The War for Talent

Increasing retention and associate satisfaction

The War for Talent

♫ People say they wouldn’t change a thing, even if they could. Oh, but I would
Oh...oh, I, I’d done a lot of things different... ♫

— Music and lyrics by D. Dillon, B.
Anderson, recorded by Kenny Chesney.

There is a war going on and not just the one in Ukraine. COVID, law firm management’s back-to-the-office movement, and the resultant calls for greater work-life balance from associates who have now tasted the forbidden fruit of working-from-home, have all compounded the whole associate retention, recruiting, and compensation landscape.

In the 2021 Above the Law Millennial Survey by Major, Lindsey & Africa, associates were asked what they would desire over increased salary. The results:

  • 29% more time off;
  • 25% flexible work schedule;
  • 26% reduction in billable hours; and
  • 8% more time for career, training, and development.

This clearly runs headlong into management’s goals for an annual increasing billable hour requirement or at least holding them steady from year to year.

Associates, tired of waiting for change, are voting with their feet. A Thomson Reuters survey indicates that associate turnover reached 23.2% in 2021 compared to 15% in 2020. Moreover, Thomson Reuters estimated that the turnover cost for an associate is 1.5-2 times annual salary. Based on a 3rd year associate salary of $200,000, the cost to the firm would be $300,000-$400,000 per associate.

What is the usual grounds for competition between firms for associates? Greater associate compensation — which in turn translates into increasing hourly rates charged to clients with resultant — and expected — pushback.

Is there a win-win in this situation? I believe so. The solution is to adopt procedures that tighten up the financial boat and allow for a greater percentage of fees worked to be collected, thereby reducing the sheer volume of work being performed.

There are a number of policy changes that can increase the bottom line without causing lawyer burnout. One is to reduce the leaks in the billable hour boat. This starts at the client intake process. By vetting clients carefully and mandating written retainer letters with evergreen retainer and collection clauses on all new matters, the resultant account write-downs and write-offs can be reduced to a minimum. Increasing billing frequency keeps the client informed on the state and cost of the work to date. Having associates and partners review files frequently with clients cuts down on “scope creep” and resultant sticker shock. Time capture software can reduce unrecorded time spent on mobiles, evenings, and weekends.

A simple policy of requiring daily time submission cuts down on lawyers reconstructing their daily time entries with resultant missed entries. A firm in Atlanta, GA paid their timekeepers $7/day if the time entries were in by 10 a.m. the next day. Their CFO stated: “You would be amazed at what lawyers will do for $7 a day.”

Another technique is to reduce “lock-up” — the time between time worked and time paid. Clients have introduced policies to refuse time that is too old; firms have backed this up by setting time and billing systems to reinforce this. Having a partner being told that the client will not be billed, and he will not be paid, for his 45 worked hours because they are too late certainly brings home the point of timely time entry.

Bill in accordance with Jay Foonberg’s “Graph of Gratitude.” Jay Foonberg is both a CPA and a lawyer and the author of the venerable “How to Start and Build a Law Practice” (now in its 6th edition). In his graph, you can see when is the best time to render an account based on when the work was done. Gratitude does not age well — send your bill before it has eroded. By maximizing your account collections, you and your colleagues don’t have to bill 115% of your target collected income just to realize 100% of your collected fees target.

While measuring billable targets and billable rates are fine, they are too early in the cash flow cycle to translate into cash in hand. Make sure you are measuring collected rates and cash collections and tie these metrics to performance evaluations to keep your time billers focused on producing work that leads to collections and not just monthly invoice targets.

Lastly, pay draws based on accounts paid, not fees billed. Cash is king and notwithstanding accountants and their accrual systems, you can’t spend cash you haven’t received.

These are a sampling of the techniques that can be implemented by law firms to increase their bottom line without flogging associates and partners to death and hopefully increasing associates quality of life. We can do a lot of things different.

This article is excerpted from an upcoming article on the Rules For Winning The War For Talent While Improving Profitability by Steven Campbell CPA and David J. Bilinsky for the American Bar Association’s Law Practice Magazine. Steven Campbell is a Consultant with Acumen Consulting, LLC. Steven has been a pioneer in data-driven profitability analysis and performance management in law firms.