One-third of UK law firms do not have a formal talent management strategy in place despite challenges facing the legal sector in the current environment, according to a survey by the business advisory firm Deloitte. 90% of law firms admit to having talent challenges, most frequently for junior and senior associate roles, but some are failing to take the steps necessary to counter this problem.
Bill Cohen, partner and remuneration specialist at Deloitte, said: "Law firms face an increasingly challenging environment in recruiting, motivating and retaining high-calibre staff. The legal sector market is experiencing the same demographic squeeze as other intellectual capital sectors. Furthermore, the lure of positions in investment banks, US firms and in-house roles leave many UK law firms with a tough task to attract and retain quality people."
The results suggest that many law firms are only just beginning to recognise the need to embrace 'total reward', rather than focussing purely on financial aspects in attracting and retaining staff.
While firms recognise that 'intrinsic' reward (e.g. the quality of client work, career opportunities, culture, work/life balance) is now a primary selling point in attracting talent, the focus has remained on base pay and bonuses in terms of talent management activity over the last 12 months, with over 40% of participants making changes to these reward elements.
Jon Clark, director of the strategic employee reward team at Deloitte, said: "When we asked survey respondents to identify their talent challenges for the next 12 months again the emphasis was on financial elements. This highlights the short terms challenges that many firms face. Many non-financial reward programmes take longer to come online and have an impact. However, aspects such as career opportunity, style/culture of the firm and working environment were also listed as key areas of focus over the next 12 months, and we may see things moving in that direction."
"Furthermore, firms outside of the Top 20 recognise that often they cannot compete with the larger firms on base pay and need to differentiate along other lines in order to compete for talent."
Where firms have implemented non-financial talent management initiatives, typical examples are leadership training and development, management development programmes, training in mentoring and coaching skills and revised partner admission processes and firm wide appraisal processes.
According to the survey, the vast majority of firms have also yet to allocate responsibility for talent management to a designated Talent Partner. In most cases this remains with the Managing or Senior Partner, in contrast to the wider professional services sector where this role is often clearly allocated to a specific equity partner.
One area for development within the legal sector concerns the processes used for identifying internal talent. These are relatively poorly developed and inconsistent between grades. For example, at entry level, many firms use assessment centres to select candidates from the market. However, through the PQE levels, few firms continue to use a formalised assessment approach. Instead, nomination by a partner is the most common approach in identifying talent within the firm, followed by performance management and financial measures (e.g. chargeable hours).
Cohen added: "The use of chargeable hours as a measure of associate performance could be a contributing factor to the challenges firms are experiencing in developing the wider 'commercial' characteristics that are desired as individuals progress. A focus on financial measures could mean that individuals are not correctly incentivised to develop and practice wider professional competencies which in turn results in frustration around professional development and career progression."
The results of the survey suggest that many firms should focus on three top talent management priorities:
- Appointing a specific individual to be responsible for
talent across the organisation,
- Identifying, developing and managing future partner
talent through a co-ordinated and transparent process,
and
- Recognising that to manage talent effectively, it is the
total reward package that will be most effective.
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