Attracting and retaining partners

Attracting and Retaining PartnersJohn Colvin

November 2013

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Contents

• Introduction

• We are living in exponential times

• Law firms are facing tremendous change as well

• What does all this mean?

• Reasons partners leave law firms

• How to keep partners happy

• How to attract partners into the firm

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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

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We are living in remarkable and exponential times.

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Did you know?

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China will soon become the number one English speaking country in the world.

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According to the U.S Department of Labor…

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1 out of 4 workers today is working for a company for whom they have been

employed less than 1 year

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More than 1 out of 2 are working for a company for whom they have worked

less than 5 years

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According to former Secretary of Education Richard Riley…

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There are over 2.7 billion searches performed on

Google each month.

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SEEK now has a market capitalisation greater than the whole of Fairfax

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

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There are about 540,000 words in the English

language…

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About 5 times as many as during

Shakespeare’s time.

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More than 3,000 new books are published…

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daily.

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It is estimated that a week’s worth of New York Times…

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contains more information than a person was likely to come across in a lifetime in

the 18th century.

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It is estimated that 1.5 Exabytes (1.5 x 1018) of unique new information will be

generated worldwide this year.

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That’s estimated to be more than in the previous

5,000 years.

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The amount of new information is doubling every 2 years.

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Third-generation fibre optics has recently been tested by both NEC and Alcatel…

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That pushes 10 trillion bits per second down one strand of fibre.

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That’s 1,900 CDs, or 150 million simultaneous phones calls,

every second.

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Predictions are that by 2013 a supercomputer will be built that exceeds the computation capability of the human

brain.

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2009 was the first year in the history of

the industrialised world that more

people left the workforce than joined it

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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

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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

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Law Firms are Changing Too

• The shape of the legal profession has changed enormously over the past 20 years

• It will change even more so over the next 20 years

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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

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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…

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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

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• Demand side

• Significant cost pressures cont’d

• 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

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• 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

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• Supply side

• 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

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Major Business Issues

Paradigm shift20%

Acquisition and retention of talent

20%

The growth of regulations20%

Growing the business15%

Risk management10%

Globalisation5%

Operational excellence and Media10%

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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

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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

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• 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

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Reasons Partners Leave Law Firm

• 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

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• Lack of flexibility – Project at BDW driven by Liz B & myself

• 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

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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

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How to Keep Partners Happy

• Its 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%

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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

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Contact Details

John ColvinPrincipalE: [email protected]: +61 409 183 174S: +61 2 8823 3485Level 36, Governor Phillip Tower1 Farrer Place, Sydney NSW 2000, Australia

Sandra HeinigSenior AssociateE: [email protected]: +61 416 731 897S: +61 2 8823 3485D: +61 2 8823 3487Level 36, Governor Phillip Tower1 Farrer Place, Sydney NSW 2000, Australia

Sian O’ShaughnessyResearch AnalystE: [email protected]: +61 2 8823 3485 Level 36, Governor Phillip Tower1 Farrer Place, Sydney NSW 2000, Australia