Associate retention/attrition may have always been a chronic problem for the industry, but is it only me or is the situation actually deteriorating? Annual attrition rates of 25% at AmLaw 50 and UK 50 firms are now widely reported, and as I previously noted one downtown NYC firm lost 7 of its first-year class of 25 associates between September, when they arrived, and the following April—over just 7 months.

Allen & Overy has gotten religion about this—they were widely reported to be in the 25% (or higher) annual attrition camp—and they’re created a comprehensive program attempting to address the problem from all angles, but primarily from the social/career satisfaction, and the economic/financial, perspectives.

First, the change in the way the firm is "engaging with our associates," as Genevieve Tennants, A&O’s HR Director, puts it at Legal Week. Without question, everything she says about the firm’s plans is commendable. Among other things:

• The firm recognizes that "the old days of the partnership laying down the terms and conditions of employment and then expecting associates to acquiesce are over."
• Retaining key talent is the only way to maintain competitive advantage.
• So the firm is taking a page from the way it treats its clients (or aspires to treat its clients, at any rate): "When competing in the ‘war for talent’, we would be well advised to apply the same principles we do when managing our client relationships. We need to listen. We need to understand the issues and be ready, willing and able to respond."
• As associates have become more involved in trying to find a solution, "their appreciation of the complexity of the situation has increased. They too realise there is no quick fix that management has — for whatever reason — decided to ignore." This remark I found particularly telling: Rather than be "afraid" of involving associates for whatever irrational reasons might obtain (generally revolving around such bogeymen as "losing control"), you might discover that involving them makes your job easier. Associates are not, need one be reminded, stupid. They are amply capable of appreciating the tug-of-war between the exigencies of firm profitability, the fundamental pyramidal structure of our industry, and the fact that well-rounded, sane and level-headed professionals need to "have a life." Engage them; you might like it.
• At the most summary level, the A&O initiative can be distilled into "creating a coaching culture:" Providing greater clarity about performance expectations, career paths, and better two-way communication.

Notably, the A&O initiative includes as an integral part a revamped pay-for-performance component. The aspect that grabbed all the headlines a few days ago was the 15% across-the-board pay rise ("out of season," as it were, to boot). But that’s the boring part; the fascinating part is a new deferred-compensation structure (somewhat obliquely described in this companion piece), but the primary component of which is: "The bonuses are linked to the value of an equity point, thereby tying the associates’ financial rewards to the fortunes of the firm and its partners."

What makes this more radical at A&O is that firm has simultaneously abandoned its firm-wide bonus handed out every summer "as an article of faith." While intended to foster a "one-firm" mentality, it suffered from the familiar maladies of any lockstep system.

Now, of course, comes crunch time. It’s all well and good to pump up morale with a more-than-generous financial gesture, but as the months ahead unfold, if that turns out to be all there was to it—if, in other words, the "coaching culture" initiative falls to inertia, fear, or distraction—then A&O, for all its thought and effort spent over the past year in devising this innovative and, on its face, admirable program, will likely find itself back in the high-attrition-rate penalty box.

Loyalty and enthusiasm cannot be bought and paid for. This is so for associates, it’s so for partners, and it’s so for clients.

Would you sincerely prefer it otherwise?