This Part I in a 2-Part Series on law firm profitability. Read Part II here.
Did the word profitability get your attention? If it did, here’s a warning, this blog post isn’t about hourly rates and utilization and realization. It isn’t about effective billing strategies or streamlining your collections process. It’s not about your profit and loss statement. It’s not about numbers, but it is about your bottom line. It’s about what you need to know and do to build a profitable law firm in 2020 and beyond. It’s about your people and the culture you create for your people. Yes, I said it. Culture. Your law firm’s culture has a tremendous impact on the profitability of your firm. And with respect to Millennial lawyers, getting your law firm’s culture right is integral to profitability.
This is the first of two posts on this topic. In Part 1, we’ll explore why your law firm’s culture has a tremendous influence on your firm’s profitability. (Spoiler Alert: It is everything.) We’ll also look at why the current culture in most law firms — a culture built by Baby Boomers — is simply not sustainable. In Part 2, we’ll dig more deeply into what Millennials want and what you can do to create a firm that attracts and retains the best and brightest. Both posts will cite numerous studies and publications from Gallup, Inc.
“The one thing leaders cannot do is nothing. They cannot wait for trends to pass them by, and they cannot wait for Millennials to get older and start behaving like Baby Boomers. That won’t happen. This workforce isn’t going to acclimate to the status quo.”
– From State of the American Workplace, Gallup, Inc.
Profitability and Culture
What is the foundation of profitability at your firm? Perhaps the better question is “who” is the foundation of profitability at your firm? The foundation of profitability in any business is its people. Everyone in your firm either contributes to or detracts from your firm’s profitability. The Gallup organization has engaged in extensive research on how the culture of a workplace can have either a positive or negative effect on the level of employee engagement and profitability.
“The foundation of profitability in any business is its people.”
According to Gallup, engaged employees “are involved in, enthusiastic about and committed to their work and workplace.” In short, they are happy. They have a positive mindset. Happy, positive employees are engaged employees. Engaged employees are productive employees. Productive employees are what profitability is all about. Gallup’s research has found that businesses with a high level of employee engagement have, on average, 21% higher profitability than businesses with low levels of engagement. Yes, 21% higher profitability. So, if you want your firm to thrive in the coming decades you must pay attention to your firm’s culture. And if you are not considering the needs of your Millennial lawyers with respect to your culture, your firm is suffering. You may not feel it now, but you will.
Why Culture Really Matters to Millennials
According to reporting from the American Bar Association, by the end of this decade, Millennials will make up 75 percent of law firm staff. And perhaps more than any generation before them, Millennials want their work to have meaning and purpose. They want to work in a culture that supports their development. They want a culture that supports their personal well-being, or at least doesn’t damage it. And if that culture doesn’t exist in their current firm, they will walk. In fact, Gallup’s research shows that “Millennials change jobs more often than do those of any older generation.”
Use this guide to take control of your firm’s finances and increase profitability.
The predominant culture in most law firms was created by Boomers. It is a culture that says, “Work late, every night, no matter what you are working on. Oh, and come in on weekends, too.” Boomers see this as a positive work ethic. It has always been a badge of honor for lawyers to work long hours. Many law firms are desperately trying to cling to this culture. After all, those hours aren’t going to bill themselves. And while this aspect of law firm culture is just one piece of the puzzle, it is a very important piece. It affects a number of other areas that are equally as important to Millennials.
As we’ll see in Part 2, your firm can create a culture that will support the engagement of Millennial attorneys, and engaged attorneys mean more profit for your firm. But it’s about more than just profitability. Engaged attorneys care about the firm. They provide excellent client service. Engaged attorneys will attract other like-minded attorneys who will help your firm stand out from the crowd. I am not suggesting that this work will be easy. It will not. Accomplishing anything that is truly important and meaningful is rarely easy. But it is work that must be done. We’ll get started in Part 2 by examining the 6 things Millennials want and what you can do about it.
About The Author
Nora Riva Bergman is a law firm coach and author. She is the founder of Real Life Practice and a certified Atticus Practice Advisor. As a licensed attorney since 1992, Nora brings a deep understanding of the practice and business of law to her work with lawyers, law firms, and bar associations across the country. She has practiced as an employment law attorney and certified mediator and has served as an adjunct professor at both Stetson University College of Law and the University of South Florida. Nora is a graduate of Villanova University’s Lean Six Sigma Program and teaches a course on Lean for Lawyers at Solo Practice University. She is the author of, 50 Lessons for Lawyers: Earn More – Stress Less – Be Awesome and 50 Lessons for Women Lawyers – From Women Lawyers, both available on Amazon.com.