Striving for success: Talent management for law firms in the recovery

With the UK economy finally on the cusp of recovering to its pre-crisis level, law firms are recognising that they need to refocus their efforts on talent management if they want to retain their brightest minds and grow their businesses in line with projections. Managing Partner’s talent management survey, which received 126 responses, provides insight into how UK law firms are adapting to the trends and challenges shaping the market and which initiatives they are putting in place to future-proof their businesses.

Greater competition for legal talent
will have the biggest impact on law firms in the current year, according to more
than half (56 per cent) of respondents.
This, in turn is stimulating the trend of rising legal salaries (42 per cent).

Many also recognise that an
increasing number of lawyers demanding better work/life balance (31 per cent) will impact their firms in future, as will increased usage of flexible resourcing (25 per cent). A greater focus on knowledge sharing (23 per cent) will be important as firms tend to the demands by Generation Y for more varied and interesting work
(18 per cent).

Effective learning and development is recognised as a priority by many, with nearly two fifths (38 per cent) saying that improving partners’ supervision of junior lawyers is a key challenge, as is developing lawyers’ client-facing skills. Another issue for a third is getting older partners to share clients with younger partners (32 per cent) and ensuring knowledge sharing across teams, departments and offices (29 per cent).

Reward mechanisms feed into how well these objectives are achieved.
“Rigid adherence to the old model of chargeable hours billing targets with little or no recognition of work brought in by
fee earners but referred to other fee earners is a challenge,” said a senior associate at a regional firm. “This approach encourages territorialism
and people are more likely to dabble
in areas which they do not know when they are trying to meet billing targets.”

Other challenges raised include: enabling lawyers to have better work/life balance (30 per cent); ensuring a steady flow of legal work throughout the year (29 per cent); providing diverse tracks for younger lawyers (27 per cent); creating partnership opportunities for young lawyers (26 per cent); providing flexible working opportunities (23 per cent);
and providing targeted L&D opportunities (22 per cent).

 

Strategic agenda

So, in light of the myriad issues affecting law firms, how will they need to change their approaches to legal talent management in the next three to five years? Respondents provided a range of suggestions.

“Law firms will be required to be more agile as the marketplace changes and other agents offer legal advice. A culture of innovation will need to be developed and talent recruited and retained to support this,” commented the head of
HR at a national UK law firm. “Change
will be a feature and people will have to
be ‘groomed’ for change and adaptability.”

“Some law firms are ahead of the game and, through size and critical mass, can successfully implement the training technologies that we will be using in an increasingly global, do more with less market,” said the head of learning and development at an international law firm.

“Smaller firms, some of which lack the vision, need to keep up or merger will become their only option for survival. The one-hour bite size, whilst being resurrected by some firms, will not change the behaviours that lead to market success. Lawyers need to take as much business skills training as technical training to ensure that they can survive in the market.”

Firms need to “become more modern and appreciate what people want from their roles,” according to the head of HR at a national firm.

“More innovation and flexibility is needed,” agreed a partner at an international law firm.

Added the head of L&D at a regional firm: “We are probably 20 years behind the big accountancy firms and I think we could learn a lot of lessons from them.”

A focus on how they recruit and retain staff will also be a key issue for law firms in future. “Firms need a better understanding of and response to the needs of the talented individuals they
want to attract and maintain,” noted the head of KM at a national law firm.

“This requires attention to personal and career development, also to building, maintaining and leveraging a strong, stable and attractive business culture and client base. Knowledge sharing on legal and practical issues is an obvious way of supporting this and is currently underutilised in many firms.”

A “more focused and targeted approach” is needed, according to
a managing partner of a local firm,
“involving staff in decision making and shaping strategy and development”.

Clear development and career paths for lawyers will form a key part of talent management strategies going forward. “Provide clear career paths to young talent,” commented the managing partner of a regional firm. “Be prepared to promote good young managers over existing legacy partners.”

Firms also “need to develop diverse career structures – not all lawyers want to be partners,” added a solicitor at an international law firm.

“We have to be a lot more flexible
in our approach to what people want
for interesting and rewarding careers,” agreed the managing partner of a
local firm.

Added a senior associate at a regional firm: “They need to give ambitious lawyers a clear development path and be transparent as to the opportunities available in the firm. Endless carrot dangling with no results, even though
the lawyer is performing, is damaging.”

Noted the managing partner of a regional firm: “Unless staff feel that their employers are taking their development seriously, they will move to firms that are now highlighting effective talent spotting and retention.”

“Law firms need to be less arrogant,” said a partner at a regional firm. “Some think it is a privilege for people to be allowed to work there. That is not how employees see things these days and they need to be looked after to be contented to stay. Small gestures can go a long way to ensuring that you have a happy workforce.”

A key aspect of that is providing “greater flexibility and supported learning opportunities, plus better work/life balance,” a practice group head of a national firm noted.

A strategist at an international law firm suggested that the way firms think about talent management needs to fundamentally change. “First and foremost, stop focusing on just legal talent management and focus on securing, motivating and rewarding
the correct management and leadership talent too. Then, it will be far easier to improve legal talent management in a sustainable way.”

The need for competitive salaries was also highlighted by several respondents, along with changes to traditional remuneration structures. “Move away from the up and out approach, but this can only change with the willingness of lawyers to accept that lockstep increases would not exist,” suggested the managing partner
of a national firm.

“Get away from the old models where partnership is the ultimate goal and reward earlier and better,” argued the head of HR at a regional law firm.

“There will need to be a switch from the current salaried associates – equity partners model to a full shareholding model, so that everybody from a trainee to a partner knows that their personal financial interests are directly related
to how well or badly their firm performs,” suggested a legal support provider at
a national UK firm.

Management roles

As service providers, law firms are
clearly nothing without their people. Nearly three quarters (73 per cent) of respondents recognised the importance of talent management in business planning and said that HR directors should be members of law firms’ senior management committees.

However, not everyone felt that heads of HR would be effective in informing business strategy. HR directors “should avoid being seen as merely the ‘puppets’ of the partnership,” said a senior associate at a regional firm. “In reality they are,
but they should aim to foster more trust and direct contact with staff.”

Others were even more hesitant about the value of including HR directors in executive committees. “Based on my current experience of people in these positions, no – they don’t have the strategic understanding to add value at this level,” said a strategist at an international law firm. “However, the right person in a HR director role may be able to add value on such a committee.”

A managing partner of a local firm argued that, instead, “a member of the firm’s senior management committee should have overall responsibility for HR”.

Added a practice group head at a regional firm: “If a business is able to afford a director-level person, then yes, but not over promotion of managers.”

A greater number of respondents were positive about involving HR directors in strategy development, with four fifths
(79 per cent) agreeing that they should help to shape law firm strategy.

“All the best-growing firms have
HR at the centre of focus,” commented
a practice group head at a regional firm.

“HRDs should be informing on the people issues and helping the leadership team to come to sensible conclusions that will overcome the human capital challenges that law firms face,” noted the head of learning and development at an international law firm.

A senior associate at a regional firm argued that HR directors should get involved, “but only so long as they understand what is actually required of lawyers and the career development
steps lawyers can take to advance in skills and development”.

A solicitor at an international firm was similarly unconvinced about HR directors’ awareness of the issues facing fee earners, suggesting that they have “insufficient knowledge of the client base and client needs”.

Still others were put off by the idea of involving HR directors in firm strategy development. “Leave shaping law firm strategy to the strategists! We’ll ask for the relevant HR input throughout the process as it’s required, but that should come from the whole HR team, not just the HR director,” said a strategist at an international law firm.

Sources of inspiration

Traditionally, law firms have taken an insular view of their market and believed that their uniqueness makes them distinct from other organisations, including other professional service firms. However, our survey found that the majority now recognise the importance of learning from client organisations and research institutions when developing their approaches to talent management.

When asked if law firms should learn more about talent management from the corporate world, the overwhelming majority (91 per cent) said ‘yes’.

“We should learn from the wider world,” the practice group head at a regional firm said.

Added a strategist at an international law firm: “My personal experience is that law firm HR teams have very little
clue about talent management at all, certainly when compared to leading management schools.”

Similarly, when asked if academic research should inform law firms’ approaches to talent management, three quarters (75 per cent) said ‘yes’.

Several comments were made about the need for the usage of such research to be measured by relevance to day-to-day work at law firms. The head of KM at a national firm noted that it should only be used “if it is practically focused, relevant and not too theoretical”.

Added a senior associate at a regional firm: “Academic research is often not based in the ‘real world’.”

A practice group head at a regional firm suggested that academic research should “inform but not at the cost of common sense”.

“One size will not fit all,” he concluded.

Rewarding CSR

Many firms recognise that corporate social responsibility (CSR) initiatives are important in making their workplaces more attractive. More than three quarters (79 per cent) said they encourage fee earners to provide support to their communities, while 63 per cent said they encourage
fee earners to do pro bono work.

A range of activities are adopted as part of law firms’ community efforts.
The managing partner of a regional firm said: “We adopt a charity each year and raise funds for it. We also support the taking of appointments on charitable
and community boards.”

Another regional managing partner noted that partners have high-profile local involvement, including chairing a local chamber of trade and providing local news to a free paper. The practice group head of a regional firm added that his firm has a charitable foundation focused on community support.

However, when asked whether their firms incentivise fee earners to provide support to their communities, half (48 per cent) said they do not. A managing partner of a local UK firm commented that “it is seen as part of an individual’s personal development and career progression”.

A partner at a national law firm added that “they do not give any allowance against chargeable hours”.

For the majority of firms that do provide incentives for community work (42 per cent), this is done through non-monetary rewards such as paid time off. Only a tenth said they provide monetary rewards such as bonuses and profit sharing.

“We have an active CSR programme with the main support coming from the trainees,” commented the head of learning and development at an international law firm. “There is an allowance in the billable bonus for good non-billable hours which can be gained by supporting the CSR programme.”

Added the managing partner of an international firm: “We have a corporate responsibility policy that encourages colleagues to provide charitable support. Two days holiday a year are offered by the firm to colleagues in addition to their annual holiday entitlement.”

Pro bono work is given lower priority to voluntary work in many firms, with two thirds (64 per cent) saying they do not incentive fee earners to provide free legal advice. Among those that do, a third
(30 per cent) offer non-monetary rewards. Only six per cent offer monetary rewards for pro bono work by fee earners.

Performance management

Looking into how law firms measure and reward fee-earner performance provides an interesting perspective on their priorities. Less than half (44 per cent)
said they primarily reward fee earners based on hours billed, while a third
(32 per cent) said they do so partially.
Just under a quarter said that the billable hours recorded was not their firm’s primary method of compensating partners.

“We are looking to recognise people’s strengths and make rewards on the basis,” commented a partner at a regional firm. “Some are good at business development, others are good at supervision.”

Recognition of the value of a balanced scorecard to measure all areas of fee earner performance is high; 83 per cent said they think their firms should use
this approach.

“Areas such as sharing knowledge to increase quality and efficiency and to reduce costs for the firm and its clients are just as important as hours billed,
if not more so,” said the head of KM at a national UK law firm. “Review forms suggest that investment time is taken
into account as well as hours billed,
but in practice this is limited to direct business development.”

The managing partner of a regional firm who favours the balanced scorecard approach said that partners are currently rewarded based on both hours billed and cash collected. “However we are concerned that certain supposed metrics could be considered too subjective to
the scorer and therefore less transparent to the employee.”

At present, less than a third (30 per cent) of respondents said their firms currently use a balanced scorecard to measure fee earner performance. But,
a further 18 per cent said “we’re working on it”.

“Two years ago we introduced a set of performance indicators to measure individual performance against as part of the annual appraisal,” said the managing partner of a local law firm. “Financial performance is included alongside others (such as client satisfaction, involvement
in business development). We are working on improving the training and personal development side.”

Added a practice group head at a regional law firm: “We have our own review process and it incorporates elements from what might be described as a balanced scorecard. This works for us.”

Not all agreed that the balanced scorecard is an effective means of performance management. “We use it but it is not effective,” commented a partner at a national UK firm.

Meanwhile, a partner at a regional firm noted that a balanced scorecard would be useful “as long as there is flexibility to play to people’s strengths”.

A strategist at an international law
firm added that it should only be used
“in conjunction with 360 feedback,
which is an essential element”.

Despite the balanced scorecard having an overwhelmingly favourable
view by respondents, more than half
(52 per cent) said their firms did not plan to change their remuneration and reward strategies in the coming year. A fifth
(20 per cent) said they would do so,
while nearly a third (29 per cent) said
they were considering it.

The practice group head of a regional UK firm commented: “We are always reviewing the effectiveness of our offering. This year we have introduced pension enhancements to our reward package – other refinements will no doubt follow.”

Added the managing partner of a
local firm: “We changed it a couple of years ago and are still seeing it bed in.”

But, for others, there is no immediate strategic imperative to change their firms’ reward mechanisms. The head of learning and development at an international law firm commented that the firm would not change its remuneration and reward strategy in the coming year “unless we merge, in which case the remuneration would need to be reviewed to take into account the larger firm”.

 

Flexible working

From 30 June 2014, all UK employees with more than 26 weeks’ continuous service will be eligible to apply for flexible working (see ‘Permanently flexible’, pp.54-57). However, just under half (48 per cent) of firms currently offer flexible working beyond the groups that legally qualify for it. Eleven per cent said their firms are currently working on it.

Among the firms that currently offer flexible working, half (51 per cent) offer part-time work and/or working from home (55 per cent) as options, while only a third (36 per cent) offer variable working hours.

When asked if their firms plan to widen the range of people who may apply for flexible working in the coming year, two thirds (61 per cent) said ‘no’, while a quarter (27 per cent) said they are considering it.

A practice group head at a regional law firm that is considering making flexible working more widely available commented: “We always look with an open mind – flexibility needs to work for the business and, often, what employees want does not fit for the business and other people affected by the flexibility.”

Only a small majority (51 per cent) of respondents said their firms are prepared for a potential increase in the number of people who will apply for flexible working.

A managing partner of a regional firm who formed part of this group noted that “rather than agree without considering the consequences, we now insist that the board agree every request after the division head has properly looked at
the issue”.

Meanwhile, the managing partner of a local law firm noted that flexible working is already available for all qualified staff.

Interestingly, the vast majority of respondents (86 per cent) agreed that flexible and mobile working are effective means of getting more hours and greater commitment from staff.

Caveats were offered by some. “It can be – but depends on the personality and commitment of the people involved – not just the person given flexibility – also the team affected by the change of approach,” commented a practice group head at a regional law firm.

“Yes, but it’s not the primary focus of why it’s offered,” commented the managing partner of an international firm.

“To an extent, there still needs to be adequate face time with colleagues,” added the practice group head of a national firm.

A partner at a national firm added that the same expectations are made of staff who take advantage of flexible working, but that it “just enables people to have
a more effective work-life balance”.

HR technology

Investment in new HR technology is on the minds of many, with nearly a quarter (22 per cent) saying that it is on their firm’s agenda and a further 18 per cent saying their firms are considering it.

Technology that enables legal process improvement will be the biggest winner
in the coming year, with just under half
(48 per cent) noting that their firms plan
to invest in it. Other investment priorities are performance dashboards (42 per cent), client relationship management systems (36 per cent) and salary/payroll software (36 per cent).

Cloud computing (32 per cent) and remote working (32 per cent) are also popular, as are software as a service (29 per cent) and project management systems (19 per cent).

Social tools are also rising in importance, with blogs (29 per cent), instant messaging (23 per cent), intranets (19 per cent) and videoconferencing
(16 per cent) gaining investment from
law firms in the coming year.

Among the respondents who said they do not plan to invest in HR technology in the coming year, the primary reason given by two fifths (39 per cent) was that all systems are currently up to date.

“We have recently upgraded our
HR IS and the firm is small enough at
the moment that we can achieve most
of what we need with the HR IS,” commented the head of learning and development at an international law firm.

Noted the practice group head at a regional firm: “We are not complacent on technology generally. We have bespoke office systems to support HR and other office functions.”

A further 34 per cent said that
new HR technology is not considered
a priority. Only 13 per cent said the lack
of investment was due to budget cuts.

“We are a very small firm and we manage people in a very old fashioned way with good two-way communication at the heart of everything we do,” said a partner at a regional firm. “Shame more people don’t operate that way.”

Training investment

New training is also on the agenda for many law firms, with 62 per cent saying their firms plan to invest in it in the coming year and a further 15 per saying they are working on it.

A variety of learning and development resources will typically be used within respondents’ firms. The most popular types are those provided by specialist training providers (82 per cent) and webinars (57 per cent).

Also popular are digital learning platforms (44 per cent), which have emerged as an affordable source of
user-directed training. Three fifths
(60 per cent) of respondents said they think existing digital learning platforms
are effective in training lawyers.

“I think there is great potential,
if used well, for digital learning to be effective in training lawyers,” commented the head of learning and development
at a regional law firm.

Meanwhile, the head of KM at a national firm suggested that digital learning is best used for certain types
of training (such as money laundering) rather than skills-based learning.

The head of HR at a regional firm added that digital learning is useful “for certain things and only those we develop in-house, not off the shelf packages”.

Commented the head of learning
and development at an international law firm: “The initial engagement needs to
be very strong if these are to work.”

While the majority of respondents
(68 per cent) agreed that existing webinars are effective in training lawyers, some reservations were expressed. For a partner in charge of training at a regional firm, one of the key challenges of webinars is “you cannot ask questions and some presenters are very bland.
I also have yet to be impressed with
any ‘handouts’.”

Measurable learning outcomes are also lacking in webinars, according to
the head of learning and development
at an international law firm. “Although lawyers value the webinar technology, which they frequently use with clients to do ‘training’, there is no check as to transfer of knowledge.”

Several respondents noted a preference for face-to-face interaction
with trainers over the convenience of online learning. “It is not like the old
days when we went on courses and
had proper interaction with other
lawyers and the training provider,”
said an associate at a regional firm.

“We prefer the interaction of
face-to-face training,” added a
managing partner of a regional firm.

Many firms rely on traditional sources of training, asking partners (51 per cent), L&D staff (31 per cent) and HR staff
(23 per cent) to develop staff. Interestingly, only 18 per cent intend
to ask universities or colleges to provide training in the coming year.

A solicitor at an international law
firm noted that partners “delegate to
team members to ensure drafting, research and presentational skills
spread throughout the team”.

The head of KM at a national firm added that training is also provided through “KM/PSLs, associates and specialist internal and external providers. Additionally, we get some limited
training/insights from client contacts”.

Among the 22 per cent of respondents who said their firms do
not plan to invest in new training in the coming year, the primary reason given was that the current level of training is considered adequate (41 per cent). Budget cuts were cited by 28 per cent, while 22 per cent said that new training is not considered a priority in their firms.

 

Management skills training

Looking at the issue of management skills development in young lawyers, three quarters (74 per cent) said that primary responsibility for this should be taken by the law firm’s partners. Only a fifth thought that HR departments (22 per cent) and L&D departments (21 per cent) should be tasked with this work.

Colleges and universities (12 per cent) and higher education providers (6 per cent) ranked low on the list of groups with primary responsibility for helping young lawyers to develop management skills; they were even surpassed by third-party training providers (20 per cent).

Several respondents noted that a combination of sources should be used, particularly people in management positions (such as head of HR, practice manager and BD director), while others suggested that young lawyers should
take initiative for their own learning
and development.

A strategist at an international law firm argued that responsibility for management skills development lies, first and foremost, with the young lawyers themselves. “Obviously, a key institution in pointing them in the right direction is their LPC provider. Law firm L&D departments must also then play their part. However, ‘management skills’ have to be taught by management professionals, not by legal professionals who think they know how
to manage.”

A practice group head at a regional firm noted the importance of mentors “at partner and subordinate levels to support this requirement to develop people”.

New appointments

With the UK economy taking faltering steps towards a full recovery, many firms are cautious about increasing their levels of recruitment for legal talent. More than half (52 per cent) of respondents currently take on between one and five trainees a year, while a third (33 per cent) bring in between six and 20 trainees. A minority (15 per cent) bring in between 20 and 100 trainees a year.

Three quarters (73 per cent) said their firms do not plan to increase their number of trainees year on year. Among those
that will bring in new trainees, the majority
(73 per cent) said they will create between one and five new positions.

New partner positions are more limited, however, with only one or two partners made up a year in 45 per cent of firms. A third (32 per cent) said they appoint three to five new partners
each year.

Similar to their position on creating new trainee positions, three quarters
(77 per cent) said they will not increase their number of new partnership positions in the coming year compared to the previous year. Only one or two new spots will be opening up in three fifths (58 per cent) of partnerships open to expansion, while a quarter (25 per cent) said they
will create three to five new positions.

Survey respondents

Managing Partner’s survey on talent management approaches in law firms was conducted between 23 April and 6 May 2014 and received 126 responses, of which 97 per cent are from people
based in the UK.

Three fifths (58 per cent) of respondents are actively involved
in developing their firms’ strategies;
a further two fifths (38 per cent are members of their firms’ senior management committees.

At less than half (42 per cent)
of firms, primary responsibility for HR decisions rests with the head of HR. At two-thirds of firms, it is held by the managing partner/CEO (32 per cent)
or the management board (30 per cent).

Two thirds are at regional (29 per cent) and national (29 per cent) firms
and a quarter are at international firms (24 per cent). A further 17 per cent are at local firms and two per cent are at continental firms.

Fifty-nine per cent of respondents
are at firms with revenues of less than £40m. Thirty-five per cent work at firms with turnover of between £40m and £400m. The remainder (six per cent)
are at firms sized at between £401m
and more than £1bn.

Manju Manglani is editor of Managing Partner (www.managingpartner.com)