In a recent discussion about the future of the practice, some 'biglaw' legal marketing professionals related that the only way to attract and retain top tier legal talent is by increasing profit per partner. This seems to be the conventional wisdom at large firms. But is it true that the top legal talent is looking at profit per partner as the yardstick by which they measure potential law firm employers?
The trend among young lawyers seems to be moving away from joining one firm and staying there for their entire career. Therefore, for young legal talent, it would seem that profit per partner would be low on the list of criteria for future employers. What good is high profit per partner if the attorney thinks they won't be staying at the firm for long? What if the possibilities for advancement are slim? What about culture, atmosphere, flexible work schedules, contact with clients, challenging work, intellectual stimulation, enjoyable clients and co-workers, mentoring, training, etc.?
Perhaps this discussion about profit per partner really meant lateral legal talent, rather than new legal talent. But are laterals primarily motivated by profit per partner, or are other factors coming into play? Are we really saying that money is the only thing that attracts top legal talent?
The same biglaw professionals opine that biglaw firms will move to leverage ratios of up to 9 associates per partner in order to continue to drive up profit per partner without continuing to drive up billable hours. While leverage is important for many reasons, there is no reason why profit must be tied to leverage which must be tied to billable hours.
Assuming that the answer to increasing profit per partner is hiring more lawyers ignores the fact that hiring more lawyers means hiring more staff. And more employees often means more problems. Growth isn’t always the answer. Further, the reality is that many of those additional lawyers won't stay with the firm - for reasons other than money.
Firms continue to complain about the high cost of associate attrition, and yet they seem to forget that the attrition continues despite increased salaries for associates. A compensation system that rewards only hours and doesn't take into account the intellectual capital that exists in the firm is not likely to increase profitability without also increasing the negative aspects of practicing law, including poor client service.
Increasing the number of associates may increase profit per partner, but it may make it less likely that those associates will eventually become partners – that reduces the likelihood that some of the ‘top talent’ will stay. (After all, what good is profit per partner if you never make partner?)
Firms continue to get stuck in this rut because they can’t imagine any other way to run the business than by billable hours, which are, by definition, limited. ‘Top talent’ isn’t likely to want to continue to work more and more billable hours, no matter what the profit per partner is.
Most law firms also continue to make the incorrect assumption that all ‘top talent’ actually wants to become partners in a law firm. But that isn’t necessarily true. Not every lawyer wants to become a partner. And that means that profit per partner may not be nearly as important to 'top legal talent' as some might think.
Whether billable hours increase or not, whether leverage increases or not, law firms that want to attract and retain top talent must face the reaility that not all talented lawyers can (or want to) become equity partners. And that means that firms are going to have to reconsider compensation based only upon billable hours. It’s just not a workable solution.
The problem with all of this discussion is that much of the profession continues to revisit the same issues and make the same old assumptions, which lead to the same old 'solutions.' Instead, firms should take the time to sit down and talk to clients about what they really want, and what is valuable to them (and the answer isn't tied to the number of hours worked) so that they can change the reliance on the billable hour.
The same can be said for top legal talent - do law firms really know what the 'top legal talent' is looking for in a firm? Law firms need to re-think the idea that high salaries or profit per partner are the only criteria by which top legal talent judges a firm - or that the number of hours worked is the only basis upon which to compensate them.
There are other ways to increase profit per partner, other ways to entice top talent, than by breaking the backs of the firm’s most valuable assets – the lawyers that work there.
Bottom line: it isn't just financial packages that make the difference. But who is willing to explore alternative solutions, including restructuring the way law firms typically bill their clients and compensate their attorneys?