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Law firm associates have a nasty tendency to pack up their toys and go start their own law firms. Keeping them in our employ is difficult. The grass is often greener elsewhere. They’re tempted by other offers or, quite often, the option of opening their own practices.
We live in a world where it’s easier than ever to start a solo law firm.
Buy a laptop and a phone, sign up for malpractice insurance, subscribe to a few software services, order some online ads, pop up a website, and you’re a law firm. If you can’t get a new law firm started in 24 hours, you’re doing it wrong.
The toughest part of going solo, of course, is getting clients. That’s something lawyers starting their shiny new firms rarely appreciate, so it doesn’t slow their departure nearly enough. Most of us underestimate the difficulty of bringing in money, until we’re actually up and running our firms.
Your former associates don’t think about generating new business, because they’ve “stolen” a few clients. It’s a little like your kid declaring that he’s “running away,” and sauntering fifty feet to the treehouse you built. They’re insulated (briefly) from the revenue-generation pressure. But when that money runs out, they quickly learn that you knew a thing or two about getting clients. They hit the wall pretty hard until they figure out how to run a basic marketing campaign.
But eventually they’ll figure it out, and they’re not likely to come begging back to you. They’ll find a way to overcome the marketing obstacles. I’ve watched many Rosen Institute members go from zero to a great income with focused effort. It’s not only possible to support yourself practicing law–when done right, it’s lucrative.
When starting a law firm is easy, it’s always an option
The reality of today’s marketplace and economic environment is that your associate, practicing on his own, in a low overhead situation, has a decent chance of making more money than you do, in your larger firm. The resourceful, aggressive, nimble solo practitioner is often the most profitable lawyer in the marketplace.
There was once a time when group practices made a great deal of economic sense. Even today, the very large firms remain incredibly profitable. But small and medium-sized law firms often struggle to maintain the profitability of both larger firms and solo practices. They face increasing competition, downward price pressure, an inability to hire and retain the best and brightest, and clients who prefer to find non-lawyer alternatives to solving legal problems. It’s a difficult environment.
The reality is that most small and medium-sized firms haven’t easily retained associates for quite some time. It has been a struggle for years now. Some law firm partners resist hiring because they’ve been burned so many times by associates they’ve hired, trained, nurtured, and lost.
Even when firms are good at retaining associates, it’s not always a positive situation. Look around at the firms retaining lawyers. They start small with one owner and, eventually, an associate or two. Before you know it, they’re two owners and one or two associates. If the group gets along, it grows to five or ten partners and five or ten associates. At first glance, the firm appears to be growing bigger, but the reality of the situation is often very different.
The firm with one owner and two associates has a fairly healthy owner-employee ratio. But after years of ‘growth,’ they have ten owners and five or ten associates. The leverage, the source of additional owner income, has usually declined. The economies of scale, which are usually a big part of the argument for growth, typically fail to materialize. Marketing should be enhanced by a larger group of lawyers contributing to the effort. But inevitably, the marketing presence of the larger group is less effective due to multiple practice areas, lack of alignment in messaging, and the tendency of a large group to refuse to promote themselves in interesting, edgy, persuasive ways.
When leverage is minimal, a larger firm means lower profit per owner, and that trend continues as the firm keeps ‘growing,’ while the per-owner value of the business keeps slipping. Having lots of lawyers doesn’t necessarily correlate with lots of profits.
The time bomb is ticking
Your best associates are watching you, and they don’t like what they see.
Of course, what they think they see may not be reality, but we’re all self-obsessed and don’t always look at the whole picture. They think highly of themselves, their ability, and their worth. You, no matter how hard you try, are the boss who they suspect is screwing them. That’s what bosses do, right? Doesn’t that, at some level, have a lot to do with why you left your old law firm?
When you collect a fee, they wonder why you get so much and they get so little.
When you make them split an assistant with three other associates, they feel bruised.
When they discover that the associates at another firm get reimbursed for their mobile phones and you don’t offer that benefit, they feel cheated.
When you ask them to attend a weekly meeting, they want to know how much extra you’ll pay them.
When you ask them to start building their business network, they want to know what’s in it for them.
It goes on and on.
Eventually, their suspicion that they’re being exploited will outweigh the perceived value of the direct deposit they get from you every two weeks.
They’re biding their time, building their reservoir of energy for departure, and waiting for the moment when you cross the line.
Your associates know they can leave. For them, it’s mostly a matter of finding sufficient courage at an opportune moment.
Associate departures are a nightmare–I feel your pain
You put your sweat and blood into your associates. You jump through hoops to hire them, train them, manage them, and support them through their personal trials and tribulations.
You rack your brain for innovative approaches to compensation and benefits. You send them to the best continuing education courses. You give them time off for things you’d never have dreamed of requesting from your boss. You bend over backward, you lose sleep, you strategize endlessly about how to make them more productive and capable of generating more revenue. You make yourself crazy, trying to keep them happy.
Their response to your effort?
They leave and take your clients.
It’s upsetting, but it’s also hard to be too upset. Many of us did the same thing. We’re living our dream. So are they.
Let that sink in: for many of your associates, leaving your firm is their dream. Do you really want to get between your employees and their dreams?
How to deal with associate departures
What should you do?
Many of us react to the departures by doing more of what we’re already doing. We replace them, we give the newbies what they want, and we keep killing ourselves to meet their needs.
How does that work out?
Doing the same thing over and over while expecting a different result is crazy. But that’s exactly what most law firms do. Our reaction to empty associate desks is to fill them with new associates. What if, instead, we just sell their desks?
You need a new model
When the old business model stops working, it’s time for a new business model.
Switching gears can feel like failure. Those of us who committed to growing a bigger law firm feel awkward about scaling back to a smaller footprint, even if we see a path to greater profitability.
For some lawyers that means following the associate’s example, and becoming a solo business. The nimble solo truly is, quite often, the most lucrative model in many practice areas. Consider it for yourself. Being big was once a badge of honor. Today, though, being profitable is a badge of honor. That’s one option.
For other lawyers, a new model still looks like a multi-lawyer firm, but it’s more platform than law firm. The lawyers in these firms own the responsibility for profitability, rather than shifting that responsibility to the firm. These lawyers bring their clients, set their rates, and determine their own draws. From a law firm perspective, these lawyers are profitable from day one because they’re required to contribute to the cost of running the platform, rather than the other way around.
Going solo or working within a lawyer support platform are just two ideas. There are many other models for the future of law. Others write extensively about the economic changes happening in our profession. These changes often result in clients getting better service, lawyers living happier lives, and everyone involved coming out ahead economically. The changes also show no sign of abating. The old models are no longer the only models.
Business models constantly morph and change. Amazon started off as something akin to a retail store, except that it operated online. Now it’s a broad collection of businesses with online store offerings, retail stores, subscription services, web services and more. Back in the day, you were buying things directly from Amazon. Now, when you buy something on Amazon, you’re likely buying from a third-party seller contracting with Amazon for services. Models change. Don’t be overly attached to the way it used to be done.
If you keep bumping into an obstacle, find a different way to get from here to there. If departing associates are limiting your profitability, build a model that either eliminates associates, anticipates their departure, or profits from associates regardless of their level of commitment.
When Jonathan Ive was designing the first iMac with an LCD screen, he attempted to address heat dissipation, optical drive orientation, and a myriad of other considerations in a traditional enclosure. No matter how he tried to shoehorn the new technologies into the old-fashioned box, he wound up with a monstrosity of a device. Steve Jobs suggested that the solution was to “let each element be true to itself.” The final product was a wildly unconventional (but strikingly elegant) design.
Look past the way you did it before, and find a better way that either meets your associates where they are, or changes your need for associates entirely.
When associates leave, they’re attracted by the greener grass. Sometimes the grass really is greener, and they’re doing the right thing for themselves. Take a look around. The old model isn’t always the best model. Sometimes it’s time for a change.