training into the years of greatest productivity for the firm; and at partner level, how to deflect highly productive partners from the allure of higher compensation and a “stronger” platform.

New challenges spring from the excess, for the time being, of supply over demand for legal services. Law firms are responding by reducing capacity (5,259 lawyers laid off by the NLJ 250 in 2009); this may alleviate short-term problems but, as we discuss in this article, smart firms are using this as an opportunity to reshape their model and to attract and retain lawyers, not merely by paying more, but rather as part of strategic planning to compete more effectively in the future.

Adding Scale

During the good times, many firms added scale to match expansion of their clients and desired clients, first nationally and then internationally. These scale firms are constructing networks, typically by assembling portfolios of high-value, specialist capability, deployed to meet the needs of clients in many locations across jurisdictions. Specialists are attracted as laterals or by acquisition of/merger with other firms. Successful firms assemble and manage portfolios of talent to provide distinctive service to clients and a high return for all partner/owners with exceptional return for the most productive.

The Internal Labor Market

The internal labor market of scale firms is organized to support delivery of specialist services across a wide network. Academic excellence, though valued, is not paramount. As important are attributes such as willingness to specialize early, teamwork, leadership and client-pleasing skills. Some firms have started to define “competencies” individuals must display at different stages of their careers. Outstanding performers are rewarded by exceptional pay (compensation can exceed pay of comparably senior associates at other firms) and even early election to partnership. Adequate performers are paid less, but still well, while underperformers are managed out. Partnership is a reward for demonstrating the ability to attract desired clients, or for servicing clients within the network, but carries no promise of continued tenure if there is disappointing performance or a turndown in demand for the partner's specialty.

Providing Specialist Services

These firms promise associate talent: “We will train you to provide specialist services; to cooperate with other specialists across our network; and eventually to sell services to existing and potential clients. Passage to partnership will depend not only on mastery of specialist legal skills, but also on demonstrating mastery of the competencies that we require at different stages of an associate's career, including self awareness, teamwork, leadership and rainmaking skills.” These firms do not promise their partners tenure. Instead they say: “Deploy your specialist skills to attract clients and create distinctive, high value capability across our network and we will reward you handsomely. But understand that if you no longer command high value, we reserve the right to turn you loose.”

Downsizing

Scale firms have reacted to the recession by downsizing, or exiting legal service offerings for which demand has declined. Retention of partners and associates is an economic decision. If there is excess capacity the reaction is to reduce the least productive economic units ' typically junior associates. These firms are not troubled by the traditional social contract under which the first employer of law graduates assumed the burden of providing the practical training that elite law schools eschew and that partnership represented tenure.

What Firms Must Do

All firms must develop a clear idea of what is important to their talent and then deliver it. This is never only the money. It is about attracting the right recruits; frequent and constructive communication
of expectations and training to reduce deficits; having role models to reinforce expected standards; adequate reward dependent on performance and keeping pace with an increasingly competitive environment. Effective steps to retain the best talent are more related to firm strategy than to palliative measures to improve the lot of particular partners and associates.

Can your firm answer the following questions?

• Do we have a clear message for incoming associates?
• What do we promise incoming associates? Is it to train them “at the elbow of experienced lawyers” or something else? Do we live up to our promise? Occasionally? Always?
• What feedback do we give to our associates?
• Do we establish clear guidelines for associates to understand the competencies we expect of them and to judge how they are progressing? Do we tell them how they are doing? Annually? After each important engagement?
• Who provides the feedback and are they trained to do it?
• How do we help associates overcome performance deficits?
• Do we attain consistency of performance and feedback across jurisdictions and offices, large and small?
• How do we ensure that work opportunities are equitably distributed? To women? To minorities?
• Do our partners participate fully in training associates?
• Are our partners fully aware of our policies insofar as they relate to attracting, retaining and training associates?
• Do we expect them to participate fully in the development and delivery of these policies? Are they trained to provide timely, honest and consistent feedback to the associates with whom they work?
• Do we have a system to evaluate partner performance on this dimension? Are they incentivized to be fully and effectively engaged? Punished if they are not?
• How does the firm treat associate compensation? As a fixed cost dictated by the market, or a tool to incentivize desired behavior among associates, and hence with a variable cost component?
• Do we distinguish in payment to associates who have demonstrated mastery of expected competencies and those who do not? If so, how do we do so? Do we send the correct messages to those associates we pay more? To those we pay less?

What Do We Expect of Our Partners?

Do we allow partners complete autonomy in the way in which they service their clients or do we establish a code of expected partner behavior that requires them to adhere to standards, including rules in relation to the deployment of associates? Do we allow partners to “nobble” talented associates and reject others? Does partners' compensation reward those who display good behavior or does it tolerate almost anything, so long as the partner concerned is productive?

What Do We Tell Our Clients?

Do we expect our clients to trust us totally in our selection of associates to staff their matters? Can we clearly explain the different capabilities of different attorneys who might be available to work on a file? Can we therefore justify the difference in their charge out rates?

Conclusion

If you cannot answer these questions, this article should serve as a “heads-up.” The game is no longer about loading up on lawyers and selling their hours. It has become far more competitive. Every firm should have a clear idea of what its clients want and need, what its talent wants and is able to deliver, and a plan to bridge the gaps. Every plan depends on retaining key players to deliver service.

Retention of talented lawyers depends on establishing clear expectations and living up to them. “Talented” can and should mean different things to different law firms. A holistic talent retention policy starts with attracting lawyers who are a good fit for the firm, not any firm. It continues by establishing clear mileposts for progression over time, informed by feedback and supported by training, role modeling and performance related compensation. Expectations for partner performance are clearly set and partner compensation aligned to performance.

A successful firm depends on its ability to attract clients and to deliver consistent, predictable and valuable service. No amount of firefighting or special deals with high producers can produce this; it takes a clear strategy, supported by a rigorous and consistent talent policy.

Authors' Note

A small number of firms are organized around a traditional model that has a consistent and unchanging mantra of “excellence.” What distinguishes these firms is their deserved reputation as “go-to” firms for high value transactions and litigation; their migration away from commoditizing legal “products”; restrained growth, typically in a single or few locations; recruiting at a level just sufficient to produce a deep bench of outstanding partners and associates; recruitment policies designed to attract law graduates of outstanding academic achievement; a competitive path to partnership; and high though not always the highest compensation somewhat mechanically spread across the partnership. There are very few of these firms and we chose not to discuss them in depth in this article, though for some of them, the challenges of retaining talent will be just as great as for the firms discussed above.

David Barnard and Mark Shapiro are partners at Blaqwell, a management consultancy firm that specializes in providing strategic advice to law firms and legal departments. Before joining Blaqwell, David was a partner of Linklaters. He is also a lecturer in law at Columbia University. Prior to joining Blaqwell, Mark was a Director (senior partner) in McKinsey & Co.'s New York Office, where he served clients in the financial services and professional services sectors. In some 20 years of consulting, Mark has developed a special interest and expertise in strategy and organization for professional service firms