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Smart Growth Part 6: Organic Talent Growth

11.13.19 | Susan Duncan

In our first post on Smart Growth, we cited the 2019 Altman Weil Law Firms in Transition Survey, which reported that the number one growth strategy law firms intended to use was organic growth at 96%, followed by acquiring laterals at 92% and acquiring groups at 76%.   We rarely focus on organic growth as a strategy since there is so much lateral movement in the marketplace and it doesn’t have the same “shine,” appeal or east as hiring laterals. Growing organically is not mutually exclusive from also using lateral hiring, acquisition of groups and mergers as growth strategies simultaneously.  In this post, we are addressing organic growth as it pertains to growing talent and in our next post we will address growing revenue organically.

Growth is not an option for firms that want to continue to compete and provide advancement opportunities into their partnerships (though most equity partnerships have been shrinking in order to maximize PPP for core equity partners.)  While it used to be the way most law firms grew in the past, organic growth alone will not achieve the growth firms need in today’s market, however, it still plays a critical role. Firms should take time to assess and improve upon their approaches to organic talent recruiting, development and retention, especially as the talent market continues to tighten.

Growing Organically as a Talent Strategy

Decades ago, firms relied on organic growth 95-100% of the time – hiring law school graduates out of law school or clerkships.  The exception to the rule might have been a high profile political or government official who likely had left the firm for the post and returned when they finished that post.  Even until the last five years, several prestigious New York firms that are known for their strong one-firm approach, institutional client base and lock-step partner compensation grew successfully by highly selective recruiting of law students and judicial clerks, hands-on training and mentoring, up or out systems for those who did not ascend to the partnership (and were often carefully placed in client organizations) – these firms rarely if ever recruited lateral partners (or associates) from other firms.  This was known as The Cravath System.

Many firms still put a premium on hiring out of law school and bringing along their associates up through the ranks to partnership.  There are many very successful rainmakers and client developers in law firms that have been “home grown” and have been with their firms since being a summer associate or 1L.  These loyalties are hard to break and the bonds that have developed contribute to a firm’s strong cultural fabric and sense of purpose.  Unfortunately, the reality is that 75% or more of all associates leave their first firms by the time they are fifth year associates.

A number of firms have significantly reduced their entry level hiring efforts. This trend was particularly acute right after the 2008 financial crisis which triggered recruiting and hiring cutbacks, firing of associates and deferred starts for new lawyers. Compounding this has been push back from clients, many of whom stipulate they will not pay for first- or second-year associates who bill on their matters, believing that new associates often get trained on the client’s dime.  The high turnover rate and the pushback from clients are prime reasons why many firms have turned to lateral associate hiring to fill many of their talent gaps and needs.

In addition, with the dramatically changing landscape of legal services companies, LPOs, ALSPs, the Big 4, legal technology vendors and on-line tools and resources – law students have more choices than ever before and will be seeking non-traditional paths and careers.  These trends and market factors pose a substantial challenge for firms that rely on traditional, organic talent growth.   All of these challenges have made it more difficult for law firms to grow quickly enough and to be efficient and effective enough to generate the leveraged profits seen in former decades, resulting in the focus on growing revenue more quickly through lateral partner hiring and mergers.

Time for New Approaches: “The Chapman System”

Tim Mohan, the Chief Executive Partner of Chapman & Cutler, recently published an article, Updates to a 100-Year Old Talent Model, in the Legal Evolution blog. He describes the evolution and characteristics of the traditional Cravath model of the up or out system of hiring and promoting that we described above and acknowledges that it is still the model used by most large law firms today.

In looking at today’s market conditions – the flattening decline in demand, the decline in law school students (law school enrollment is at a 40-year low) is reducing the number of qualified entry level lawyers, the focus by clients on costs and their unwillingness to pay to train new associates, the high turnover rate of expensive associates, and the need to provide services more efficiently and cost-effectively — Chapman & Cutler decided to take a look at an alternative way of hiring/training.

As well described in the linked article, the firm developed their Finance Law Development Program (FLDP) which is similar to the financial analyst model used in investment banks that train college graduates for a few years and who then are eligible for their MBA reimbursement. Chapman has developed an internship model for college graduates who might consider law school that begins with a Bootcamp for Finance Law Interns, then an Analyst internship for two years. Their LSAT prep courses are covered by the firm. If selected, they are designated as a Chapman Law Fellow, given the signal they would be hired as a Chapman associate once they graduate from law school and provided a loan for housing costs during law school. Their summers are spent with Chapman or with a client.

An Alternative for New Lawyer Hiring and Training: Legal Innovators 

In response to the challenges noted above, Jonathan Greenblatt and Bryan Parker co-founded Legal Innovators, a company that provides a two-year legal apprenticeship program for new lawyers. “Our core competency is to provide an integrated suite of talent management solutions, on an outsourced basis, primarily at the junior associate ranks, to our clients.” The firm will recruit, provide office space for, train, mentor and pay new or junior lawyers who will be contracted out to law firms and their clients for an agreed upon amount of time. As a new business, we don’t yet have a track record to measure its success, but it certainly addresses the question law firms are asking: “If our clients won’t pay for first or second year associates as they get trained, how will we get new lawyers up to speed and who will pay for it?” Another important aspect of this company’s core mission is also to assist firms in reaching diversity goals and create opportunities for junior African American attorneys.

10 Ways to Improve Your Organic Talent Growth Strategies

  1. Assess the market. Use research to determine strategy for talent growth. Look at best practices, business models and the cultures/values at the firms that best grow talent organically including Wachtell, Cravath, Cleary Gottlieb, Bartlit Beck, Davis Polk, Debevoise, Simpson Thacher, Sullivan & Cromwell.  Different practice groups will be impacted by market trends differently as well as clients’ needs and preferences. This often indicates the need for different types of skills, levels of experience and even approaches to hiring. Think out of the box and consider alternatives like the Chapman model or Legal Innovators. These should be explored and determined in advance of any recruiting efforts.
  2. Hire for cultural fit. If you want your associates to stay with your firm, begin looking at more than their law school and undergraduate credentials. Assess what makes associates in your firm successful and loyal.  Conduct communication and personality assessments to test for qualities you seek that are not always detected in academic records.
  3. Hire for the future. If traditional law firms want to survive the disruption occurring, they will need lawyers, process engineers, technologists and data scientists. Lawyers must be adaptable and proactively in search of innovation to effectively use technology, process design, data and project management to deliver results efficiently. One size will not fit all needs your various practice groups have, nor the preferences and career goals of candidates you seek to hire.
  4. Commit to and nurture diversity. Diversity leads to better work processes and work product, innovation and higher profitability. Clients are expecting or demanding it. Building a diverse workforce and holding on to diverse lawyers will be critical to future success. Building a dedicated sponsor role for senior lawyers to promote and advance diverse lawyers is essential and work together with clients to develop joint recruiting, development and retention programs.
  5. Train and mentor. The firms that still are best at organic growth of talent place a premium on training and development. Associates at firms like Bartlit Beck, where none of their legal services are ever billed by the hour, still shadow partners and spend many hours in court on pro bono cases to get trial experience. Wachtell exposes associates to clients right out of the gate and their team approach to client matters provides broad and well-rounded exposure early on.  Provide training on delegation, feedback and coaching as well as build in and measure performance and time of attorneys who supervise younger attorneys.
  6. Feedback in real time. Millennials and Gen-Y lawyers want feedback on an ongoing basis and in a face-to-face setting (despite the assumption that they prefer digital communication.) They don’t want to wait for a formal review once a year, in which partners and senior associates check off boxes and often don’t take the time (or the risk) of honest and actionable feedback.  360 reviews provide for better feedback on all attorneys so that supervising lawyers can also be evaluated as to their effectiveness and areas for improvement.  Train partners to be coaches to associates.
  7. Career advancement strategies and alternatives. For those associates who may want to progress to partnership (and many will not want to make the sacrifices required for that,) establish and articulate criteria, benchmarks, milestones and provide level-appropriate training programs, secondment opportunities and effective mentors/sponsors. Hire non-traditional professionals to do more routine work (contract lawyers, legal technicians, eData and eDiscovery experts, etc.) Develop alternative career options and paths.
  8. Provide meaning in work. Millennials often are idealists and want to be a part of something larger than a legal task or narrowly defined role.  They want the opportunity to grow and to connect what they are doing to something that has meaning beyond the actual project. Supervising lawyers should make connections between what the legal project is and the relevance to the client, the client’s industry and/or the eventual outcome/benefit. Provide structure, opportunities, recognition and role models for pro bono, charitable and civic work.
  9. Collaboration. Restructure work assignments so that millennials are working in teams with ongoing mentoring and real time feedback built in. Invite associates to join in cross-practice, cross-functional, cross-office projects, task forces or innovation contests with lawyers and professionals.
  10. Well-being. Build a wellness program that acknowledges and provides support for stress and time management, physical and mental health and work flexibility models that afford lawyers ways of balancing work demands with life choices.

Our next post will address Organic Revenue Growth.

RainMaking Oasis provides consulting, training and coaching services to law firms and lawyers in the areas of business development and growth strategy, innovation, client retention and expansion, succession planning and leadership and personal effectiveness skills. Please contact Susan Duncan at [email protected].