How Law Firms Value “Human Capital”

The ups and downs in the economy, rapid cultural shifts, and increased emphasis on the value of “human capital” continue to affect U.S. businesses. How are law firms adjusting to these changes? This month’s Roundtable, which addresses human resources and staffing issues, delves into the legal industry’s ability to grow with the times—and even set standards—while remaining profitable. Law firms are using mobility to create new hiring and staffing options, allowing non-lawyer professionals greater opportunity to add value to the firm’s bottom line, embracing societal perceptions about gender identity, and grooming their next generation of leaders to competently manage the challenges underpinning the evolution of the legal industry.

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Our Moderator

GaffneyNicholas Gaffney (NG) is a member of the Law Practice Today Editorial Board and a veteran public relations practitioner.

 

 

 

Our Panelists

David Hellmuth (DH) is a founding partner of Hellmuth & Johnson, PLLC. He is an honors graduate of William Mitchell College of Law and obtained his undergraduate degree from the University of Minnesota, where he obtained a B.S. from the Carlson School of Management. He represents a large number of for profit and non-profit organizations in a variety of legal matters.
Charles Volkert (CV) is an executive director at Robert Half Legal. A former litigation attorney, Charles brings more than 15 years of legal, document review, and strategic business experience the table. He previously served as vice president of national accounts at Robert Half Legal, and has been instrumental in their expansion, with locations in major North American and international markets.
Ann Batcheller (AB) is the director of business development at Legalpeople, a legal staffing services company. Ann graduated from the University of Southern California where she earned her B.A. in English Literature. As a recovering law librarian, Ann has worked in the legal industry for 25+ years, including working in several large law firms, managing a successful practice for 12+ years as a consultant to national and boutique firms, and having a successful career in business development and account management at LexisNexis.
Barbara Kott (BK) is a partner in Major, Lindsey & Africa’s San Francisco office, where she specializes in law firm and in-house placements. Prior to joining Major, Lindsey & Africa in 2006, Barbara was an associate with Wilson Sonsini Goodrich & Rosati in Palo Alto and San Francisco.

 

NG: What has changed in the past few years in the way law firms are recruiting and hiring lawyers?

DH: Our law firm and many medium sized firms like ours have typically not participated in on campus law school recruiting. Rather, we prefer to hire lawyers with prior experience. We seek to recruit lawyers who have their own clients and referral sources. Generally, I think that law firms are getting smarter about their hiring practices. I think that the days of paying high salaries for inexperienced lawyers with no clients are coming to an end.

CV: Hiring managers are looking for lawyers with specialty experience, stable work histories and proven track records. Many are placing more weight on work experience or the pedigree of a former employer as a way to assess whether a job seeker will be a good fit with their firm. More than half of lawyers we interviewed said “previous work experience or prestige of former law firm/company” was the best indicator of a job candidate’s potential for success within their organization.

AB: At the lateral partner level, firms are being much more deliberative and discerning, and are more vigorously conducting diligence. Firms also are more actively viewing themselves as needing to “sell” the firm and the opportunity to the candidate (rather than the resting on their reputation), and have become more equipped and ready to do so. Generally, firms also are being more careful about deciding to add service headcount, and only doing so when absolutely certain that workflow will remain steady and will sustain the hire for the long term (fortunately, the market is good right now and we see a great deal of associate hiring across all practice areas). When not certain, firms are increasingly utilizing contract attorneys, both for document review and also for projects requiring substantive expertise.

BK: Law firms have come to understand that hiring and retaining top talent requires more effort than ever before. Demand for top attorneys is high, and firms are not only competing with one another, but also with companies, as internal legal departments continue to grow. Law firms are now more adept at taking control of the recruitment process, moving quickly and accommodating candidate requests.

NG: What is the next trend in how law firms will staff legal matters? For example, will firms expand their use of project and temporary lawyers?

DH: Yes. Many law firms seem to be relying on contract or temporary help and are allowing lawyers to work out of their homes and use the internet and offsite resources to increase productivity and provide better life-work balance. Some firms are trying to eliminate “brick and mortar” and encourage virtual office environments. We have recently hired contract lawyers to assist with large litigation projects.

CV: To secure new clientele and expand profitability in a competitive business landscape, law firms are seeking specialists in high-demand practice areas such as litigation, intellectual property, commercial law, and healthcare. Heightened concerns regarding data privacy and security matters are also increasing demand for legal risk managers, security auditors and analysts. The need for specialized legal expertise will remain a driving factor in the legal employment environment as clients seek legal counsel who are true experts in a particular practice area or sector. Law firms will continue to use flexible staffing models and expand their use of lawyers and legal support professionals on a project or temporary basis in the years ahead. Hiring contingent legal professionals is an effective strategy for law firms that need to “right-size” their organizations, balance workloads, improve efficiencies and gain immediate access to specialized expertise.

AB: Large firms are definitely seeing the benefits of using project-based substantive contract attorneys especially since the quality of education and experience available is impressive. Mid-sized firms using agencies for attorney/paralegal staffing is on the rise. I predict this trend will continue to increase, especially since the Department of Labor’s recent opinion clarifying “independent contractor” definition under the FLSA.

BK: Contract attorneys are starting to play a more significant role in law firm staffing, and I suspect this trend will continue. Pressure from clients about rates force firms to find cost- efficient ways to staff large matters. Temporary or contract attorneys allow firms to quickly staff up and then reduce on a project-by-project basis, which results in savings overall. The priority for top-notch full time associates remains, but most firms see the benefits of adding contract attorneys to their structure.

NG: Do law firms need to do a better job appreciating and fully utilizing non-partner “human capital”? How are they turning departments such as HR, marketing and IT from mere overhead to value-added functions?

DH: Yes. We have regularly relied on our IT and marketing staff to ensure that our website is current and that our marketing efforts are ongoing and active. The firm’s IT, marketing and HR roles are critical to successful operation and growth. Law firms need to proactively use these departments for growth and fluid operation.

AB: Most firms tend to underappreciate and underutilize their non-partner “human capital.” One way to improve the value-add of these individuals is to support their membership and activity in professional associations and related networking groups. The knowledge gained and contacts made often result in measurable improvements, efficiencies and cost savings to the firm. We see IT increasingly supporting internal eDiscovery teams (and participating in managing the workflow of attorney reviews), HR actively participating in recruiting, and marketing working directly with lawyers to pitch new clients.

BK: Large firms become more business-savvy as they mature. Firms that achieve a successful corporate structure with non-partner “human capital” will ultimately see more profit. The best value add is to take these responsibilities away from the partners, allowing them to focus on client development and billable work.

NG: How are law firms grooming their next generation of leaders?

DH: Open communication and sharing of resources is critical to law firm growth. It is important for seasoned partners to allow junior attorneys to have opportunities to participate in firm marketing, including writing articles, participating in trade groups and teaching seminars on legal topics. Law firms, like any other business organization, should have written plans that guide future leaders towards successful operation.

CV: When grooming new management candidates, firms are implementing formal leadership development plans, providing insight into the management of the firm, monitoring progress and providing frequent feedback. Many are establishing mentor programs with senior-level firm leaders. When veteran attorneys take the time and effort to impart their accumulated knowledge to the next generation, the firm moves one step closer to a seamless transition.

AB: The successful firms have programs in place to increase the business development skills of their associates and junior partners. They include them in client meetings and new business proposals with prospective clients. They also encourage membership and activity in professional associations and business networking groups and events.

BK: It varies from firm to firm. But I will say that law firms realize the importance of cultivating the next generation, more than they did a decade ago. Junior partners were unlikely to lateral to a different firm ten years ago. Nowadays, lateral partner movement is mainstream. Firms must either invest in grooming the next generation or run the risk of losing them to competitors. This includes teaching them business development and supporting their desire to grow their own practice.

NG: Our culture has changed recently to accept and accommodate transgender people more readily. Have law firms moved as quickly to accommodate transgender lawyers, particularly those who interact with clients?

DH: Yes. I believe so. Law firms are at the forefront of legal changes resulting in societal acceptance of differing types of people. Law firms generally have policies which promote non-discriminatory practices. Law firm clients have the right and power to choose who will represent them.

AB: The answer to this question would vary depending on geography/location, firm culture, practice area, and client.

BK: Well, I work in the San Francisco Bay Area, so we have always been ahead of the curve. Overall, however, any firm’s social progressiveness is hard to predict. No two firms are ever alike.

NG: How can lawyers report harassment or discrimination without jeopardizing their careers?

DH: There is simply no place for harassment or discrimination in law firms. Lawyers should report any of these types of improper or illegal practices to the firm’s board or directors or governors.

AB: Again, the best course will vary, depending on the size of the firm/legal department, whether HR is available, if managing partners/heads of departments are approachable. Firms with labor and employment practices typically have education and protocol established. Other firms with several employees typically have outside L&E counsel advising on harassment and discrimination matters.

NG: How can law firms help lawyers, who typically have no management training, become better managers of other lawyers and non-lawyers who staff legal matters?

DH: The typical approach is for junior lawyers to learn through experience in working as part of a team environment. Law firms should encourage their junior colleagues to follow “best practices” as established by and communicated to the entire law firm.

CV: To be successful, managers need to balance the efforts of individual team members and the team as a whole to maximize productivity. It’s important to have a plan in place to identify and define goals as well as success measurement. By defining goals, matching talent with tasks, monitoring progress, recognizing individual contributions as well as team efforts, new managers can foster team cohesion and optimize performance.

AB: Mentorships by partners or other senior personnel are an effective way of increasing the skills of junior attorneys. Leadership/business generation programs within the firm (either by attorneys in the firm or outside consulting firms) have proven helpful.

BK: Great question. Law firm lawyers are trained to practice law, and there is no management training in law school. Yet the majority of firms are still run by practicing lawyers. Firms would be well-served to invest in teaching lawyers the importance of good management in all areas. For example, management training could prove very useful for associate retention.  A significant number of associates leave their firm due to the management style of their superiors.

 

(Image Credit: ShutterStock)

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