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Insights

Attracting and Retaining Partners

Attracting and Retaining Partners

Introduction

In this session my aim is to:

  • Outline some of the major forces that are reshaping most businesses and the legal profession – and because of these forces
  • Argue the case that attracting and retaining the talent that you need for your success is the most important issue facing services businesses today
  • Give you the benefit of my experience as to why partners leave firms – and what you can do about it
  • Give you some thoughts as to how to attract partners from other firms
  • Questions

Consider the following

We are living in remarkable and exponential times.

Did you know:

  • China will soon become the number one English-speaking country in the world
  • According to the US Deparment of Labor:
  • 1 out of 4 workers today is working for a company for whom they have been employed
    less than 1 year

  • More than 1 out of 2 are working for a company for whom they have worked
    less than 5 years

  • According to former Secretary of Education Richard Riley:
  • There are over 2.7 billion searches performed on Google each month
  • SEEK now has a market capitalisation greater than the whole of Fairfax

  • The number of text messages sent and received every day exceeds the population of the planet

  • There are about 540,000 words in the English language - 5 times as many as during Shakespeare’s time
  • More than 3,000 new books are published daily
  • It is estimated that a week’s worth of New York Times contains more information than a person was likely to come across in a lifetime in the 18th century
  • It is estimated that 1.5 Exabytes (1.5 x 10 to the power of 18) of unique new information will be generated worldwide this year
  • That’s estimated to be more than in the previous 5,000 years

  • The amount of new information is doubling every 2 years
  • Third-generation fibre optics has recently been tested by both NEC and Alcatel - that pushes 10 trillion bits per second down one strand of fibre
  • That’s 1,900 CDs, or 150 million simultaneous phones calls, every second
  • Predictions are that by 2013 a supercomputer will be built that exceeds the computation capability of the human brain
  • 2009 was the first year in the history of the industrialised world that more people left the workforce than joined it

The Legal World is Also Changing

  • The number of lawyers in the USA tripled during the last 30 years
  • For every 10 lawyers, there are:
  • 7 doctors
  • 7 teachers

The US legal profession is worth close to $200 billion, which is more than the GDP of Singapore; Israel; or the United Arab Emirates.

The Legal Wold is Changing

The USA has 5 times as many lawyers per capita as India. But with 800,000 lawyers, India has the second largest national body of lawyers, second to the USA. The USA has 45 times as many lawyers per capita as China. But in parts of China, the number of lawyers is increasing by 10% each year. That’s 17 times faster than China’s population growth.

Law Firms are Changing Too

The shape of the legal profession has changed enormously over the past 20 years, and will change even more so over the next 20 years.

Legal Services are Changing

  • In India, LPO professionals earn US$6,000 per annum
  • Someone doing the same job in Australia earns 10 times that much
  • In the past 3 years, the legal outsourcing industry in India has grown 60% annually
  • The market in India for outsourced legal work is currently close to $200 billion – that’s the same size as the US legal market
  • In the US, the LPO Industry grew 495% in 2009
  • And, as yet, only 2% of General Counsel outsource offshore

Imagine…

  • Currently, there are fewer than 10 non-US or non-UK law firms in the largest 100 globally – most of these are Australian
  • BUT by 2040:
  • Legal industries around the world will be liberalised and commoditised
  • Firms with >1000 lawyers will be considered mid-size
  • India and China will have over 5000 firms with more than 100 lawyers…
  • And over 100 million lawyers globally…

Law Firms are Facing Significant Changes

  • Demand side
  • Spoke to around 60 GC’s of top 100 ASX listed companies
  • Significant cost pressures
  • Growth in Indian outsourcing – less than 2% of work that is capable of being outsourced is being outsourced today
  • Taking control of litigation
  • Arbitraging between fee rates in different centres
  • Adelaide partners doing work at same rate as SA’s in Sydney or Melbourne
  • Some companies are looking at fixed price deals with the law firm quoting a price for a job, and a mechanism to deal with variations
  • Some companies are getting at least 2 quotes from their panel firms for each job
  • Billable hours across the system have been in decline for many years
  • Now there are serious downward pressures on fee rates as well
  • Supply side
  • Globalisation is actually happening – after 20 years of talking about it - driven by
  • China & India – Australia is a serious global resources provider to these countries
  • Global firms are wanting to serve these giant Asian companies for all their global resource requirements
  • Australia now has serious global players that require global management – BHP, Rio, MBL
  • A&O has changed the shape of the Australian legal market for ever
  • Other London and New York firms are also considering their strategies for this market
  • Top firms are downsizing to focus the firm on high value practice areas in order to increase profit per partner – aim is now $2 - 2.5 million plus
  • These people moving to firms that have less demanding performance targets

Major Business Issues

attractingpartners1

What Does all this Mean?

The legal market in Australia is going to change significantly over the next 10-20 years

  • Commodity work at risk

The key to surviving and prospering is to be incredibly close to your clients

How do you do this?

  • Develop leaders that can navigate the firm through these choppy waters and grasp the opportunities
  • Attract and develop partners that are excellent at managing client and staff relationships

Reasons Partners Leave Law Firms

Over the past 20 years, I have spoken to hundreds of partners in law firms and other professional services firms, persuading them to move from their existing firm. In the vast majority of cases, there has to be at least one key push factor for people to want to move. Push factors can take many forms, but the most common are:

  • No vision for the future of the firm – people want to be part of a firm that has an ambitious vision
  • No coherent strategy to achieve this vision
  • No real analysis of the forces impacting the firm today and tomorrow – and therefore no strategies in place to deal with these issues
  • Poor management of the firm
  • Issues not dealt with – cancers left to fester
  • Management of key drivers are poor
  • Utilisation
  • Costs
  • Leverage
  • Fee Rates
  • Partner units
  • Broken promises
  • Inconsistent behaviours
  • Too much complexity
  • Poor communication
  • Firm’s earnings per partner not competitive
  • Culture at odds with personal values
  • No real partnership culture – Partners need to:
  • Have the opportunity to discuss current issues
  • Feel engaged with what is happening in the firm, and feel they have some input into what is happening in the company
  • Build a feeling of collegiality
  • Leaders not living the values that have been agreed to – which breeds cynicism
  • Cultural glue needs to be built – it doesn’t happen by itself
  • Lack of flexibility
  • Part-time partners
  • It is usually the case that there are a combination of some of these factors that cause people to wake up one day feeling they have no choice but to leave
  • In a large number of cases people have mentally decided to leave their firm before thinking about alternative options
  • By that stage it is too late to stop them

How to Keep Partners Happy

  • Collegiality and team work
  • Treated with respect
  • Fair reward for fair effort – merits of lockstep
  • Part of a successful well managed business
  • Strong and healthy culture
  • Genuine interest and caring for the people in the business
  • Ability to focus on practice areas that have greatest potential for quality work

It's all about creating an environment where people genuinely want to come to work and connect with their colleagues. If you can do that, then they will resist offers that could increase their earnings by as much as 50%

How to Attract Partners into the Firm

  • Build a value proposition
  • Ambitious vision and strategy – but realistic
  • Strong culture
  • Prove it by showcasing how people work together
  • Genuine partnership
  • International network
  • Quality clients and work
  • Partner development processes
  • Strong management and performance

Author(s)

John Colvin

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