Originally published in The Legal Intelligencer/law.com
Smart Strategy
Talent is the single most valued asset within a law firm. And, the role and influence of talent in law firms is on the rise. From the talent wars of 2021, to the persistence of the hybrid work model, to layoffs in 2023 and ever-climbing salary burdens, talent is at the forefront of discussion in legal circles (and beyond). How law firms engage with, respond to and anticipate changing talent needs has the power to transform the legal landscape and dictate which firms come out ahead.
Combining insights from macro-trends in organizations worldwide with critical shifts within the legal industry, five prevailing trends promise to impact the legal workplace in 2024.
New Partners, Senior Associates and Middle Management Bear the Burden of Engagement
While engagement overall in the workforce is slowly improving, one notable group continues to report lower engagement and higher stress according to Gallup. It just so happens this group is also the one most often responsible for the engagement of others. A pivotal finding from Gallup reveals managers—those responsible for other people within the organization—account for 70% of the variance in employee engagement. In other words, effective managers are more likely to have more highly engaged team members.
Within law firms, who plays the role of “manager” is obscure. Using the definition of those most often tasked with the coordination, development and elevation of others, the professionals most analogous to managers in other organizations are new partners, mid- to senior-level associates, and manager and director-level professional staff. Like other organizations, engagement in law firms is low. In fact, 1 in 4 associates indicated a plan to leave within the next year, according to a Major, Lindsey & Africa survey of Big Law associates. Nearly 80% of associates leave within five years.
One of the keys to enhancing engagement is to improve the experience and skills of “managers” —new partners, senior associates and manager/directors in law firms. Broadly, managers have to balance demands of their personal role, the company and their teams. Those in law firms have the added burden of billing hours, creating an especially daunting tension between generating revenue and spending (nonbillable) time investing in the management and development of others. It is this inherent tension which exacerbates this workplace trend in the legal environment.
To harness this trend for good, strategic law firms will:
Protect this cohort—provide support, training and mentorship to ease the pressure of burnout and offer needed skills to elevate engagement of those in their charge.
Help to balance pressures of the billable hour with recognition—monetary and nonmonetary—of the essential value of management time.
Emphasize transparency, communication and connection within these cohorts to alleviate burnout and enhance skill-building.
Leaders Take on Firm Culture
It is no surprise that leaders have an outsized influence on cultural experience. We need only look to the past to see leaders who have inspired people around a set of ideals—positively or negatively—with enough aplomb to change the course of history. Law firm culture is no different. Leaders within a firm have the power to mold the fabric of the firm, intentionally or not. The Tilt Institute’s most recent study, “The Expanding Role of Professional Development in Law Firms,” co-produced with ALM, highlighted the correlation between a leader’s leadership style and the perceived cultural experience (or climate). Specifically, over 50% of the variance in described culture could be attributed to the way in which the senior-most leader approaches their role. This finding is in keeping with more extensive academic research.
Yet the evidence doesn’t stop there. Lack of confidence in firm management and strategy is the number one reason partners leave their firm according to Major, Lindsey & Africa’s 2023 lateral partner satisfaction survey. Women are even more impacted, with 90% of women leaving Big Law citing culture as their reason, according to research by Leopard Solutions. Plus, in the hybrid world, the creation and cultivation of culture is all that much more difficult, relying on intentional, deliberate efforts in lieu of casual interactions. This confluence of factors, exacerbated by how little leadership training partners get prior to taking their roles (just 5.4 hours of dedicated leadership training per year according to recent research creates a perfect storm, thrusting law firms into a potential cultural crisis.
To prepare for this workplace trend, savvy firms will:
Make investments in getting leaders the right preparation, skills and support to be effective.
Tap into tools to measure, monitor and manage culture (not engagement).
Deploy “carrot sticks”—a combination of reward and enforce—to encourage in-person interaction (e.g., small dedicated budgets for peer-directed social activities, recognition for onsite attendance at an event, face-to-face mentoring).
Burnout Continues to Plague the Industry
Mental health and wellbeing will continue to be areas of investment of time and resources. People reported experiencing record high stress levels per Gallup’s most recent state of the global workplace. The legal sector is notorious for having higher levels of anxiety, substance abuse, alcoholism and suicide. This heightened state of burnout will continue in the new year and potentially worsen should inflation concerns return or as elections approach.
Many organizations, including law firms, have responded to burnout with mental health resources and wellbeing initiatives. These are important. Equally important is seeking out ways to combat the root causes. The previous two trends—leadership and management—have the power to impact engagement and wellbeing. Other ways savvy law firms can tackle burnout:
Clarify roles and expectation—knowing parameters helps improve chances of success and alleviates anxiety.
Provide meaningful, ongoing feedback—constructive insights into where and how to develop support individual growth and self-confidence.
Be transparent—clear, open communications (even when answers are unknown) help to quelch the uncertainty that breeds fear.
Encourage deeper relationships and trust—a key finding recently highlighted by Heidi Gardner demonstrates the healing power of collaboration.
Factor people impact into decisions—metrics seldom illustrate the impact on people; consider broader implications (connection opportunities, core values, etc.) when making strategic decisions.
Compensation Will Evolve to Bifurcate Merit and Ownership for Law Firm Partnerships
Compensation system reviews were a hot topic in law firm management circles this year as firms strived to determine how to align motivators with strategic goals and improve their ability to attract and retain top talent during a hot lateral market. While the primary drivers center around big-dollar rainmakers, how to reward profitability and the incorporation of nonmonetary values, the coming year shows signs of possibly, at long last, bifurcating the portion of partner compensation linked to merit from that tied to ownership.
Traditionally, profits per equity partner have been treated as a single “pot” to be distributed, often according to a point system tied to a variety of factors including seniority, originations and hours worked. As seniority begins to get downplayed to reward up-and-coming lawyers and new talent, so too does the concept of equity—true ownership—enter the discussion. In coming year, firms will look more intently at how to bifurcate merit from ownership, currently both elements of partner compensation. The spin-off of FisherBroyles capitalizes on the potential of this trend, where equity as a “founding” member was used to entice over 100 lawyers to part ways with the prior firm.
Adoption of Generative AI Will Transform the Needs and Structure of Law Firms
Artificial intelligence (AI) entered with a bang, followed by a slew of controversies and questions about how and where AI could be safely and effectively deployed in the delivery of legal services
Today, many firms limit the use of AI tools while “conducting due diligence” and seeking to pinpoint the opportunities while eliminating risk. Clients have not been quite so squeamish— and, interestingly, some law firms have used client exploration as an opportunity to gain their own insight and knowledge into AI’s potential.
In the coming year, expect clients to continue to deploy AI-powered tools to streamline routine tasks. This shift will eliminate swaths of work from law firms similarly to the use of e-discovery tools and services. Savvy firms will capitalize on this trend, just as they did then.
Similarly, certain forward-looking firms will ramp up the use of AI to advance their business objectives, both in the delivery of legal services and in supporting the firm. Over time, AI promises to transform the law firm leverage model. Not only will the trend toward smaller equity partnership continues, but also the use of AI will help create a broader platform to deliver value and impact, potentially with fewer people (but most likely with people who have vastly different skills than today’s workers). Already, the workforce in large law firms is 49.1% professional support staff at year-end 2022, down from 50.9% in 2018, according to Am Law data. We expect the trend of law firms doing more with fewer people to continue.
Reprinted with permission from the [January 16th edition of the Legal Intelligencer] © 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.