Talent Strategies for the Well-being of Colorado Law Firms
| Publication year | 2023 |
| Pages | 06 |
DEPARTMENT | LAW PRACTICE MANAGEMENT
Talent Strategies for the Well-Being of Colorado Law Firms
BY GENE COMMANDER
A perfect storm of demographic, economic, and professional trends is shrinking the pipeline of affordable and productive legal talent across the nation and in Colorado. The storm threatens to shake firms to their core by 2030 [1] —which means that law firm leaders have a six-year window of opportunity to adopt future-focused smart-growth strategies that invest in human capital while serving the best interests of the firms' clients, the profession, and the communities in which the firms do business.[2]
Smart growth does not necessarily entail increasing lawyer headcount, but rather encompasses a wide range of strategies that invest in talent and add value to the business enterprise, like nontraditional staffing arrangements, talent-driven mergers and acquisitions, and succession planning initiatives.[3] The end goal is to scale law firms' business models to ensure that revenue growth outpaces the increased costs of doing business, thereby ensuring sufficient profits per equity partner (PPEP) to sustain the business enterprise.
This article focuses on smart-growth strategies that are designed to cultivate and secure productive talent. At its heart, this means doubling down on the firm's existing talent through an approach where firm leaders humbly and openly explore innovative methods and refine existing best practices to satisfy the needs of the firm and the expectations of talent and clients. Doing so will require an intentional effort to cultivate a magnetic workplace culture that attracts and retains productive talent.
Experience tells us that law firms are fragile enterprises, unusually vulnerable to collapse for talent-related reasons.[4] So the stakes could not be higher: law firms that are passive in the face of a shifting labor market may fail not only to thrive but also to survive.
The Shrinking Talent Supply
The perfect storm of trends that law firms in Colorado and across the nation are confronting is shrinking the supply of talent and changing the face of the legal industry. And there is no end in sight.
Dramatic demographic trends are at the eye of the storm. Our country is aging: The number of Americans over 65 years old is predicted to climb from 54 million in 2021 to 74 million by 2030.[5] Baby boomers are rapidly departing the profession. By 2030, today's youngest boomers will be 65 and older. Meanwhile, the graying of the population is expected to constrain women's labor force participation as they care for aging parents.[6] At the other end of the spectrum, US birth rates have tumbled over the last five decades.[7] College enrollment is expected to drop sharply starting in 2025, [8] and law school enrollment in 2021 (117,305) was far lower than at its peak in 2010 (147,525). [9] Thanks to COVID-19, law schools saw a bump in applications in 2021, but applications have continued their prior downward trend for the past two years.[10]
Economic forces are the second contributor to the perfect storm. Since the pandemic, law firms across the country have waged a bruising price war for talent, and Colorado firms of all sizes have suffered the effects because of the influx of deep-pocketed national firms into the Denver legal market.[11] Associate compensation growth nationwide hovered between 1.8% and 4.5% each year from 2011 to 2020 but then spiked to 9.3% in 2021 and 9.4% as of November 2022.[12] Given rising costs of living and staggering law school debt, up-and-coming talent can be expected to continue demanding high salaries. Overall, law firms' direct expenses and overhead expenses have reached some of their highest levels since 2008, with higher recruiting, office space, and marketing and business development costs layering on top of compensation growth.[13]
A suite of disappointing professional trends makes up the third element of the storm. Legal careers appear to have lost some of their luster for college graduates. Looking ahead, a 2023 survey found that the long-term career objectives of Gen Zers (currently aged 11 to 26) "are veering away from traditional law firm paths."[14]
Moreover, a substantial number of US workers left their jobs during the Great Resignation, and the outlook remains unsettled for Colorado law firms. Nationwide, just 51% of 2018 law graduates surveyed were working in law firms three years after graduation.[15] The State of the Law Firm Survey published this summer in Law Week Colorado found that more than half of respondents expected to leave their current firm within six years.[16] Still more troubling, about 28% of respondents anticipated they would leave within three years.[17] Law firms thus can no longer rely on a traditional organic growth strategy in which they recruit and invest in rookie lawyers with the expectation that those lawyers will devote their career to the firm.[18]
In addition to a contracting labor supply, several trends are reducing lawyer productivity. For example, the Great Resignation was accompanied by a trend described as "quiet quitting," where workers have arguably become less invested in their jobs.[19] Likewise, COVID-19 normalized the pre-pandemic trend toward remote work, which can limit the professional growth opportunities that feed off the "power of proximity." Moreover, lawyers' poor well-being in the "most stressful profession"[20] often manifests in sick leave and underperformance, if not attrition.
Finally, the profession's Achilles' heel still constrains the talent supply. Even though women now represent majorities in law schools nationwide and the proportion of women with active licenses continues to grow, women and people of color still depart law firms at disproportionately high rates. For instance, a 2022 nationwide survey found that half of female associates at firms of varying sizes plan to quit within one to two years, compared to one-third of male associates.[21] In addition, comparatively few Black associates report that they plan to remain at their law firm in expectation of becoming a partner.[22] Yet issues of diversity, equity, inclusion and belonging (DEIB) are remarkably under-acknowledged by members of the profession; for instance, 74% of male lawyers in an American Bar Association (ABA) survey believed firms were succeeding at retaining experienced women, while only 47% of female respondents said the same.[23]Given the increasing numbers of women and people of color in the talent pool, investing in strategies designed to mitigate attrition of underrepresented talent should be an obvious priority for law firm leaders.
Viewing Talent Challenges and Solutions Through New Lenses
The need for change is clear: Colorado law firms are facing an unprecedented talent crunch, and surmounting this new obstacle requires a new brand of business-minded leadership to identify possible blind spots in firms' business models.[24]
But cultivating change is difficult. Law firm leaders who view existing practices as tried and true may not see the value in exploring new approaches.[25] Change requires leaders to humbly acknowledge where past practices have fallen short and calls for openness to novel approaches. And law firm leaders—like all of us—harbor unconscious biases that skew their perceptions about what steps are reasonable and necessary.
To address these barriers, law firm leaders should view their firm's circumstances through new lenses. Leaders should strive to create an organizational culture that values courageous conversations and the continuous learning and progress they make possible. Leaders must be willing to learn in public, move on from mistakes, and engage in hard conversations as they test new approaches. Exploring fresh ideas and candidly acknowledging missteps will be uncomfortable for leaders—but they must become comfortable with this discomfort. This includes engaging in vigorous but healthy and respectful conversations with colleagues throughout the organization about their personal and professional goals and how new practices may alter the trajectory of the law firm.
Law firm leaders face the task of not only shifting long-held practices, but doing so in a multigenerational, more diverse workplace. In creating change, all generations' voices must be heard—including those of baby boomers, who may be nearing retirement but who still can play a vital role by sharing their hard-earned knowledge and insights. And "generational friction" should be reduced through open communication that fosters multigenerational empathy and encourages give and take on all sides.[26]
Smart-Growth Talent Strategies
As the Thomson Reuters Institute sums up the talent crisis, the legal industry may have "reached a point that calls for a fundamental re-examination of how we approach talent management in law firms of any significant size."[27]
To develop wise solutions, we must understand the reasons for the current shortcomings in retaining talent. What causes lawyers to leave firms? According to a 2022 Thomson Reuters Institute survey, the primary factors driving associates' decisions to switch jobs relate to much more than compensation—other key considerations include feeling underappreciated, lack of career progression, lack of genuine regard for well-being, insufficient mentorship, and inflexibility in work timing and location.[28]A broader 2022 survey of ABA members yielded somewhat similar results, finding that work-life balance, compensation, a welcoming and collaborative culture, quality of work, and the ability to work remotely were the factors most important to attorneys—particularly those who are female or persons of color—when deciding whether to change jobs.[29]
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