This is a struggle. The grass is always greener. People come, and people go. Today, they go more often than they stay. It’s the nature of a more mobile society with different ideas about loyalty. It’s not worth being distressed by the societal changes. It is what it is. Now we deal with it.
This is a continuation of the discussion started by my friend with 45 years of practice experience who notes that he hasn’t ever made any money from hiring associates. He’d like to figure out how to make it work. I commend him for his ambition at this point in his career. I can only hope that I’ll give a crap about improving anything after 45 years. Stay tuned for the next 20 years, and you’ll find out what happens.
Implicit in the discussion about keeping associates is that we need to keep them until they become profitable and then keep them well after that point to keep generating profits.
I disagree with that premise.
I say they’ve got to be profitable from the first day (or darn close to it).
If you can’t make money from them very early in their tenure, then this isn’t going to work for you. You can’t count on them staying for long. Of course, you hope they’ll stay, but you can’t build a business model based on hope. You need a profitability plan for every investment you make, and if you can’t see dollars flowing to the bottom line from the start, then it’s probably a bad investment. Everyone laments the short-term focus of big corporations, resulting in their quarter-by-quarter planning without attention to the big picture.
Why do they focus on quarterly results? Because it works, and they drive their stock price up. Having a great decade requires stringing together 40 great quarters. Focus on the short term when it comes to hiring associates. Those MBAs learned something in that $100,000 business school.
You’ve got to figure out a billing model and compensation plan that builds in profit from the very beginning. There is minimal time for training today. They need to bill—right now—or this isn’t going to work.
How do you get them up and running instantly? Most importantly, you need someone managing the associate. Hiring associates doesn’t work if you select people, set up offices for them, and tell them to get to work. Associates can’t be effective if they’re hunting up and down the halls looking for an open partner’s door when they have a question. They need someone supervising them who can answer the overwhelming number of questions and deal with their anxiety and uncertainty. You need someone in management who is excited about managing and growing lawyers. This can’t be an afterthought or a secondary duty of the manager. This needs to be the manager’s primary focus and passion if it’s going to work.
A great manager will deliver instant profitability by being certain that the associate’s time is being sold at a fair price and that there is a margin between the price you’re paying for the labor and the price at which the services are being sold. Certainly, new associates aren’t worth as much as more senior attorneys. However, that doesn’t mean that you can’t sell their services at a profit. You’ll sell their work for less, but you’ll also pay less for it. With good management, the associates’ time will be used efficiently and sold profitably. Buy low, sell high: that’s the deal with running a business.
What happens when those associates decide to leave?
Well, some will leave, but, if you quickly turned those folks into profit centers, you’ll be less concerned. Sure, you’ll hate to see them go, but they’re not walking out the door with your investment. You had a fair exchange, they made you money, and if they need to go, they can go. Everyone can feel good about your time together.
However, in many instances, you’d like them to stay. Can you pull that off?
Sure you can. Here’s how.
Most of the associates who leave you have big dreams. They’re going to go off, start a firm, change the world, and make gobs of money.
Unfortunately, that’s not usually the way things work out.
The harsh reality is that they mostly leave, start practices, earn a crappy income, struggle for a few years, and then get a job somewhere else (if they can). They rarely achieve much of what they set out to achieve.
Remember, you’ve got clients. They need clients. Without them, you can’t get the work done and make money. Without you, they have no work to do and can’t make money. For now, you need one another. Don’t let it end so quickly.
Is it possible for both you and your associates to get what you need out of the relationship?
What if you can keep them while they do their own thing? What if they open an office but continue to do your work on a contract basis? The compensation system is easy if you’re doing something like the attorney compensation plan I described earlier this week. They can keep getting your work done. You keep earning the margins on that work. You’re happy, the associate is happy, and the client is happy. It’s a win-win-win.
One day, maybe, these associates will build a practice and finally leave. In the meantime, however, the associates keep earning an income, and you keep getting the work out the door. There’s really no reason for the associates to go like they did in the old days. It used to be that you were left in a lurch, and they were left with a crappy income. Now they can accomplish their goals, and you can accomplish yours. Let them go away and do their own thing without going away.
The keys to keeping associates are good management, a fair compensation system, and a plan for them to achieve their dreams (without killing yours). You’ll find that with these systems in place, lawyers will stick around longer and make you more money. If the relationship ends, it ends on good terms and was a profitable experience for everyone involved.