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The ������Ƶ report, Rise of the legal consultants, highlights the growing popularity of virtual or fee-sharing law firms. One of the main drivers for the current growth of such firms, however, is nothing new: the tendency for partners to leave law firms and take their business with them. All law firms, whether virtual or based around offices, face the same issue of how to retain their people. Here are some of the factors that come into play.

Fairness above all

There are many studies that show that what really motivates people is not what they earn, but what they earn in comparison to others. We find it very difficult to equate our income with our work, except in the broadest terms. We can understand that our work may be worth £100,000 rather than £1, but we struggle with the difference between, say, £90,000 and £100,000. We make sense of these figures instead in relative terms. We compare them with our previous income, and we understand pay cuts and pay rises. Even more than this, we compare our income with the incomes of others. There is nothing more motivating than seeing someone advance ahead of you in terms of income, but you feel that advance is unfair. Unfairness pushes people out of the door.

Partners originally split profits equally, but those days are now long gone. Partnerships must now come up with a system of allocating profits unequally but fairly. Some firms adopt complicated methods of weighing up the contribution of each partner to the life of a firm, but at the risk of partners not understanding how decisions are made (and a lack of understanding may lead to partners making dark assumptions about “real” motives behind pay decisions). Others strip back the system to a correlation between billings and earnings, but at the risk of encouraging individuals to focus on themselves rather than the greater good of the firm. Others try to avoid comparisons entirely: Jones Day, famously, has a “black box” system in which no explanations are given, and partners are discouraged from discussing their compensation – but again at the risk of encouraging speculation. All of these approaches have their advantages and none of them are perfect. There will always be times when the outcomes are perceived by some to be unfair.

Only connect

A second important factor is the feeling of self-worth that comes from being connected to others – or perhaps more accurately the need to avoid the reverse, namely the disconnection and dehumanisation that comes from perceiving oneself as just a cog in a machine. A common trope in dystopian films is the image of people lined up in ranks, serving some inhuman purpose: think of Neo in The Matrix discovering that humans are mere rows of batteries charging a machine. The modern office block lends itself to such fears. The opening shot of Billy Wilder’s classic 1960 film, The Apartment, pans up the outside of a giant office, each window identical, then across a floor filled with rows of men dressed the same, seated at the same desks and performing the same task, before focussing in on the protagonist. The viewer understands his predicament instantly.

Like all organisations, law firms need to ensure their people feel connected and valued; and that becomes harder as a firm becomes bigger. An individual can easily feel lost within a giant structure, and the resulting apprehensions of drudgery and helplessness (and sometimes sheer terror) drive them to the exit. Firms can do a lot to foster connections, and make people feel at home, through shared activities and welcoming environments, but a top-down approach can be perceived as cynical, controlling or manipulative, and reinforcing not removing those fears. The strongest connections often grow organically. People who joined firms as fellow trainees have memories in common that sustain their links through the years. People find shared interests, both within work and outside. They enjoy each other’s company. These links motivate people to turn up for work rather than spend their time looking for positions elsewhere. 

Embracing change

Change, though, is inevitable. There are always people coming and going from a law firm. People get older, and retire. Illness may force individuals to resign. People can also get the wrong idea, either about the firm they are at or about the firm they might join. These all lead to departures and the way that a firm responds can often set the tone for those that remain, and encourage them either to stay or to leave as well. A firm that faces up to change, and has a plan for the future that will survive any departures, even of individuals that might appear to be the most critical to its business, will be a firm that retains its people. On the other hand, a firm that is seen to be on a downward spiral will be abandoned.

A virtual future

Virtual firms often respond well to these issues. Remuneration that is linked to the amount of work one does can seem fairer (and lawyers may not have visibility over what others earn). Such firms also make extra efforts to foster connections, knowing that people might otherwise feel isolated; while the comforts of working from home can often help dispel any feelings of alienation. The real challenges, however, come over time. Will these firms have the resilience to respond to the ups and downs that all businesses experience? And will individuals still feel at ease, and not jealous of what people in office-based firms have, after years in a virtual environment? Only time will tell whether such firms are actually better at retaining their people, or whether they face the same merry-go-round. 

Fox Williams LLP is a leading adviser to law firms, accountancy practices, and other professional services organisations. For more details see