The road to better retention of associates: make sure the experience base sticks around.

• Author: Galbenski, David
• Position: Reprint

Corporations expect their law firms to manage the cost of legal services on their behalf, and ineffective cost management is high on the list of reasons that law firms are fired. Specifically, it has become clear in recent years that most corporations are not willing to pay the tab for training law firm associates on the job. As a result, firms are finding that they can flaunt their strength in retaining seasoned associates as a selling point to their corporate clients.

The trick these days is to figure out how to hold on to associates as their billable value increases. A 2006 survey published in "The American Lawyer" identified "poor associate retention" as one of law firms' biggest disappointments. Indeed, the trend toward lateral partner hiring confirms that the "free agency" mentality permeates the entire legal services profession.

Funding associate pay raises to increase retention is an ever-increasing struggle for much of the industry. Nevertheless, law firms have hiked starting associate pay rates significantly in 2007. When a law firm raises its base associate salaries, that affects the salaries of associates hired the year before, and the year before that--resulting in a trickle-up effect that strains the revenue model. The options then are to pass the added cost to clients, or to take it from equity partners' compensation.

Even if a firm can overcome the financial challenges, there's no guarantee that pay raises for associates will work. In fact, it may not even be likely to work. Lumen Legal polled Am Law 200 law firms (culled from a database of several hundred thousand legal professionals) and got some surprising results: 64 percent of respondents felt that an increase in associate salaries would either have no impact on associate retention, or actually contribute to a decline in retention. Within this group, 9.5 percent indicated a slight decline; 11 percent a significant decline. In other words, offering more money tends to promote a "jump ship for another buck" mentality and environment.

If pay raises aren't doing it, what are associates looking for? A clear path to becoming a partner; this has been the traditionally-assumed motivator. Opportunity for advancement is high on any professional's agenda. However, frequent recognition for efforts along the way is another important ingredient.

Another problem, however, can be the nature of the work that associates are...