“Failure to attract and retain top talent” was the number-one issue in the Conference Board’s 2016 survey of global CEOs—before economic growth and competitive intensity. In more complex jobs, this will continue to be true as baby boomers (and their long experience) exit the workforce and technology demands more sophisticated skills.
—McKinsey, “Attracting and retaining the right talent,” June 2018.[Note 1]
If this is true for Fortune 500 CEOs and their ilk, running organizations where maybe 2% of employees can have a real impact, how much more so for law firms where essentially everyone matters–or certainly should.
That may strike you as self-evident, but how often do we honor it in the breach? And do we know (1) who really is our firm’s critical talent–that is, who drives results for clients; and (2) how to motivate and retain them?
Many of you just jumped to the readily available conclusion that your key rainmakers are clearly the critical folks, and I’m not going to pick an argument with you that I’d lose over that. But who else matters? Consider an analogy: Most armchair football fans would guess, correctly, that the quarterback tends to be the highest-paid player on a team. But who’s usually second? A running back or wide receiver, because they help the QB put those points on the board? Rarely. It’s frequently the offensive left tackle, because he protects (or doesn’t) the quarterback from being hit by defensive linemen coming from his blind side.
Maybe the second most valuable category of professionals at your firm should be the COO and CFO, because they can dramatically enhance or impede the actual delivery of client service, through efficient, fast, optimized, and intuitive-to-your-lawyers tools informed by financial metrics–or get in everyone’s way.
Disconnects such as this between talent and value are risky business—and regrettably common. Gaining a true understanding of who your top talent is and what your most critical roles are is a challenging task. Executives often use hierarchy, relationships, or intuition to make these determinations. They assume (incorrectly, as we will explain) that the most critical roles are always within the “top team” rather than three, or even four, layers below the top. In fact, critical positions and critical people can be found throughout an organization. (McKinsey, “Linking talent to value,” April 2018.[Note 2]
Let’s make this a bit more concrete. Suppose you’re looking to grow top-line revenue . (We hear this every so often in our consulting practice. Surprise!) Absent any grounding in insight developed from real-world data and analysis, a popular modus operandi for many law firms when it comes to running their business, one might assume the most effective approach is the “peanut butter strategy:” Spread a little bit more everywhere, evenly.
The opposite is closer to what might might work: Put your most talented and highest-performing lawyers and business professionals where your research and analysis shows you the firm’s best growth opportunities are, and pull resources from mature and declining practices and/or geographies.
We recently encountered an extreme case of a firm (AmLaw 200) whose practice mix was divided sharply between one set of industry clients driving a high-margin, high-growth, high-realization line of business and another large group of lawyers devoted to a quiet, predictable, static, low-margin, low-pressure group of clients. You could think of it as the “high performance” practice under the same tent as the “lifestyle” practice. We suggested an approach lifted directly from the playbook of corporate strategy: A spin-off. Let the lifestyle group set up its own firm and enjoy life on their terms unfettered by invidious comparisons, perennial guerrilla warfare over compensation and billable expectations, and all the rest of fallout from amazingly incompatible lines of business occupying the same organization.
Shall we open an office pool among Adam Smith, Esq. readers as to whether this proposal for a spin-off was accepted?
No need to bother: Not on your life. (Truth be told, we meant it only as a mind-expanding thought experiment; we’re nothing if not realistic about law firms’ decision-making.)
But back to talent, and continuing with our theme that Law Land could pick up a few tricks from Corporate Land, which often has been there already:
Identifying and quantifying the value of the most important roles in an organization is a central step in matching talent to value. These critical roles generally fall into two categories: value creators and enablers. Value creators directly generate revenue [and] increase [financial and human] capital efficiency.. Value enablers, such as leaders of support functions like cybersecurity or risk management, perform indispensable work that enables the creators. These roles are often in counterintuitive places within the organization. Typically, companies that consciously set out to pinpoint them find about 60 percent are two layers below the CEO, and 30 percent are three layers or more below the CEO.
The ability to achieve true role clarity is closely tied to overall organizational performance and health, according to McKinsey research. In the pursuit of such clarity, it is critical to think first about roles rather than people. The initial goal is assessment of where the greatest potential value is and what skills will be necessary to realize that value—not identification of the top performers. This approach allows leaders to think more strategically about matching talent and value rather than merely focusing on an individual’s capabilities. (emphasis supplied) [Id.]
Let’s consider another high-performance professional services organization: Goldman Sachs. Their “value creators” are obviously the investment bankers on the front line out in the market meeting with customers, analysts, investors, governments, and others, and the traders.
But the “value enablers?” Today technology is almost synonymous with “enabling” value: Enabling real-time collaboration, serving up transparency, delivering just-in-time information, making mobile and “agile” work possible, and if AI lives up to one-tenth of some of the hype surrounding it, transforming what lawyers do and what skills they will need to bring to bear. With that premise, what percentage of your firm’s staff are engineers? (You can keep that to yourself for a moment.) The percentage at Goldman Sachs is over one-quarter and “that’s likely to keep growing.” according to a Bloomberg interview late last year with Harvey Schwartz, at the time President and co-COO.[Note 3]
Does Goldman know something you don’t?
More seriously, when you invoke the “war for talent” as a priority for your firm, your partners, and your professional staff, are you casting a wide enough net? It’s not all about the rainmakers.
Note 1: Available at: https://www.mckinsey.com/business-functions/organization/our-insights/attracting-and-retaining-the-right-talent
Note 2: Available at: https://www.mckinsey.com/business-functions/organization/our-insights/linking-talent-to-value
Note 3: Available at: https://www.bloomberg.com/news/articles/2017-10-24/goldman-presidents-take-turns-touting-firm-s-shifting-workforce