With the current generation of young lawyers less inclined to make a long-term career commitment, is the traditional legal partnership model on its way out? And will we see ownership and rewards shared among employees rather than concentrated among a few?
Don Tapscott, a LinkedIn Influencer and one of the world’s leading authorities on media, technology and innovation, envisions future workplaces will be “like a jazz ensemble where hierarchy is replaced by creativity, sense-and-respond, peer-to-peer, collaboration, empowerment and improvisation”.
If you are looking to review your law firm’s business model or talent strategy, here are some factors to consider.
Re-engineer your business model
The first step when considering a move away from the well-trodden partnership path is to review your firm’s business model.
Factors such as the commoditisation of legal products, competition, globalisation and emerging technologies have seen law become less of a vocation and more of a commercial business, providing a great opportunity to take stock and decide whether a standard partnership is still the best option.
Speaking with Australasian Lawyer in June 2014, executive chairman and partner of Beaton Capital, Dr George Beaton, said that in order to alleviate the fact that fee levels (particularly in large firms) have been steadily falling for the last five years, firms must start re-engineering their business models to achieve flexibility, cut costs via technology, offer clients fixed fee or alternative fee arrangements and outsource back-office services.
If a complete overhaul seems daunting, implement some or all of the above strategies rather than establish a completely new structure. Find your industry niche, harness new technologies and consult your colleagues and staff so that your firm can hit the right note in a busy marketplace with a formula that lasts.
Consider a corporate structure
Your business model review may lead you to conclude that a corporate structure would suit your firm. In addition to sole practice and partnerships, solicitors can choose to operate through a corporate structure or a multidisciplinary partnership.
One of the main benefits of incorporation is the ability to share receipts with employees and non-lawyers, representing a competitive and attractive employment option for talented recruits and a good long-term succession plan for existing partnerships.
Many firms have already rejected the traditional partnership structure in favour of a corporate set-up. Slater and Gordon, AdventBalance and M+K Lawyers are just some of the players that have managed to achieve client service delivery and shareholder rewards simultaneously. As reported in BRW in 2012, the success of these three entities lies in the fact that all have created business models that deliver superior value to clients, staff and owners, with an intense focus on readily targeted parts of the market.
The Queensland Law Society suggests firms should consider some key factors when determining the best structure for them. These include:
• Practice culture
• Compliance requirements
• Asset protection
• Greater flexibility in employee remuneration and raising and retaining capital
• Wealth creation and tax
• Sharing of receipts and income splitting
• Succession issues.
Additionally, moving towards a corporate structure may bring tax, decision-making and management advantages.
Talent retention and engagement
In support of his vision of a collaborative ensemble of employees, Tapscott observes that millennials are bringing a new culture into the workplace, forcing business owners to rethink their talent management.
Rather than the current model, which aims to recruit, train, manage, retain and evaluate the performance of employees, Tapscott believes in a more holistic approach that focuses on building relationships and developing work-learning environments.
For perfect pitch on the recruitment front, build a company culture that fosters talent, intelligent discourse, broad accountability and strong, respectful relationships.
Respect, incentives and rewards
Let’s face it – no young lawyer derives innate pride and joy from seeing an equity partner driving home in their BMW to their waterside mansion while they sit at their desk until midnight, worrying about realisation rates and watching their annual salary increase at a glacial rate.
Sure, they may know nothing about that partner’s stress levels or mortgage debt, but the new recruit is far more likely to stay motivated for a longer period of time with a bigger and better carrot dangling in front of them.
To speed ahead in the talent-management race, consider providing employees with rewards, different remuneration models, bonus incentives and a potential cut of the financial pie by allowing them to enter the practice without significant capital. At the same time, you’ll also groom strong successors to help your business grow and evolve for decades to come.