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How Law Firm Culture Affects Profitability

Posted by Gaby Isturiz on March 13, 2014 at 8:46 AM

23950163_sCulture is often regarded as a “fluffy” aspect of the firm’s operations and is typically assigned to the Human Resource department as a feel-good, nice-to-have.

In our recent blog posts, we’ve been speaking to many CFO concerns, such as why the CFO should be involved in vendor selection. In this post, we’ll explore another topic that directly affects the firm’s profitability: culture.

What exactly is “law firm culture” anyway? Attorney and legal blogger, Jordan Furlong offers the following definition in his blog post titled, Vulture Culture:

Culture is what people at the firm actually do every day. In harsher terms, it’s what people get away with. Culture is what actually happens. A law firm’s culture is the daily manifestation of its performance expectations and behavioural norms — what is encouraged and what is tolerated. So it’s not a matter of law firms “ignoring” culture — every firm has a culture, and most firms’ cultures are remarkably and depressingly similar. It’s a matter of recognizing that the culture that a law firm develops and sustains has an impact on productivity, retention and morale — in many cases, a catastrophic one.

So, how would you describe the culture of your firm? How does your firm’s culture play out on a daily basis? How might your assessment of the culture differ from that of partners, attorneys and staff members?

Perhaps, most importantly, how is your firm’s culture affecting the profitability of your firm? There are triggers that are affected by law firm culture, which can ultimately contribute to profit or loss. We explore them in the following list:

#1 Talent Attraction

Do the best attorneys want to work at your firm? Better yet, are they knocking the door down in order to join the team? Law firm culture feeds your employer brand and can be a major decision point as to whether prospective employees pursue or accept an offer from your firm. In a recent article written on Lawyerist, David Parnell argues that candidates will challenge legal recruiters and other representatives of the firm on the firm’s culture, especially those candidates contemplating a lateral move. This makes sense. Candidates want reassurance that the environment is favorable to their productivity, job satisfaction and future career goals.

#2 Turnover

The cost of losing an attorney and having to hire a replacement can be extremely costly for the firm. Consider that the cost of hiring a new attorney could amount to 1.5x to 3.0x the cost of the attorney’s annual salary. These costs are not to be taken lightly.

These costs are magnified when several attorneys decide to move on. Law People suggests that the attrition rate for law firms could be as much as 20% per year. How often are you losing attorneys and what is contributing to their decision to move on?

#3 Productivity

Law firm culture has a direct impact on productivity. Positive, engaged attorneys are likely to maximize productivity throughout the day, while the opposite is true for attorneys who are disgruntled or have “checked out.” How would you describe the mood at your firm and how have you noticed it impacting productivity?

#4 Technology

How does your firm use and respond to technology? Is technology widely adopted and integrated into the daily functions that your attorneys carry out? On the other hand, is your firm a “technology dinosaur,” still limping along, relying on old tools while half-heartedly embracing the new ones? Believe it or not, the culture of your firm in regard to technology can have a powerful impact on attorney satisfaction. adoption and attitudes. If attorneys do not feel that they have the right tools to perform their job or that tasks are “more difficult than they have to be,” they are likely to become frustrated. This is especially true with Gen Y attorneys, which represent a significant portion of today’s attorneys.

#5 Client Retention

Renowned business author, Simon Sinek once said “Customers will never love a company until the employees love it first.” The same rings true when it comes to law firms. If your attorneys don’t love your firm, how can you expect your clients to? And, if they don’t - let’s face it - there are plenty of other options out there. Loyal clients will love your firm, and the process of making them fall in love with you starts with your attorneys.

What are some of the other ways that law firm culture can affect profitability? Share your thoughts in the comments section below.


Topics: Real-time Compliance

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