Some newly qualified lawyers at US firms in London are said to be starting on salaries as large as £135,000 — quite staggering, right? It is a bold statement to invest so much in young talent, but is it a risk that will pay off?
Coincidentally, £135,000 is estimated to be the average cost facing the top ten firms when they are forced to replace a departing associate. Taking into account downtime, recruitment fees and training costs, high churn can seriously impact a business’s bottom line.
My company, Peakon, analysed churn at the top ten law firms, and while the drop from 18 per cent in 2015 to 14 per cent last year may be comforting for human resources and senior management across Canary Wharf and the City, we would advise against complacency. Employee retention has understandably become a greater focus within the industry in recent years and this figure had been expected to drop.
The legal industry has often been criticised for not employing enough of an employee-focused approach to its business — and this is often replicated in other industries with a partnership structure. Partners in law firms are often appointed because of their technical knowledge and ability, rather than strong leadership skills or the ability to nurture and retain talent.
Retention is a significant concern with regards to the millennial generation, for whom the punishing demands of starting out in law and the notoriously tough culture of “magic circle” firms, are unappealing. Long 80-plus hour weeks, lost weekends and monotony in your twenties used to be a rite of passage for any young lawyer worth their salt, but the times are changing.
This unflattering reputation is having an impact on millennials before they even step foot in law school. The profession is becoming an increasingly unpopular as a career choice, with applications to US schools declining dramatically in the last decade, and students favouring engineering.
Unlike the baby boomers, who tended to be motivated by status and salary, millennials place more value on experiences. Flexible workplace policies are vital to keeping the latest recruits engaged. Millennials are even willing to sacrifice pay in exchange for the option to work from home. Regular feedback is also an expectation, thanks to the rise of social media and a culture of 24/7 communication and instantaneous social recognition.
Not all young lawyers are going to strive and sacrifice everything for partnership — especially given the estimated 1-5 per cent chance of success — and this should not be frowned upon. Indeed, more senior colleagues may rue their lost twenties and respect the attitude of this younger crop.
A modern workplace requires a different approach to management and incentives. This includes a more continuous feedback process, and making leaders more accountable for their managerial performance. The businesses that take the longest to recognise this will be the ones that feel the impact of churn the most.