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Some Tangible Costs to Weak Leadership

When I raise the topic of leadership in law firms or the idea that lawyers should be leaders -- to their clients, on their trial teams, in their firms -- I'm often faced with (best case) silent skepticism or (worse) eye rolling and suggestions that lawyers "aren't meant to do that." Wrong. We are meant to do that, and there are very real costs to not doing it or not doing it well. Today, I want to talk about some of the tangible costs involved; tomorrow some of the intangibles.

Above the Law recently included data from the 2017 NALP Update on Associate Attrition in a discussion about how to respond to an associate attorney's announcement that they've gotten an offer from another firm. They noted the cost of losing an associate may be bigger than you think and should include [emphasis is mine]:

Losses from lost billable hours, investments in the associate, and potentially turning away work. Add in the lost time spent recruiting and hiring on their own and a firm will face a larger cost than expected.
...A 2017 NALP Update on Associate Attrition pegged the cost of replacing an associate between $200,000 and $500,000. That may sound like a lot but a back-of-the-envelope calculation shows that it doesn’t take much to reach $200,000.
Let’s assume that on an annualized basis the firm is collecting on 1600 of the associate’s billed hours, at an average rate of $750/hour. That generates annualized incremental gross revenue of $1.2 million. Also assume the associate’s compensation and benefits cost the firm a total of $400,000. If none of the associate’s hours transfer to others and the position was vacant for a year, the firm would lose $800,000. It only takes three months to hit $200,000 in lost profits. Next add lost revenue from partners and associates hiring instead of billing. Plus a potential signing bonus in a tight hiring market for certain practices. The NALP range not only becomes plausible, but likely.

Those sound like 'big-firm' numbers to me, so let's change the math a little bit. Billing at $200/hour with an annual salary of $100K/year. The same math ATL uses means the year-long cost of an associate vacancy is $220K and three month costs of losing an associate could be $55K or more in profits, before adding in the recruiting and hiring costs of shifting the firm's attention to filling the vacancy. Where do your numbers put you?

What does attrition have to do with leadership? According to Forbes:

According to a study of 19,700 post-exit interviews, 89% of employers think their people leave for more money. The employees who actually leave for more money? Just 12%.
...An employee’s relationship with their manager is a huge factor in job satisfaction, with one study revealing that more than 40% of employees left a job because of a bad boss.
Your primary job as a leader is to remove obstacles to high performance.

Your team is full of great attorneys, and they spent years learning how to practice law and then actually practicing it. As they move up, take on their own cases, manage trial teams, lead practice areas, or become partners, chances are they haven't had the same opportunity to learn, grow, and practice the new mindsets and skills that are necessary to set the conditions for optimal success. You can provide that to them by investing in training or a coach, to help them navigate their transition from doer to leader. You can tackle this problem any number of ways, and BKG Leadership Coaching may be the right partner for you or your firm, but doing nothing is costing you money and shouldn't be an option. Set up a Legal Leadership Strategy Session; we'll help you chart your leadership journey, and it won't cost you anything.



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