This post was spurred by two recent articles/posts — Biglaw Firms Must Conduct More Layoffs, Before It’s Too Late, and A Law Firm Structure that Avoids Layoffs.
I have written before about the horrific performance of law firms when it comes to retention. Previous posts have discussed the enormous direct cost, indirect cost and human cost associated with attorney turnover.
Fortune 500 companies can maintain turnover rates of 2-3%. Meanwhile, law firms as a whole have averaged around 20% turnover a year for the last several decades.
Think about that. We’re not looking at a single blip on the radar over an extended period of time. For an industry to consistently experience turnover of 1/5th of the talent something must be broken in the hiring process, the management systems or both.
As is implied by the above articles, as law firms see a fluctuation in demand the knee-jerk reaction seems to almost always be to downsize. Then when things pick up we can always re-load.
All businesses — including every one of the Fortune 500 — experience demand fluctuations; but in every sector outside of legal they somehow seem to be able to weather the storm with significantly better retention rates
How And Why?
I believe there are five key reasons for the superior retention in the Fortune 500 vs. law firms. Consider the impact these 5 areas have on turnover:
- Companies on Fortune’s list, by and large, know what it takes to be successful in their environment, and they recruit to those characteristics.
The culture of every organization is different; service and production means and standards vary widely. But the organization that knows with specificity what characteristics are reflected in individuals that are successful is in a much better position to do a better job of hiring
As Jim Collins says “First…Get the Right People on the Bus.”
If you aren’t recruiting people that are a great fit to start, odds greatly increase that these individuals will rotate out in the midst of any high-consequence change.
- The Fortune list is, for the most part, made up of companies that are run by professional managers
The people that run large non-law firm businesses are seasoned executives. They have come up through the ranks, and developed the ability to make sound long-term decisions…knowing how to count costs (hard and soft), factor ups-and-downs, and manage through volatility.
There has been a bit of an increased focus on management and leadership skills in law firms, but we have a long way to go. It is still fairly common for a Managing Partner’s first management role to be the one she was just elected to.
The impact quality and experienced management could have is still seriously under valued in most law firms.
- The well-run business (on or off the Fortune list) invests in retention.
More specifically, the successful business invests significantly in developing and understanding its workforce.
- Well-run businesses utilize creative means to staff for peak periods.
The seasoned business executive knows that an “uptick” in demand isn’t necessarily permanent. In order to avoid the myriad costs associated with hiring as if it is, successful businesses make much more extensive use of temporary staffing, seasonal players, outsourcing, and par- time to potential full-time arrangement.
In many situations, law firms would be better served to under-hire permanent attorneys until the demand is demonstrated over a longer period of time.
- The “best places to work” know why people leave. . and they build around why people stay.
Exit interviews are essential to understanding why you are losing the people you are losing. A common business practice is to conduct two exit interviews; one while the person is on their way out, and a second as a follow-up exit interview after the person has been gone a few weeks or even a few months.
The follow-up exit interview is valuable for a couple of reasons. One, there is a greater willingness to be frank after a physical separation; and second, it sends a message that you do really care about losing the individual as a member of your team.
I am not saying that downsizing is never the answer. The fact is that , some firms find themselves in a position where there are no other viable options for survival. But, surely we can do much better.