Though we might quibble about the rate of our economic growth, there is no denying that India is among the fastest growing economies of the world. The follow on effect of this has been the rapid expansion of domestic corporate law firms – expansion both in staff and work as Indian and foreign companies investing in India increase their legal expenditure. In 2013, India Inc. spent USD 1 billion in legal fees, 77% of which is said to have been cornered by Indian law firms, according to a report by the UK-based legal research group, which also described the Indian legal market as the most dynamic in the world.
Why then, in such a dynamic market, is there growing evidence of partners breaking away from their ‘parent’ firms to set up smaller and leaner firms of their own?
Law Firm practice in India is comparatively new when you look across the pond at the U.S. and the U.K. where many of the established firms are more than 50 years old. India saw the establishment and rapid growth of law firms only in 1991 with the opening up of the Indian economy. It is only natural therefore that these law firms face several challenges, not least of them centring on staff retention.
A recent article in Fortune Magazine on law firm attrition in the U.S. said eventhough they had a history of paying high salaries and large bonuses, law firms suffered from ‘notoriously busy revolving doors’. In 2010, the National Association for Legal Professionals Foundation in the U.S., said medium to large law firms suffered an attrition rate of 20%, attributing the top reason to work quality standards not being met. While there are no attrition figures available for law firms in India, it would be fair to suggest that as the market in India matures, partner retention will be one of the key challenges that law firms face if they do not focus on business leadership and management.
Over the last ten years 15 of the 50 top law firms in India have been set up by partners who have broken away from their parent firms. Increasingly clients have been seeking out these smaller firms for producing better quality work cost effectively.
So what is it that law firms need to do differently to encourage partner retention? A few top law firms have been path breakers in foreseeing the challenges of attrition and while they may not have always succeeded inretaining key partners, they certainly have been successful in professionalizing their operations to a very large extent.
While most successful law firms have been generous about recognizing talent, newlyappointed partners have struggled to understand that their new responsibilities transcend just the practice of law and that they need to increasingly focus on what is described as the ‘business of law’. The reasons for this are manifold. For one, the role of the new partner is many a time not clearly delineated. And the result is that they have neither a clear idea of the firm’s expectations of them nor a perspective of the collective vision of the group.
From a managing partner’s perspective, many of those who do make partner do not have the necessary wherewithal or even a sense of belonging to handle the shift in responsibilities. This, the managing partners believe, they would be able to overcome if law firms were able to put together a professional mentoring system to guide senior associates to the path of partnership.
Law firms are increasing putting in place a partner compensation system that is no longer closed but follows either the western lock-step model or a modified version of the same. However what we need to see along with this democratization is a similar opening up at the discussion table, where new and young partners get an equal voice to senior partners in laying out the strategy and growth goals of the firm.
In addition, a compensation system that rewards not just performance and contribution to a firm’s business goals butalso recognizes other behaviours, such as contribution to one’s community would go a long way in not just enhancing the firm’s brand but also partner loyalty. A study done by Australia’s National Pro-bono organization found an increase in job satisfaction and subsequently in retention rates as lawyers benefitted personally from the opportunity to make a social contribution while at the same time getting more varied work and more control over their work.
The legal profession is notorious for its inordinately long and inflexible working hours, intense work pressure combined with extreme internal and external competition. Lawyers are judged more by the long hours they put in rather than output and very few law firms have invested in technology to improve work efficiencies. In the West, given the high percentage of staff attrition, including cases of early burn out, law firms are experimenting with changes in work place culture in particular innovations in bringing about work-life balance. In Australia, law firms that suffered up to 50% staff attrition, have successfully put in place partner-led initiatives that include rostered time off, time in lieu and flexiplace, paid parental leave with reduced financial targets of up to 14 weeks for the primary caregiver.
Many of the changes and innovations that one sees in law firms in the West have resulted from intense internal and external surveys that these firms have allowed themselves to be subjected to. These surveys have covered subjects as diverse as compensation, work place culture andpartner and associate satisfaction.
Indian law firms are still comparatively private about their functioning and it will take some willingness on their part to share information with objective third parties before there can be empirical data that will allow innovative ideas to be implemented across the board.
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