attracting and retaining partners
TRANSCRIPT
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Attracting and Retaining PartnersJohn Colvin
November 2013
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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
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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
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We are living in remarkable and exponential times.
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Did you know?
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China will soon become the number one English speaking country in the world.
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According to the U.S Department of Labor…
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1 out of 4 workers today is working for a company for whom they have been
employed less than 1 year
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More than 1 out of 2 are working for a company for whom they have worked
less than 5 years
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According to former Secretary of Education Richard Riley…
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There are over 2.7 billion searches performed on
Google each month.
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SEEK now has a market capitalisation greater than the whole of Fairfax
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The number of text messages sent and received every day exceeds the population of the planet.
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There are about 540,000 words in the English
language…
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About 5 times as many as during
Shakespeare’s time.
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More than 3,000 new books are published…
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daily.
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It is estimated that a week’s worth of New York Times…
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contains more information than a person was likely to come across in a lifetime in
the 18th century.
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It is estimated that 1.5 Exabytes (1.5 x 1018) of unique new information will be
generated worldwide this year.
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That’s estimated to be more than in the previous
5,000 years.
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The amount of new information is doubling every 2 years.
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Third-generation fibre optics has recently been tested by both NEC and Alcatel…
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That pushes 10 trillion bits per second down one strand of fibre.
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That’s 1,900 CDs, or 150 million simultaneous phones calls,
every second.
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Predictions are that by 2013 a supercomputer will be built that exceeds the computation capability of the human
brain.
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2009 was the first year in the history of
the industrialised world that more
people left the workforce than joined it
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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
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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
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Law Firms are Changing Too
• 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
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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
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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…
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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
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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
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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
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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
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Major Business Issues
Paradigm shift20%
Acquisition and retention of talent
20%
The growth of regulations20%
Growing the business15%
Risk management10%
Globalisation5%
Operational excellence and Media10%
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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
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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
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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
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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
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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
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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
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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%
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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
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Contact Details
John ColvinPrincipalE: [email protected]: +61 409 183 174S: +61 2 8823 3485Level 36, Governor Phillip Tower1 Farrer Place, Sydney NSW 2000, Australia
Sandra HeinigSenior AssociateE: [email protected]: +61 416 731 897S: +61 2 8823 3485D: +61 2 8823 3487Level 36, Governor Phillip Tower1 Farrer Place, Sydney NSW 2000, Australia
Sian O’ShaughnessyResearch AnalystE: [email protected]: +61 2 8823 3485 Level 36, Governor Phillip Tower1 Farrer Place, Sydney NSW 2000, Australia