Management: problems mount as firms suffer from over-promoting in 1990s

Low staff morale is leading to a rise in attrition rates among fee-earners, with firms facing increased salary costs and profit margins under pressure, an authoritative survey revealed this week.


Research by accountancy firm PricewaterhouseCoopers (PwC) showed that 64% of the top 25 law firms had staff turnover of more than 15% last year, with problems with 'morale, culture and management style' the most likely cause. Almost one-third had staff turnover of more than 20%.


Firms are increasingly offering bonus schemes and non-financial benefits to retain fee-earners, the report found, while trainees' salaries rose by 15%. However, firms' fee-income grew only modestly, with less than one-third of top 25 firms reporting more than a 10% increase.


Firms are also reducing partner headcounts, with more than half of the top 25 having cut numbers this year. Management consultant Alan Hodgart said: 'A lot of partners were made up in the 1990s boom who should not have been. Firms are now de-equitising them or asking them to leave, which is quite right.'


Tony Williams, management consultant at Jomati and former managing partner of Clifford Chance, said: 'Some firms see an attrition rate in the low teens as OK, but beyond the mid-teens it does have a potentially serious impact on the business, because of the sheer cost of recruiting and training, and potential disruption in the client relationship.'


Alistair Rose, leader of PwC's professional practice advisory group, argued that the real challenge for management teams now will be 'finding a balance between increasing staff utilisation and not increasing the pressures on staff that can lead to more "work-life" balance departures'.


Giles Rubens, senior consultant at Hildebrandt International, added: 'Staff are concerned about quality of work, opportunities for partnership, and the high expectation on them in terms of hours and productivity.'


Some 81% of firms, meanwhile, thought proposals contained in the government's White Paper on legal services reform would lead to greater regulatory costs, while only 13% could see any benefits to clients. But Mr Williams said: 'A number of firms are seriously considering outside investment. Firms also think bringing non-lawyer chief executives or heads of finance into the partnership will enable them to get better people from industry, who had been put off by the lack of status.'


The report was based on responses from 56 of the top 100 firms and 72% of the top 25 firms.


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