Why Should Associates Stay With Their Law Firm?

While I help law firms deal with a myriad of issues, the top focus of my consulting advice in 2022 had to be Associate churn. So, here’s a two-part post on this issue. First, I want to speak to Associates who are considering leaving their firm. Next, I’ll speak to law firms about how to create conditions that will lesson Associate temptations to leave.

Last year I wrote an article for SLAW called “When Should You Leave” to help Associates understand when it makes sense for them to move firms. But today, I want to talk about why an Associate should stay with their firm. I’m doing this because Associate churn has been – frankly – ridiculous, spurred on by almost weekly calls from recruiters promising more money, better circumstances, etc. Well, I work the law firms that are losing and gaining Associates in these musical chairs, and I’m seeing the negative impact all of that movement is having on careers. In my opinion, this constant movement will result in permanently delayed or damaged careers, setting Associates back three or more years in terms of legal skills and knowledge, experience, and preparation for advancement.

Yet, in a 2022 Thomson Reuters survey, it was found that 68% of Canadian Associates (73% of which are under 40) are likely or somewhat likely to move firms in the foreseeable future. I don’t believe this is a temporary marketplace issue that will be entirely addressed by a changing economy. I think this is a larger, generational behavioural issue that we’re all going to have to live with for a while.

There are a number of reasons why Associates are moving around so much.

FOMO or fear of missing out. The frequency with which recruiters contact Associates with offers makes the younger lawyer worry that they might be making a terrible mistake by staying put. If they can make another $5-$10K through a move, why wouldn’t they do that – and regularly – to maximize their profitability? While moving firms is the fastest way to increase your paycheck, it’s a short-term fix and can be a long-term career-killer. Such Associates will get to a point where their salary demands result in higher expectations than they can reasonably deliver. First, they will become unsellable at that salary range, and ultimately, they’ll become tainted goods. Once an employer sees that you’ve been at three or four different firms in the past eight years, they are less likely to believe it was the fault of those firms. Instead of worrying about missing out on some money in the short term, Associates would be better served to consider the best move given their overall career goals.

YOLO or you only live once. Some lawyers seem to live by this philosophy, believing it will ultimately make them happier. In fact, happiness research indicates that the opposite occurs. Too many choices can cause choice paralysis. Lack of commitment to a game plan limits the ability to form the kind of relationships that can give us a sense of belonging in the workplace, and the development of mentor relationships which are so important to an Associate’s training and advancement. And constant moving is proven to get boring, and to lower our happiness. (For more on this check out the October 16 podcast of The Happiness Lab.)

Lack of career progression. Ironically, many Associates are causing this for themselves through their frequent moves. As a result, they aren’t gaining the depth of experience and knowledge needed to progress. It takes at least a year to get to know a new firm (understand how the firm works, get to know lawyers who will mentor you, get to know the clients, establish yourself under the new firm name through marketing, etc.) and land of your feet after a move…if you’re lucky. That means that each firm move will set you back at least a year. Here in BC, some litigators are moving firms because they don’t want to be the ones to work out the PI files. They see this (rightly so) as a dying practice. They don’t see this as an opportunity to get more litigation process experience than virtually every other practice out there, which it is. But I also blame the firms. They should be dividing up the PI work to ensure no one gets buried in it, and ensuring that those lawyers are actively developing replacement areas of law.

Concerns about the compensation system. In my personal experience, the vast majority of Associates who eventually move into Partnership roles have no idea how a law firm works. So, it stands to reason that most Associates generally don’t know how the business runs. You need to learn this to prepare you for eventual partnership, but also to better understand where you sit in terms of contribution vs. drain on the firm. Traditionally, Associates under five years of call are an expense to a law firm. To cover costs and contribute even a little to firm profit, Associates should bring in 2.5 of their compensation. But even if they do, it takes more investment to train up a junior lawyer. If you add the cost of the extra staff time needed, the mentorship time by more senior lawyers, the CLE’s (in excess of those needed to fulfil Law Society credits) that are required to properly train young lawyers, they are very much an investment for a number of years.

It has become popular, especially in smaller towns, to compensate Associates with a fee split instead of a salary. This split these days tends to be at 50%. At that rate, and given the typical billings of a junior to mid-level Associate, the law firm is losing money on this Associate. (That might change if the Associates was regularly bringing in, say, $600K, but few do). Coupled with this, some firms do not set targets for the Associate. So, if the Associate is perfectly comfortable earning $78K/year, then the law firm is now hemorrhaging money for the Associate.I’ve heard Associates argue against this logic, saying law firms wouldn’t hire them in these circumstances if they weren’t making money on them. But it’s a fact. Law firms make money on senior Associates, and mid to senior-level Partners. Everyone else tends to be an expense.So why did they hire you? Because the law firm has committed to providing certain services to their clients. They need someone in the chair, doing that work. And it’s long been known that not all lawyers in a firm are profitable. The hope is that the Associate will learn and grow and one day, be a financial benefit to the firm…maybe even make Partner.

Another unspoken reality is that when Associates are over-compensated, Partners are less likely to coddle them. Such Associates are expected to get the work done, well, on-time, to learn what they need to learn with minimal mentorship, and to market and build business where they can. Afterall, in order for the firm to make money in a firm with so many investments, the senior Partners need to work harder. As a result, they don’t have time for the kind of oversight that they might have received in their day.

The fact is that a higher salary or fee split gives the firm less incentive to support you, and gives you less incentive to work hard. Functional compensation systems provide a reasonable baseline for adequate work, and offer incentives for extraordinary work. I favour compensation structures that set a target at 2.5 of whatever the Associate is getting paid, and a healthy fee split thereafter. Further, the target must be reasonable, and must be hit. So the base salary can’t be outrageous or there is no reasonable hope that the Associate will hit it…which is just dispiriting.

I’ve long felt that firms should offer a course on Law Firm Finances 101 to every Associate. It would help them better understand the business and the choices Partners need to make, and better prepare them for Partnership (or not, see below). I do, however, think there are legitimate concerns about appreciation for Associates in many law firms. But it’s not all about the money.

Concerns about being over-worked and under appreciated. Today’s younger lawyers prefer to work a 1300-1500 billable year. (In North America, the average required of Associates is between 1700-2300.) At least half of the Associates I have met in my many law firm clients do not hit their targets each year. And they won’t work evenings or weekends in an effort to make up for lost time. The problem is that law firms plan their cash flow by predicting productivity. So that target isn’t a suggestion. When you don’t hit it, the firm has to find another way to keep the lights on. The trick is to balance your compensation with your billable rate. For example, if you want to be paid $250K/year while working only 1200 hours, then you’ll need to bill $625K and have a rate of $520. This is before you qualify for any bonus. The only way a 1200 hour a year law firm survives is if there are senior Partners at the top billing at very high rates and putting in very long hours.

In terms of concerns around appreciation (aside from compensation or bonuses), I think there is merit to this. Most law firm Partners could do a much better job of acknowledging and thanking their lawyers and staff generally, and keeping firm morale high. On a more individual basis, Associates don’t need to be thanked for showing up for work. But they do think they like to hear – in a timely manner – when they’ve done something well, or when they could do something better. So, when Associates say they want to feel valued (and it goes beyond compensation), they are really saying they want to feel cared about. Frankly, every Associate (and staff member) in the firm should feel they are cared about.

The Need for Alternatives to Partnership. We know that not all Associates aspire to become a Partner. Many don’t want to work that hard, or take on that level of responsibility or risk. But they can still be long-standing, valuable members of the firm making a good living, and doing work they love. Firms are well-served by creating formal alternatives to Partnership, and ensuring Associates are aware of these alternatives and encouraged to pursue them. It also helps to ensure that any existing lawyers in those alternatives are content with the arrangement or it’s not much of an endorsement.

The lack of a strategy. In the earlier-mentioned Thomson Reuters research, Associates expressed concern about a lack of firm direction or strategy, and a lack of firm leadership. I feel those are closely connected. Organizational leaders are expected to outline firm vision, and to help the firm create a pathway toward its achievement of that vision. I recently worked with a new lateral Partner in a firm. She told me that her decision was finalized when she learned the firm was updating an existing strategic and operational plan. She was attracted to a firm that had a vision, and a means to working towards that vision. Many Associates today ask, during their interview, about a firm’s business or marketing plans. They do this because they want to ascertain if they are in the right place, if they share the firm’s values and can support the firm’s ultimate direction. But they also appreciate that a firm that doesn’t have a business plan probably won’t have a plan to support the careers of its Associates. So keep asking the question, because by doing so, you might help to shift firm culture into one that is more considered and pro-active.

As I’ve noted above, constantly moving around can cause significant delays to a lawyer’s career. Lawyers seeking to chase the money would be better served by chasing more supportive environments for their personal growth: business plans, coaching, mentorship, a good training program, marketing support, etc. The money will follow, and will continually increase throughout the lawyer’s career resulting in a much more satisfying and lucrative career overall.

Most lawyers are not dabblers. They want to be outstanding at what they do. You’ll never be an amazing swimmer if you only dip your toe in the water a hundred times. Find a place with money you can live with, and a strong training and support system.

I tell my clients that the money needs to be fair, meaning at the appropriate market rate. After that, Associates chase money when their first need is unmet. What is that first need? That depends on the Associate. Sometimes, the Associate doesn’t know what they want or need, so they revert back to money as their main driver. But money is not a good motivator in the long run, and many a lawyer has come to me frustrated at the end of ten years because it’s been lucrative, but they don’t have the career they really wanted. Law firms hire to plug a hole, but they will support someone with a career vision. Figure out where you want to go in your career and what you need to get there. Then tell your firm how they can best support you.

On a final note, I want to reference the intangible benefits of truly committing to a law firm. When you do make the decision to stick around, more focus can be placed on ensuring your success there. People with commitment to a pathway are more likely to feel a stronger sense of purpose. They build firm connections that result in a greater sense of belonging. And they build relationships that provide a greater guidance and support.

The bottom line is that that both Associates and law firms must come together to creating circumstances in which this churn can stop, and Associates can reap the benefits of a more committed law firm relationship.

As with most strong relationships, the work must occur on both sides.

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