Attracting and retaining partners

1. Attracting and Retaining Partners
John Colvin
November 2013

2. 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
2

3. 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
3

4. 4
We are living in remarkable and
exponential times.

5. 5
Did you know?

6. 6
China will soon become the number one
English speaking country in the world.

7. 7
According to the U.S Department of
Labor…

8. 8
1 out of 4 workers today is working for a
company for whom they have been
employed
less than 1 year

9. 9
More than 1 out of 2 are working for a
company for whom they have worked
less than 5 years

10. 10
According to former Secretary of
Education Richard Riley…

11. 11
There are over 2.7 billion searches
performed on
Google each month.

12. 12
SEEK now has a market capitalisation
greater than the whole of Fairfax

13. 13
The number of text messages sent and
received every day
exceeds the
population
of the planet.

14. 14
There are about 540,000
words in the English
language…

15. 15
About 5 times as
many as during
Shakespeare’s time.

16. 16
More than 3,000 new books are
published…

17. 17
daily.

18. 18
It is estimated that a week’s worth
of New York Times…

19. 19
contains more information than a person
was likely to come across in a lifetime in
the
18th century.

20. 20
It is estimated that 1.5 Exabytes (1.5 x
1018) of unique new information will be
generated worldwide this year.

21. 21
That’s estimated to be more
than in the previous
5,000 years.

22. 22
The amount of new information is
doubling every 2 years.

23. 23
Third-generation fibre optics has recently
been tested by both NEC and Alcatel…

24. 24
That pushes 10 trillion bits per second down one
strand of fibre.

25. 25
That’s 1,900 CDs, or
150 million simultaneous phones calls,
every second.

26. 26
Predictions are that by 2013 a
supercomputer will be built that exceeds
the computation capability of the human
brain.

27. 27
2009 was the first year in the history of
the industrialised world that more
people left the workforce than joined it

28. 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
28

29. 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
29

30. Law Firms are Changing Too
30
• 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

31. 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
31

32. 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…
32

33. 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
33

34. Law Firms are Facing Significant Changes
• 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
34

35. Law Firms are Facing Significant Changes
• 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
35

36. Law Firms are Facing Significant Changes
• 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
36

37. Major Business Issues
37
Paradigm shift
20%
Acquisition and
retention of talent
20%
The growth of
regulations
20%
Growing the
business
15%
Risk management
10%
Globalisation
5%
Operational
excellence and
Media
10%

38. 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
38

39. 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
39

40. Reasons Partners Leave Law Firms
• 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
40

41. 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
41

42. Reasons Partners Leave Law Firms
• 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
42

43. 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
43

44. 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%
44

45. 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
45

46. Contact Details
46
John Colvin
Principal
E: jcolvin@johncolvin.com.au
M: +61 409 183 174
S: +61 2 8823 3485
Level 36, Governor Phillip Tower
1 Farrer Place, Sydney NSW 2000, Australia
Sandra Heinig
Senior Associate
E: sh@johncolvin.com.au
M: +61 416 731 897
S: +61 2 8823 3485
D: +61 2 8823 3487
Level 36, Governor Phillip Tower
1 Farrer Place, Sydney NSW 2000, Australia
Sian O’Shaughnessy
Research Analyst
E: sian@johncolvin.com.au
D: +61 2 8823 3485
Level 36, Governor Phillip Tower
1 Farrer Place, Sydney NSW 2000, Australia