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February142022

Can Law Firms Overcome ‘The Great Resignation’?

Christopher Imperiale, CPA

2.14.22 | Practice Made Perfect

Let’s begin with the big picture: In early January, the U.S. Department of Labor’s Job Openings and Labor Turnover Summary (JOLTS) showed that the tightness within the U.S. labor market is at historic levels with demand for workers at all-time highs. The report showed there were a total of 10.562 million job openings as of November 2021. Even more eye-opening was the number of workers voluntarily walking away from their jobs (measured as “quits rate”) came in at 3%, with 4.5 million workers quitting their job. According to a report in Yahoo! finance, this exodus matched the previous record set in September 2021.

Industries and Employees Being Most Affected

A question often being asked today is: “Which industry sectors and employee levels are being most impacted by what economists are calling ‘The Great Resignation’?” While the answer may vary depending on the market, the sectors that are really feeling the pinch are white-collar professions, such as technology, healthcare, and legal professions.

With regards to employee level, a Harvard study speculated that mid-career workers were leading the exodus for various possible reasons, including but not limited to the COVID-era shift to remote work. Remote working “has led employers to feel that hiring people with little experience would be riskier than usual since new employees won’t have the benefit of in-person training and guidance. This would create greater demand for mid-career employees, thus giving them further leverage in securing new positions.”

A Storm Over the Legal Profession

The legal profession is facing a perfect storm of factors that are changing the face of the sector in the post-pandemic world. First, firms are experiencing a scramble for talent and are currently swamped with Requests for Proposals in practice areas ranging from bankruptcy to real estate. During the first COVID year, 2020, law firm associates’ average annual billable hours increased by 10%. At the same time, firms are playing catch-up in hiring from the pandemic, when associate hiring fell by nearly 50%. Not surprisingly then, as workloads have increased and new hiring has lagged, firms are fighting to hold on to their associates.

A report by the Georgetown University Law Center and the Thomson Reuters Institute shows that “at the end of November 2021, all law firms were edging dangerously close to losing almost one-quarter of their associates in 2021.” The study also shows that associates are heading for the exits, even as firms shell out higher compensation. Firms now find that higher pay does not translate into higher employee satisfaction levels. Somewhat paradoxically, the report also found that “that firms with the lowest turnover are not necessarily those with the highest compensation growth. In fact, those law firms that have experienced lower rates of turnover among their attorneys tended to have the lowest compensation growth among firms in the market.”

Adding to the retention problem, while Big Law has adapted to the hybrid work environment, it has been hesitant to embrace flexible, remote work policies fully – anticipating an eventual return to full attendance to the office. In this, they are outliers in the corporate world as firms such as Capital One, Nationwide Insurance, and Verizon have, to a degree, embraced the turn toward hybrid work. Another reason young attorneys are departing large firms is, in part, the feeling they do not play integral roles within big teams.

Facing the Challenge Head-On

So, how can firms stem the tide of departures? It is important to recognize that it is not a matter of a few tweaks and modifications. The world has changed in the last two years, and management needs to embrace that change and consider a range of options to keep their talent in place.

From an overall perspective, management needs to focus on treating staff well. The days of management having the upper hand and leveraging the mindset that staff should be grateful and appreciative for having a job are over. Employees now expect to be viewed as being valued and appreciated.

Going Beyond Money

You can’t keep your staff happy with money alone. That is not enough anymore. Associates are leaving to take positions at firms with better perks, superior work-life balance, higher morale, and a positive culture. More and more, employees seek meaning in their work over and beyond the rewards of compensation. Firms should focus on creating an environment that embraces flexibility and demonstrates empathy, making it harder for associates to leave.

Hybrid is Here to Stay … and Expected

Employees expect their remote work options to remain post-pandemic and will be offered equitably. This expectation will allow firms to reevaluate and reconfigure physical workspaces and leverage any space and rent savings that may come from this exercise.

Invest in Your People — They are Your Future

Today’s employees want to feel that you have their backs. You need to demonstrate that you want to help them succeed by offering comprehensive training, mentoring, and development programs at all levels. Acknowledge achievements and provide a clearly understood path for advancement and growth. This investment should also include opportunities to relieve stress — events, parties, trips to shows and sporting events, and even small things like pizza days. Stress relief can mean more than fun and could include services to promote mental health. Whatever you choose to do, communicate upcoming perks early so that the staff has something to look forward to at all times.

Be a Part of the Community

Firms earn respect and allegiance of employees by participating in the communities they serve. Consider participating in charitable events, fundraisers, support for children, and similar opportunities. Encourage employees to get involved and even make it a part of their evaluations. “Own” a particular event by becoming a sponsor.

Compensation Means More than Money

Offering above-market compensation is no magic bullet, but it is a statement that you want your people for the long term. Beyond that, learn what benefits are most enticing to the current and upcoming generations. It might be more about quality-of-life issues like time off for family and less about gym memberships and clothing discounts. Many corporate legal departments have started to focus much of their recruiting efforts on young attorneys with the offer of greater growth opportunities and being part of building a business, an area where Big Law may be hard pressed to compete.

Listen and Heed What You Hear

Provide employee satisfaction surveys throughout the year to show that you want their input and are willing to listen. If you choose to follow through on any suggestions, make a point by saying, “We heard you.” And don’t let it slide. Follow through.

Build a Collaborative Environment

No one wants to be a cog in a wheel. Take steps to build an environment where input is sought, accepted, and rewarded. People feel a stronger link to their job and firm if they know that they are being noticed and their thoughts are valued.

If you have questions, contact Christopher Imperiale at 212.331.7590 | cimperiale@berdonllp.com.

Berdon LLP New York Accountants

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