Fighting the Last Talent War By Jordan Furlong  Generals are often accused of "fighting the last war" - that is, employing the tactics that worked before and trying to avoid the mistakes they made last time. Wars don't tend to repeat themselves, but we nonetheless tend to repeat our strategies and responses when fighting each new conflict.
This phenomenon is relevant to what has been referred to as the "talent war" in law. Talk of this war has faded during the financial crisis and throughout the recession, but these battles are still being fought. The going price for first-year lawyers is back to $160,000 and will probably go higher still, while lateral acquisitions and law firm mergers (the traditional shortcuts for obtaining desired talent) continue to pick up steam. It might well be, however, that law firm leaders pursuing these strategies are applying the lessons from previous talent wars, when it was critical to recruit your fair share of the "best and brightest" new graduates from "top" law schools, or to land that coveted partner with the fat book of business. Those look increasingly like incomplete battle plans, if not the wrong ones altogether. Nobody believes, for instance, that even the "top" law schools do a good job preparing their graduates for practice, and nobody can offer a defensible rationale for how to define "top." Not only that, but firms still race to outdo each other in associate bonuses despite a recent American Lawyer study showing such bonuses do nothing to improve associate retention. The news is worse for laterals. A UK survey reported earlier this year by The Lawyer found a staggering percentage of lateral acquisitions simply failed to take. In a study of nearly 2,000 lateral hires over a five-year period, 33% left their new firm within three years; over a five-year span, that figure rose to 44%. Think about all the time and money wasted to integrate those new hires who didn't pan out. These are the first signs that the old strategies aren't working anymore and that new ones are needed to replace them. When crafting your talent strategies, therefore, think about the next battlefield: the leaner and more streamlined law firms of the future. These firms will be built around systems, processes and technology, where most "associate" work will be done by freelance, project or foreign lawyers (or computers) and many partners will be pricing their work on a non-hourly basis. Key personnel skills will include management (of both processes and people), collaboration, and client communications. Is your present recruitment strategy capable of adjusting to these new parameters? Try to avoid fighting the last talent war, as your competitors will be doing. Aim to win the next one instead. Contact the Author, Jordan Furlong. |
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No Good Deed Goes Unpunished
Avoiding making hard choices by creation of non-equity partners to avoid difficult personnel decisions often results in long term difficulties.
By Ed Wesemann
 For the past decade, law firms have taken the easy way out with personnel decisions. To avoid making hard choices and delivering uncomfortable messages, U.S. law firms have gone on a staffing spree with non-equity partner positions. As a result, firms find themselves massively overstaffed at the partner level. While there are no quick fixes to this problem, there are some actions firms can take to remediate the damages.
Law firms take pride in their paternalism as being a driving feature of their cultures. They proclaim themselves to not be the kind of firm that throws out associates who labored in the vineyard for eight years or votes out equity partners who are no longer valued because the rules of the game changed around them. Using non-equity partnerships to avoid taking counter-cultural actions seemed a small price to pay for law firm leaders being able to sleep at night.
Unfortunately, no good deed goes unpunished. A basic business premise is to operate the right people and the right number of people. For law firms, this means not only having the best talent but being able to field lawyers with the range of experience and billing rates to meet the needs of clients. The overall number of non-equity partners as a percentage of the number of lawyers in the AmLaw 200 has increased 78 percent since 2000 to the point where 170 of the 200 are multi-tiered partnership. There are several firms where the number of non-equity partners is close to exceeding the number of equity partners and associates combined.
But this is more than a structural problem. Typically, law firm executive committees see non-equity partnerships primarily as a means of enhancing profitability statistics. To support themselves, however, many non-equity partners who benefited from their benevolence of their firms now find themselves doing work that should be performed by mid-level associates or below, just to produce hours. Of course, the associates who should be doing the work are forced to reach down and take work off the desks of younger associates and even paralegals. So what starts as an inefficiency for clients is compounded by limiting the training and development of the law firm's entire associate platform.
This is not a problem that a law firm can solve overnight. In fact, the recent announcement by at least one firm that they will be converting all of the non-equity partners back into equity partners may be a means of doing a "reset" on the entire organization. There are, however, some less radical actions that firms can take to begin right sizing the partnership structure.
- Establish minimum expectations for equity partnership, both financial and non-billable.
- Make it clear that non-equity partnership, absent a unique circumstance, is transitional.
- Develop a three year timeframe for non-equities during which they undergo six month reviews.
- Develop a policy for the implementation of equity expectations. If non-equity partnership is going to be an ongoing transition to equity, create some ground rules.
Every firms' view on the use of non-equity partners is different but the net result over time is inevitable. And, typically, correcting that result may be very painful. Contact the Author, Ed Wesemann.
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Driving Execution Seven ways to get your team's brilliant ideas executed. By Gerry Riskin
 Every firm has trouble with implementation. Here are seven tips on driving execution on your firm's important initiatives.
- Be brutal in prioritizing... if you end up with any individual trying to get more than 2 or 3 things done, your mission will implode under the weight of your aspirations.
- Be specific in assigning responsibilities... no plan will be executed without an individual solely accountable for it... plans that belong to a group will evaporate into the ether.
- Break each initiative down into specific negotiated timelines. The accountable individual must participate in determining the target deadline for the overall initiative as well as the timeline for the next incremental step(s).
- Agree on the next step with great clarity. When you see the accountable individual walking down the hall, asking how the initiative is going will result in a meaningless response. Asking how the next specific agreed step is going will garner extremely useful information.
- Obtain weekly status updates. If you can do this in a spreadsheet so that you don't have to have actual conversations each week, all the better. Any initiative for which there is no progress in a week has no chance of being achieved. An occasional week during which there is no progress is quite tolerable if truly and anomaly. However, if the problem becomes chronic, fire the accountable person from the project.
- As leader, your job is to help others get things done. Sometimes they will need your coaching to realize the pieces of their initiative which can be delegated or perhaps there are other options and alternatives for getting things done that had not occurred to them.
- Meticulously track each and every achievement, then aggregate and publish them. Those involved in getting their initiatives done will be highly motivated by watching their peers succeed. They must believe that they are on a winning team; a "can do" team; your winning team... where succeeding is the norm.
Contact the Author, Gerry Riskin.
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Goodwill Hunting Are law firms starting to acquire a value? By Nick Jarrett-Kerr
 Are law firms starting to acquire a value?
A whole generation of law firm partners - those born in the baby boom just after the Second World War - is now reaching retirement age and forms the first generation for which the issue of goodwill has never been explicitly relevant. Goodwill disappeared from the accounts and thinking of most law firm during the late 1960's when an earlier generation of partners allowed this intangible asset (for which they had usually paid on entering partnership) to be written off or commuted into annuities and retirement payments. There was also often an implicit understanding - particularly in the Lockstep environment then prevalent in Europe - that partners, as they reached the retirement zone, would be allowed to retain high levels of compensation while at the same time easing off in their work efforts. The profession became used to a "naked in, naked out" system which benefited the income terms of partners while they remained partners but allowed for no capital gain in relation to the value of the firm except in the case of freehold properties.
This short term income philosophy still prevails in many firms. There are, however, some signs that the fixed capital tradition of partnership is coming under increasing strain and not just because of the flotations of a couple of Australian law firms and the imminent prospect of external finance through the Legal Services Act in the UK. For some years there has been a modest trading activity in small practices and those of retiring sole practitioners, and this activity is scaling up in some areas of work. In addition, divorce and death has sometimes given rise to the need for some form of valuation in cases where the issue of goodwill has not been appropriately addressed in the partnership deed. On the whole, however, valuations have usually been informally reached and have included earn-out payments and recognition for the acquiring firm taking on professional indemnity liabilities as a successor firm.
The difficulty is that it is far from straightforward to value law firms - in common with other areas of professional services. This is largely because law firms are driven by people and not products, and by intangible resources and not tangible capital. Additionally, mandates from clients to law firm tends to be more episodic than consistently and sustainably repetitive. This does not make law firms less valuable than businesses in other areas, but it does mean both that the valuation issues require a specialist approach and - perhaps more importantly - that potential purchasers may remain hard to tempt. Some law firms will certainly get traded for value, but what is also likely is that incoming partners will become increasingly unwilling to invest their capital and future in a law firm unless they are sure of a proper return on their capital. We may yet see goodwill reappearing in law firm accounts. Contact Author, Nick Jarrett-Kerr |
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| At The Podium: Upcoming Appearances by Edge Partners
January 25, 2012
Jordan Furlong addresses the ACLEA Meeting in New Orleans, USA
March 21, 2012
Gerry Riskin addresses the Pittsburgh Legal Administrator's Partner/Administrator event
Pittsburgh, PA
April 16, 2012
Jordan Furlong gives the Keynote at the Canadian Judical Council Conference in Ottawa, Canada
April 18, 2012
Pam Woldow presents a Webinar on the Role of Legal Administrators in Legal Project Management for the ALA
June 8, 2012
Pam Woldow speaks to the ALFA in Palm Beach, USA
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Edge Blogs
Nick Jarrett-Kerr's NJK
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