The road to retention

High staff turnover has financial ramifications and can damage a firm's reputation. Sarah Simpson advises on the best ways to attract and retain talented employees in the current skills-short market

Retention has long been a critical issue for law firms. Long hours, competitive salaries and highly pressurised environments have all contributed to high staff turnover.


Most firms accept that this is the norm in the industry, and turn their attention to recruiting the next big hire. But what are the hidden costs of staff attrition, and what can firms do to reduce the number of employees leaving?


When an employee leaves a firm, the most obvious financial damage is caused by having to pay to hire a new person to fill the role, both in the form of extra salary and recruitment fees, and the time and energy of human resources, fee-earners and partners to interview and assess potential candidates. The induction and training of a starter also take their toll for the same reasons. Indeed, the time spent bringing the person up to speed, while an investment, is at a cost to the firm's profit.


However, firms tend to forget that the financial impact of losing an employee takes many forms. Another, more evident cost, concerns billing. If there is a role within the firm standing empty, no-one is generating chargeable hours in that position. If a junior team member leaves, a more senior fee-earner may have to pick up the work-load of the leaver, which could not only be less stimulating but also less profitable for the firm.


Often when an employee leaves, there is much talk in the pub or the tea-room. If it is a partner or a senior fee-earner, employees may discuss the impact this has on the firm's future direction and profitability, and this departure may well impact on staff morale. A senior team member could also poach junior team members for their new team. Moreover, overworked employees can become demotivated as they pick up the slack of the missing team member.


Firms often trip up by not realising the financial ramifications of client 'leakage'. Clients can lose patience if new lawyers are introduced to work on their cases, especially if the time involved in training them is included in their fees. Client expectations must be carefully managed when an employee leaves. Clearly, if clients become unhappy with the service they receive, they will take their business elsewhere.


To quantify the real potential impact of staff turnover, firms should look at recruitment costs (both direct and interview costs), training costs (looking at both direct orientation and associated salary costs) and productivity costs (comparing a new employee versus an experienced employee). In our experience, there is no greater incentive to retaining staff than management seeing the hard financial facts in black and white.


So what can firms do to stem the tide and aid retention? It is critical to take a holistic view and not offer simplistic solutions based on broad assumptions. Firms should take a careful look at the major causes. First, firms must understand what sort of profiles they need in their staff. Often overlooked is the culture of their firms and the extent to which potential employees are likely to fit. The degree of fit has a proven major impact on the intent to stay, as well as their productivity.


Firms should consider what motivates their employees, and what type of reward or recognition they are looking for. Financial remuneration remains an important factor for employees, but they are increasingly concerned with the quality of the firm's leadership, their career prospects, and with the level of responsibility, flexibility and autonomy they are given. Long hours are typical of the law - no-one chooses the profession expecting a cushy nine-to-five job - but the daily grind can get to employees, and employers should recognise that this discontent can result in employee burnout and reduced job satisfaction.


Failure to recognise talent and endeavour can result in disgruntled employees heading for pastures new. Firms may want to consider introducing other roles for the promotion of talented employees. And identify other career paths for those employees who do not want, or will not make, partnership - such as consultants or directors. In the current talent-short market, firms should also make sure they know who within their practice will be the lifeblood for its future, and could therefore be developed. Writing and implementing a succession plan will ensure firms invest time and energy into the employees who fit with that plan, rather than the ones who may 'sparkle brightly' in the short-term.


Surveying staff on a regular basis to assess employee engagement is important, as are exit interviews with departing staff. Only when firms realise why people are leaving can they realistically implement solutions to retain and develop talent already within the practice, or entice talented employees to the firm.


Firms need to work hard to attract and retain talent, as high staff turnover can be costly, both financially and in terms of reputation. Research has shown that the cost to the firm of a poor hire is likely to be up to ten times the employee's annualised compensation, with three out of ten hiring decisions ending as mistakes. In a skills-short market, employees can be more demanding than ever before, and firms need to adapt to accommodate their needs.


A high staff turnover can be halted if firms are prepared to firstly admit there is a problem, and then address this by considering how they recruit and manage their own talent. The traditional structure of a firm may be changing irreversibly, as firms attempt to halt this tide of attrition.


Sarah Simpson is managing director of recruitment consultancy Hudson Legal UK.