Millennials Won’t Destroy Your Law Firm. Can They Save It?

From The American Lawyer: by Lizzy McLellan Oct 23, 2017

For law firms wringing their hands about how to manage the millennial generation—or asking why they should adapt to this crop of young lawyers in the first place—here’s the bad news: If you’re still clinging to traditional models for training associates and running the partnership, you’ve already fallen behind.

The millennials are here, they’re climbing the ranks, and they’ve already begun to transform the industry.

But there’s good news, too. A decade after the Great Recession highlighted the industry’s vulnerability, many firms recognize the need for new strategies. And for those that get this generation right, the changes they embrace may be key to success in a new era for legal services.

Of course, the arrival of the millennials—born between the early 1980s and late 1990s—doesn’t mark the first turning of the generational tide for most firms. “Is being different really any different than it was before? No,” said Justin Kay, chair of the firmwide hiring committee at Drinker, Biddle & Reath.

But there is a difference, and it’s not just traits like millennials’ networking savvy, or their much-hyped need for recognition.

The difference is the timing.

Millennials, with all their generational quirks, are working their way up in the legal industry at the same time that many law firms face critical decisions about how to stay relevant in the greater economy—including how to compete for talent with the rising tech sector and legal industry disrupters. At the same time, young lawyers’ millennial cohort are increasingly running the companies that firms want to represent. It’s no surprise firm leaders are paying attention.

Many are already taking action. Morgan Lewis & Bockius and other firms are implementing remote working programs for associates that would have once been unimaginable. Cozen O’Connor created a choose-your-own-technology program for all lawyers. A number of firms have moved, remodeled or completely overhauled their physical workplaces with millennials in mind, favoring common areas, for example, over large corner offices.

Beyond work-life balance perks and in-house baristas, firms are giving young lawyers the influence they crave. Orrick, Herrington & Sutcliffe is getting junior partners involved in strategic planning through a newly-created commission. Skadden Arps, Slate, Meagher & Flom is letting associates pitch business ideas through an innovation contest. And Fennemore Craig has even added a millennial partner to its management committee.

“We are selling our talent,” said Jodie Garfinkel, director of attorney development at Skadden. “And, therefore, we are always listening to what our talent needs, so we can attract the best and the brightest.”

FACING REALITY

Law firm leaders have followed two main approaches to dealing with millennial employees, said Jordan Furlong, a legal industry analyst at Law 21. The first way is simply making them fit into the traditional law firm model, like a square peg in a round hole. The results, he said: “spectacularly unsuccessful.”

The alternative, Furlong said, is accepting millennials for who they are and working with their tendencies and preferences, instead of against them.

“What’s becoming more apparent to me is that law firms need millennial lawyers a lot more than millennials need the law firms,” Furlong said. “They might not think they do, but every day, we get closer to an entire generation of rainmakers and relationship partners and corner-office heavyweights shifting into retirement.”

Marcie Borgal Shunk, founder of law firm consultancy the Tilt Institute, said firm leaders’ continued fixation on the generation is to be expected as millennials continue to fill the associate ranks, and as they begin to infiltrate the partnership level.

“It’s true of virtually every industry right now,” Borgal Shunk said. “It is compounded in the legal industry because of the nature of the partnership track and the structure of the law firm.”

With baby boomers (born 1946 to 1964) largely on the brink of retirement, law firms are about to experience a major leadership vacuum, which Gen Xers (born 1965 to early 1980s) alone will be unable to fill.

“The millennial generation and the baby boomer generation are both much larger than Generation X,” Borgal Shunk said. “The millennials ultimately will be the ones to spearhead the industry into its evolution. Whatever new law is going to look like, it’s going to be the millennials leading it.”

The demographic mismatch is real. According to Pew Research Center, there were around 75 million millennials in 2015 and 75 million Baby Boomers, but there were only 66 million Gen Xers.

Consultant Susan Saltonstall Duncan, founder of RainMaking Oasis, said she is already providing leadership training to some millennial lawyers who have risen into the partnership ranks and into junior leadership roles at their firms. Borgal Shunk said firms often ask her how they should approach training millennials for their future in heading up the firm. And multiple firm leaders said they provide training for partners, through internal and external resources, on how to bridge the generational gap.

“There’s a lot of media coverage around ‘they want to work at home in sweatpants.’ That’s such an oversimplification,” said Siobhan Handley, chief talent officer at Orrick Herrington & Sutcliffe. “They are the key to the future.”

 THE POWER OF OPTIONS

Generation X, like many lawyers before them, came up in a strict, hierarchical, traditional law firm environment, said James Goodnow, partner and executive committee member at Fennemore Craig. And until recently, young lawyers had to “adapt or get out” of the legal industry, he said. But career alternatives changed that.

“Millennials as a group just aren’t willing to do that anymore,” said Goodnow, who, still in his mid-30s, is a millennial himself. “There are too many options and too many places to go.”

Those options include in-house lawyering—in the fast-rising tech sector and elsewhere. But they also include positions with alternative legal service providers, virtual law firms, and legal jobs in other professional services businesses.

While the millennial generation is large, fewer of its ranks are going to law school, and even fewer are enticed by the traditional law firm lifestyle, said Handley, of Orrick.

“There’s just much more competition, a much smaller talent pool, and then that group when they’re coming in, they’re not staying,” she said. “Partnership is not the Holy Grail it once was.”

Scott Connolly, director of professional development at Drinker Biddle, said he has seen that change first-hand while teaching classes at University of Pennsylvania Law School.

“Twenty years ago when I started with the firm… a lot of us talked about the path to partnership,” he said. “I don’t see that now. I see much more of people thinking much broader about their careers.”

 James Goodnow of Fennemore Craig says millennials are less likely to think their only options are to “adapt or get out” of traditional legal industry jobs.

Firms have to think about how to stay relevant to young lawyers, said Orrick’s chairman, Mitch Zuklie. “The war for talent…requires us to be more thoughtful about adapting our firms to the workplace they would find engaging,” he said.

Then there’s the small matter of clients.

“If you were to look at the law firms that are out there and their client base, their client base is being more and more run by the millennials,” said Jonathan Littrell, managing partner at Los Angeles midsize firm Raines Feldman. Born in the early 1980s, Littrell toes the line between millennial and Generation X.

“If you’re viewed … as an old-school law firm, I don’t think the 30 year old who created the next Uber will be excited to use your firm,” Littrell said.

Borgal Shunk described the combination of greater options for young lawyers, new disruptive entrants to the legal industry and boomer-heavy partnerships as a kind of perfect storm.

“All of that is compounding,” she said. “It’s exacerbating the generational difference.”

A CRITICAL MASS

Some of the changes associated with millennials started with the Gen Xers, said Mathieu Shapiro, managing partner of Philadelphia-based Obermayer, Rebmann, Maxwell & Hippel.

He recalled the expectations he faced early in his career—that associates would go out to network with potential clients every weeknight and come in Saturdays to make up for time lost on business development. To the leaders at that time, he said, working long hours, six days a week was part of the job. But that wasn’t going to work for a generation of lawyers who were less likely than ever to have a stay-at-home spouse.

“In that sense, I was stubborn. I refused to conform,” Shapiro said. “When I was a kid, there were older partners who thought I didn’t have the right attitude.”

Millennials seem to be taking bigger steps in the same direction. They’re an optimistic generation, Shapiro said, who want “the best of everything.”

“We didn’t have the critical mass,” said Furlong, a self-proclaimed Gen Xer. And Gen X was more practical-minded than the generations before or after.

“The boomers were absolutely visionaries, and, in their own way, so are the millennials,” Furlong said. “They love getting stuff done, and they love getting praised for it. … That’s how they were raised.”

TURNING LAW FIRMS ‘UPSIDE DOWN’

Just as the millennials are reaching a critical mass, their law firms are reaching a critical turning point for their business models.

“There’s only so much growth we can have by continuing to grind out the hours,” Goodnow said. “We’re at the beginning of large law firms being turned upside down. And frankly, that is a necessary thing.”

At the same time the first millennials were graduating from law school, the legal industry suffered a shake-up from which it has yet to fully recover.

“When the bottom fell out in 2008, business leaders realized they can’t just continue to send the work to a law firm because they’ve done that for 50 years,” Goodnow said.

Post-2008, law firms continue to face challenges that started with the Great Recession. Their clients’ increased attention to legal spending did not fade as economic indicators improved.

“Large law firms are no longer keeping pace with the economy. The question is: Why is that happening? At the core, it’s because of years of complacency,” Goodnow said. “The legal industry doesn’t take risk as a whole. Now firms are paying the price because of that.”

For example, fewer clients than law firms expected have demanded flat fees, contingent fees and other nontraditional billing arrangements, Goodnow said, so many law firms never moved to embrace them. But millennials won’t see that as an obstacle dodged. They’ll see it as a missed opportunity.

Billable hours and long-standing partner compensation schemes are the hallmarks of traditional law firm business models that “baby boomer partners are holding onto tightly to control,” Duncan said. But those practices have held law firms back from increasing efficiency and investing profits into updating their resources.

“I’m not suggesting that I think millennials won’t want to continue to be in profitable businesses, but I think they’ll be more able and willing to take a longer-term view of how they invest,” she said. “Maybe they reinvest 25 percent of the profits every year in major initiatives required to adapt to the marketplace.”

Additionally, Duncan said, many younger lawyers are less concerned about trade secrets and may be more willing to collaborate with others in the legal industry. Having come of age with the internet and social media networks, future firm leaders are more worried about missing out on the next revolutionary business practice.

“They’re accumulating power now. They will pretty soon assert it,” Furlong said. “Once they’ve got the keys to the place, they’re going to be making some pretty big renovations.”

One of the changes already underway is a shift in the amount of influence that younger lawyers are able to exert on management decisions.

“The challenge is, in a hierarchical world, lawyers across the country were trained not to speak unless spoken to,” Goodnow said. But millennials “were encouraged to speak up at the dinner table, were encouraged to speak up in school.”

And as teenagers and young adults, they were speaking up on a totally new platform—social media. Some boomers might roll their eyes at the young people attached to their phones, tweeting every thought that occurs to them. But Goodnow cautioned against dismissing the ideas of a generation.

“Leaders should care, if they want their law firms to exist. They need to start a dialogue,” he said. “You need to stop the millennial bashing, and you have to start conversations.”

A number of firms are doing just that.

Zuklie, who became Orrick’s chairman and CEO in 2013, has since implemented town hall meetings with two-way feedback. The firm has also held training sessions focused on helping lawyers and staff from different generations relate to each other.

A year ago, Zuklie took a step toward getting young partners directly involved in the firm’s strategy, forming the Higgins Commission. Named for a partner in New York who is leading the effort, the group of 20 junior partners, many of whom are millennials, were tasked with making recommendations for how the firm should operate in 2022.

Garfinkel, of Skadden Arps, said her firm has, for a number of years, examined how different generations, at times up to four, interact within the firm, and how management should respond to each generation’s needs. The firm recently held an innovation contest, she said, in which about 170 associates entered their ideas for how the firm could improve itself.

Michael McTigue Jr., litigation chairman at Drinker Biddle, said his firm has also held management and feedback trainings, bringing in external resources that included material on millennials and intergenerational communication.

“We’re always looking at … how to have a work environment that appeals to all of the generations within the firm” McTigue said. “We just have to ensure that this is one of the opportunities that will appeal to them in the long term.”

TAKING ON LEADERSHIP

Even if they have been immersed in a traditional law firm atmosphere so far, millennials are more likely to make changes once they’re in charge, Duncan said. And those changes could ultimately help law firms survive disruption in the legal industry.

“If firms are really smart, they would accelerate some millennial leaders,” she said.

A few firms have done just that, like Raines Feldman and Fennemore Craig. Being a young law firm leader at Raines Feldman has given Littrell some opportunity for reinvention at his firm, he said. He lacks the multiple decades of law firm experience many managing partners have, but he also hasn’t wedded himself to the traditions of the industry.

“There’s a little bit more of a motivation to enact change,” he said. “It’s not like I’m just going to be here another five years. I’m thinking 30 years out.”

Goodnow, of Fennemore Craig, said he is not the only millennial with a voice at his firm. Associates are included and take leadership in strategic committees, he said, and the firm’s managing partner, Steve Good, has embraced some of their ideas.

“Many law firms don’t like to single out what they call future stars,” Duncan said. But “if you don’t give them the opportunities, you don’t know until it’s too late whether they’re actually going to be great or not.”

And that time lost could mean losing out on a competitive edge, as millennial traits become the new mainstay in the legal industry.

“They’re here,” Furlong said. “You can be baffled by them. You can resent them. You can fight them … or you can figure out, ‘How can we work with them?’”

4 Trends Shaping Our Legal Future

From Above The Law:  By and

We need to retrain lawyers to be more open-minded not only to a non-traditional career path, but to build a community.

Trend 1: Golden Age of the in-house legal department

We are convinced that we are entering the golden era of the in-house legal department. There is a trend of large legal departments hiring junior lawyers, sometimes even straight out of law school. This would not have happened in the past. Law departments are also running a larger amount of internship programs, and are training law students to work in-house. All of this used to be done solely by law firms. In-house law departments are becoming much more sophisticated legal services consumers. They have also become much more sophisticated about fee arrangements and hiring or outsourcing decisions. They are adept at choosing whether to hire big, small, in the US, outside of the US – or to use a technology solution! The confluence of these changes is driving in-house legal department to lead the charge in an unprecedented way, and we suspect this will cause dramatic shifts in what has long been considered the “standard” lawyer career path.

Trend 2: Automation

Artificial intelligence, machine learning, and various other automation methods are going to impact the way we practice law. While automation will not get rid of lawyers and replace the strategic value we provide, AI and automation trends have been automating and continue to automate e-discovery, contract review, knowledge management, compliance, and other routine practices. This means that attorneys will need to be true business partners, provide strategic legal and business advice, and lead initiatives. Great legal education will need resemble business school education, with case studies, leadership training, and active networking. The law school, law firm, and overall lawyer training approach and curriculum will have to dramatically change to train for the new type of lawyer.

 Trend 3: Rise of the legal operations professionals

Legal departments increasingly need to balance budgets, recruit and inspire personnel, collaborate with other professionals, analyze data, implement and maintain a variety of technology solutions, solve diversity and other social impact problems, and much more. This leads to the rise of the multi-disciplinary legal operations professionals, many of whom report directly to the GC, are senior level professionals, and play an important role in the company. Law will no longer be a profession where you shun math in order to read and write all day. While there will most definitely still be a lot of reading and writing, there will also be budgeting and data analysis in a way we haven’t seen before. Hiring will need to adjust to accommodate this wider range of skill sets, and law departments will need to provide a greater variety of training.

Trend 4: GC and lawyers as CEO’s and corporate board members.

GC’s are already used to keeping a bird’s-eye view of the business. Today’s GC’s are involved in all business functions and manage many business teams. It’s not uncommon for them to manage parts of or the entire human resources, cyber security, and business development departments. Instead of preventing disasters, fighting fires, and assessing risk, GC’s are making exciting business decisions, stirring progress, and leading innovation. We’re actually surprised GC’s aren’t more regularly considered for the CEO or board position — they are uniquely trained and positioned to succeed in these roles! This is something we see changing as GC’s become true business leaders rather than owning solely the legal function.

Disruptions require changing the traditional approach. The 4 trends we believe will reshape the legal department and lawyers of the future require rethinking how lawyers are taught and trained (including the litigation-driven Socratic method). We must value experiential learning more. We need to get rid of the notions that lawyers don’t do math — lawyers do everything! We will also need to retrain lawyers to be more open-minded not only to a non-traditional career path, but to build a community of lawyers and non-lawyers alike. After all, it’s not likely you’ll be able to meet the types of executives you need to build relationships with at a lawyers-only event. We’re excited to see these trends come to fruition as they mean lawyers will be recognized as true business leaders!

2016 Report on the State of the Legal Market

From Georgetown Law:   Law firm leaders need to make bold, proactive changes in how legal services are delivered if firms are to thrive in the rapidly changing legal marketplace. That is among the findings of the “2016 Report on the State of the Legal Market” just issued by the Center for the Study of the Legal Profession at Georgetown University Law Center and Thomson Reuters Peer Monitor.

Two thousand fifteen saw a sixth consecutive year of largely flat demand, weakening pricing power and falling productivity. The report notes that since 2008, the law firm market “has changed in significant and fundamental ways.” Clients have assumed active control of the organization, staffing, scheduling and pricing of legal matters, where previously they had largely left those decisions in the hands of law firms. In addition, competitors such as alternative legal services providers, accounting firms and consultants, continue to grow market share.

The report suggests that law firms need to shift their focus from growth to market differentiation and profitability. But resistance to change can make it difficult for firms to adopt new strategies such as redesigning work processes, adopting new staffing models or setting new pricing strategies. In addition, many firms are locked into a “billable hour mentality” that inhibits creative alternate approaches to the delivery of legal services.

The report is jointly issued on an annual basis by the Center for the Study of the Legal Profession at Georgetown University Law Center and Thomson Reuters Peer Monitor and reviews the performance of U.S. law firms and considers the changed market realities that drive the need for firms to take a longer-range and more strategic view of their market positions going forward.

“Fundamental shifts such as we have seen in the market for law firm services since 2008 require firms to take a hard look at the long-term viability of operating and pricing models that have worked well in the past but may be at risk in the newly developing market environment,” said James W. Jones, a senior fellow at the Center for the Study of the Legal Profession and one of the report’s authors. “Firms that are able to redesign their models to better respond to the changing demands and expectations of their clients will have a substantial long-term competitive advantage.”

“A ‘buyer’s market’ for legal services is bringing increasing demands from clients, more nimble and leaner competitors and greater pressures for efficiency,” said Mike Abbott, vice president, Client Management & Global Thought Leadership, Thomson Reuters. “The good news is that some firms are already making strategic changes and performing strongly. The imperative is for firms to identify the best strategy for adapting to the rapidly evolving marketplace, given their unique strengths, talent, geographies and other assets.”

Employees Who Stay In Companies Longer Than Two Years Get Paid 50% Less

From Forbes.com:  The worst kept secret is that employees are making less on average every year. There are millions of reasons for this, but we’re going to focus on one that we can control.  Staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more.

Keep in mind that 50% is a conservative number at the lowest end of the spectrum.  This is assuming that your career is only going to last 10 years.  The longer you work, the greater the difference will become over your lifetime.

Arguments for Changing Jobs

The average raise an employee can expect in 2014 is 3%. Even the most underperforming employee can expect a 1.3% raise. The best performers can hope for a 4.5% raise.  But, the inflation rate is currently 2.1% calculated based on the Consumer Price Index published by the Bureau of Labor Statistics. This means that your raise is actually less than 1%.  This is probably sobering enough to make you reach for a drink.

In 2014, the average employee is going to earn less than a 1% raise and there is very little that we can do to change management’s decision. But, we can decide whether we want to stay at a company that is going to give us a raise for less than 1%. The average raise an employee receives for leaving is between a 10% to 20% increase in salary. Obviously, there are extreme cases where people receive upwards of 50%, but this depends on each person’s individual circumstances and industries.

Why are people who jump ship rewarded, when loyal employees are punished for their dedication? The answer is simple. Recessions allow businesses to freeze their payroll and decrease salaries of the newly hired based on “market trends.” These reactions to the recession are understandable, but the problem is that these reactions were meant to be “temporary.” Instead they have become the “norm” in the marketplace. More importantly, we have all become used to hearing about “3% raises” and we’ve accepted it as the new “norm.”

John Hollon, former editor of Workforce.com, remembers when “5% was considered an average annual pay increase.” The amount of fear the media created surrounding the recession and its length has given companies the perfect excuse to shrink payroll and lower employee salary expectations in the long-run.

The world is desperate for skilled labor and companies around the globe are starving for talent.  Companies can tout technology replacing labor, but it is only exacerbating the global shortage of human capital and skilled workers. This means that we as employees are positioned better than ever to leverage our abilities for increased pay.

Bethany Devine, a Senior Hiring Manager in Silicon Valley, CA CA +3.57% who has worked with Intuit INTU +4.12% and other Fortune 500 companies explains, “I would often see resumes that only had a few years at each company. I found that the people who had switched companies usually commanded a higher salary. The problem with staying at a company forever is you start with a base salary and usually annual raises are based on a percentage of your current salary. There is often a limit to how high your manager can bump you up since it’s based on a percentage of your current salary. However, if you move to another company, you start fresh and can usually command a higher base salary to hire you. Companies competing for talent are often not afraid to pay more when hiring if it means they can hire the best talent. Same thing applies for titles. Some companies have a limit to how many promotions they allow each year. Once you are entrenched in a company, it may become more difficult to be promoted as you may be waiting in line behind others who should have been promoted a year ago but were not due to the limit. However, if you apply to another company, your skills may match the higher title, and that company will hire you with the new title. I have seen many coworkers who were waiting on a certain title and finally received it the day they left and were hired at a new company.”

Even more importantly, when I asked Devine her thoughts on employees who had remained in the same company for periods long past the two year mark, she explained that she did feel that some were “underpaid” or had the potential to earn more.

Jessica Derkis started her career earning $8 per hour ($16,640 annual salary) as the YMCA’s marketing manager.  Over 10 years, she’s changed employers five times to ultimately earn $72,000 per year at her most recent marketing position.  This is approximately a 330% increase over a 10 year career.  Derkis’ most recent transition resulted in a 50% increase to her salary.  Derkis’ is a great example of how “owning your career” can make a huge difference in your income and career path.

Arguments Against Changing Jobs

People are worried that “changing jobs too often” will reflect negatively on employee resumes. I can definitely understand this fear because everyone is always worried about being unmarketable. I will be the first to admit that it is possible that certain employers may look at a resume with multiple transitions as a negative and may even disqualify an applicant based on that alone.

But, the important question is whether the risk outweighs the reward. Christine Mueller, President of TechniSearch Recruiters, has had clients that “will not consider anyone who has had more than three jobs in the last 10 years, no matter the reason.” Even so, Mueller still recommends that an employee makes a transition every three to four years for maximum salary gains.  Thus, the question is less about whether employees should jump ship, but how long they should they wait before jumping to maximize their salaries and achieve their goals.

Brendan Burke, Director at Headwaters HW +5.00% MB, strongly disagrees with the “up-and-out culture.”  He explains that “companies turn over great employees because they’re not organizationally strong enough to support rapid development within their ranks. In many cases, that is a recipe for discontinuity in service and product offerings as well as disloyalty in the ranks. As such, we take the opposite approach. Rather than force folks out after 24 months, we try to retain our junior and mid-level staff and develop them within the ranks.”

Mr. Burke is absolutely correct. Most companies are not equipped to “rapidly” promote and reward their best employees for a variety of reasons such as office politics. Everyone that has worked in the labor pool hates office politics, but understands that it is an unavoidable evil and is more often than not a major obstacle to rewarding talent.

Finally, we’ve been talking about money a lot.  Andrew Bauer, CEO of Royce Leather, explains that jumping ship can be “stressful.” Employees also need to consider their “quality of life, mental health, physical health and better moral standards.” Mr. Bauer is right. Money is important, but it must be balanced with everything else in your life. Monetary compensation is only one part of your life, and it should not dictate everything.

Jumping ship is a risk that we all need to weigh at a personal level.  In my career, jumping ship is something I’ve done aggressively and frequently. I’ve never looked back and regretted my decisions because I’ve always felt that my skills deserved more. Hiring a single employee who is able to perform even 10% more efficiently is worth at least a 25% increase in salary. Companies spend a lot of money to pay recruiters, human resourcing to conduct background checks and the time of existing employees to hire and train new people. It’s always cheaper to just hire better people and pay them more.

Conclusion:

It’s a fact that employees are underpaid. Instead of focusing on things we can’t control like the economy or management decisions, focus on the things we can. Employees can control their own salaries by aggressively negotiating their opportunities and being unafraid to ask for more.