The Cost – Value Conundrum in Talent Strategy

By Sue Manch –

“Nowadays people know the cost of everything and the value of nothing.” Oscar Wilde

Cost-cutting has become a familiar priority for many large law firms and ironically, it often begins with cutting people and resources at the heart of talent strategy. Despite being a business dependent on the intellectual capital of its lawyers and the effectiveness of its operational administrative teams, rabid cost-cutters go straight for the talent jugular time after time.

You all know the stories because you live them every day.

Clients complain about junior associates learning on their dime and partners complain that new associates are not useful. So you devote your intellectual firepower to developing innovative training curriculum and experiential activities to address this issue head on. But when you submit your proposal for this new approach to the management committee, it gets shot down for both its cost and taking associates away from billable time. Junior associate hours continue to lag all other lawyer categories and they are the first to be cut at review time.

Highly talented senior associates are leaving the firm because they see no hope of promotion. You carefully analyze the lawyer workforce in each practice group and highlight for group leaders the fact that of counsel and non-equity partner ranks have ballooned and are cutting off associates from stimulating work and client-facing roles. You recommend thinning these senior non-partner ranks in favor of streaming higher level work and roles to associates with the potential to become business-getting partners. One by one, group leaders tell you that these senior non-partners must stay and are profitable because we pay them less, even though there is a glaring limit to their long-term contributions. No changes are made to the staffing model and great associates keep leaving.

Partners stretched by client and firm demands are mentoring less and associates lack career and performance guidance. You look at best practices in the legal and other professional service firms and determine that having internal career coaches would add a critical resource for developing lawyers who are on track and could also facilitate performance improvement in those who are struggling. You develop a proposal for creating this role in your professional development group, but the CFO shoots it down saying headcount on the administrative side must come down – not go up. Associates continue to complain of a lack of mentoring and struggling associates, in whom the firm has invested great resources, are let go.

You have highly capable and experienced recruiters who have developed strong relations with law schools and search firms. They continuously bring in high caliber summer classes and strong laterals. When the firm decides to hire a smaller summer class to save money, they also decide to thin the recruiting staff and have the remaining recruiters cover large geographic areas. As local recruiters leave for competing firms, they take with them the local law school and search relationships formed over years. The remaining recruiters struggle to gain the trust of partners in offices in which they are not resident and develop long-distance relationships with schools and headhunters, doing all of this while handling double the workload. Eventually, they leave too.

In each of these scenarios, firms save money today. There is more money for partners to divvy up at the end of this year and their per partner profits increase. But beware the unintended consequences of business strategies that ignore the future health of the firm and its ability to compete. In each of these scenarios – and in hundreds of others all of us have experienced – money saved in the short-term will cost the firm dearly down the road.

• When junior associates don’t have access to quality training and experiential learning, they underperform and fall behind peer associates at firms that offer it, so that clients will believe the firm has sub-par associate talent. As they are moved out due to lack of hours, the firm guts its highly profitable midlevel and senior associate tiers of the future. The firm loses its ability to home-grow partners and cultivate a strong sense of culture and identity that derives from promoting your own associates.

• When the high potential future partners leave the firm, practices will be at the mercy of the lateral market to find suitable partners (and will pay a pretty penny for that talent in more ways than one). There is increasingly compelling evidence that lateral partner hiring produces less than imagined revenue results and endangers a firm culture of trust.

• Developing lawyers who lack one-on one coaching and mentoring are more likely to feel disengaged and unmotivated. We know the millennial generation of associates needs a sense of belonging and connectedness. Without it, they are less likely to do their best for clients or imagine a long-term career in the firm.

• Firms taking chances with their competitive advantage in the hyper-competitive law student and lateral markets are playing with fire. Regardless of the oversupply of lawyers in general, there remains a serious and pervasive market shortage of individuals likely to be successful in a large law firm.

The value of a long-range talent acquisition and development strategy is difficult to define until a firm begins to experience the real costs of short-term thinking. Some of those costs are articulated in the examples above, but all of us have seen too many examples. Let’s hope we can help our law firm leaders recognize the long-term impact of short-term cost savings when talent is at stake. It is our junior and midlevel partners who should be militant on his point. It’s their future that current leaders’ cost-cutting is endangering.

Blog Author

Sue Manch collaborates with firm leaders to devise strategies to align business strategy with talent strategy. Her goal is to assist firms in preparing their lawyers to provide the highest quality service to clients and build successful and satisfying careers. With 30 years of experience consulting and coaching, Sue is an established thought leader in legal talent strategy and lawyer development. She has a particular expertise in leadership development and has designed innovative succession strategies for law firms. Sue has deep experience in the design and implementation of leading-edge programs such as emerging leader development, alternative career track models and workforce planning, competency-based performance management models, and diversity initiatives.

Sue was a founding Principal of Shannon & Manch, LLP , now SJL Shannon. She has been an advisor to the majority of the Am Law 100 and Global 100 law firms, as well as top law schools and in-house legal departments. She is the author of four books, including the ABA publication “Learning from Law Firm Leaders” and countless articles and held positions at Bingham McCutchen, Georgetown University, The Catholic University of America Columbus School of Law, and Trinity College, among others. She has a MEd in Clinical Counseling from the University of Virginia and a BA in Psychology from Ohio University. Sue is also a Master Coach, certified by the Behavioral Coaching Institute and experienced in leadership, business development and team management coaching for lawyers.