Why Do You Exist Beyond Making Money?
Can the law firm you work for answer that question? Can you answer that question for yourself?
Corporate law is facing a conundrum. Talented young people aren’t joining law firms like they once did. And many of those who do join are increasingly dissatisfied, leaving after a few years and long before firms are able to earn a profit from the high salaries they pay associates. At the top of the firm, partner compensation demands continue to rise, threatening traditional loyalties and creating the real possibility that rainmakers might skip to another firm willing to meet their increased salary demands.
Most law firms have responded to this crisis in the way that they always do: by throwing money at their lawyers, increasing associate compensation, and raising the profits-per-partner payout. Surely our attorneys can’t be unhappy if we pay them THAT much money. There are two main problems with this approach.
First, law firms are simple economic machines. As one British saying goes, “Our greatest assets go up and down in the lift [aka, elevator] every day.” Paying higher salaries requires firms to extract more money from elsewhere. What’s the most common way to increase profitability for a firm? Increase the number of billable hours the firm is churning out. With the market for outside counsel static at best, most law firms are left to squeeze these additional hours from those poor lawyers in the elevator. The increased pressure doesn’t make for a great workplace, leading to increased unhappiness for associates and partners alike. And the talent crisis worsens.
The second problem with throwing money at lawyer unhappiness: The kids are getting smarter these days! The new generation of lawyers — and workers more broadly — are demanding jobs with meaning. The prestige of working for a top law firm isn’t enough for many young lawyers, no matter how much you pay them, particularly if the working conditions at that law firm are pretty grim. This is the problem with increasing billable hour requirements to the breaking point.
When law firms start to fail, they lose their best people first. The elevator is a bit less full each morning, up to the moment when it stops running altogether.
But what if there was another way to attract and retain the best talent? What if a law firm tried to solve its talent crisis not by throwing more money at those bodies in the elevator, but by rethinking ‘why’ it exists as a law firm in the first place?
What’s Your Purpose?
Why do you exist beyond making money? Can the law firm you work for answer that question? Can you answer that question for yourself? In 2017, too many firms have lost the ability to answer this question, and it has resulted in a talent conundrum that law firms are increasingly unable to spend their way out of.
No matter how much you pay them, the most talented lawyers in the elevator are no longer getting off at your floor. The solution could be a simple little thing called purpose.
A few years back, Simon Sinek’s provided a definition of purpose in his now-famous TED talk. Sinek hypothesized that ALL companies can describe WHAT they do (“We provide legal services for clients”) and that MOST companies can describe HOW they do it (“We have top notch lawyers in 26 offices around the world literally working around the clock”), but that very few companies can describe WHY they do what they do. Companies that can answer this WHY have a purpose, and a significant competitive advantage in the marketplace.
Before dismissing this notion of purpose as entitled millennial claptrap or the sort of business school thinking that law firms needn’t concern themselves with, have a look at the stats. According to a recent EY report, purpose-led companies outperformed the S&P 500 by 10 times between 1996 and 2011. A study from the Center for Economic Studies found a direct link between purpose-led companies and increased employee engagement. More and more clients are coming to IDEO these days with purpose on their minds.
Here’s some smart thinking on the topic from John Ravitch, an IDEO partner and a colleague of mine. “Purpose answers questions that are bigger than just profits and losses. Purpose is about the value humans seek to create in the world. Purpose should be enduring and sustaining, but it also needs to be highly relevant to the current business context.”
Take a moment to think back to the beginning of your law firm. What are the origin stories that are told at retreats or in the partner dining room? During a recent conversation, a partner at a law firm here in San Francisco defined the firm’s original purpose by pointing to a mural in the lobby that depicts city landmarks the firm helped to build back when San Francisco and the firm were young. What he didn’t point to was when the firm paid out a particularly rich bonus to the partnership in 1953, or that time last year when starting associate salaries reached a new high.
Still not convinced? Allow me to tell a story about a little company called Unilever. With revenues exceeding $50 billion in 2016, it’s possible you’ve heard of it. A few years back, Unilever was facing something of a crisis. In a world that was increasingly concerned with environmentalism and the impact that we are having on the planet as humans, Unilever was one of the biggest makers of plastic bottles and other waste items filling landfills around the world. The best and brightest didn’t necessarily want to work for a company that was the cause of so much environmental harm. So Unilever set out to change, aligning its existence as a company to the following purpose: to make sustainable living commonplace.
Unilever’s move wasn’t just corporate social responsibility (CSR), and it wasn’t a small pro bono requirement, and it wasn’t a marketing play. The sustainability bottom line at Unilever became equally important as profitability. Unilever moved to annual reporting because it realized that sustainability is about the long view, not quarterly profit reports. It began publishing the company’s sustainability numbers in its annual report right alongside its profitability numbers. Every employee at Unilever — right up to the top — became accountable for achieving sustainability goals. How are things going? Look at Unilever’s stock chart to answer that question.
But where the Unilever story has the most relevance for law firms is in the hiring and retention of talent. At the beginning of its purpose journey, Unilever realized that although its executive leadership team was committed to this new sustainability purpose, it needed front line workers with sustainability baked into their DNA, too. So Unilever began focusing recruitment efforts at places like Cornell University, which is world renowned for its sustainability program. In the first few years, recruiting at Cornell wasn’t always easy. Who wanted to work for one of the largest creators of plastic bottles in the world?
Eventually, a handful of graduates from schools like Cornell joined Unilever and realized that this company ACTUALLY existed for reasons that were about much more than just making money. Based upon Unilever’s size and global reach, small changes in its manufacturing processes had a HUGE impact on the landfills of the world.
And these graduates discovered that they were rewarded and promoted at Unilever for taking actions that aligned their personal sustainability goals with the company’s broader purpose. Graduates from schools like Cornell stuck around and thrived, and eventually becoming company leaders themselves.
Now, several years on in Unilever’s purpose journey, the company no longer needs to recruit quite so heavily at universities like Cornell. They don’t have to! Instead, the Cornell graduates come knocking on Unilever’s door. It’s well known that if a recent graduate of a prestigious university cares about pursuing a sustainability agenda at scale, Unilever should be at the very top of their list. Unilever is swimming in rockstar talent that cares about so much more than just making money. Unilever truly has a purpose. Put another way, Unilever is winning the race for talent. And their profitability numbers aren’t bad either!
A Purpose-Led Law Firm?
What would it look like if your law firm was purpose-led? What would its purpose be? At a recent brainstorm with some law firm leaders on this very topic, powerful terms like “delight,” “public-minded,” “builder,” “creativity,” and “lasting legacy” were just some of the words that appeared in draft purpose statements around the room.
Every law firm has a marketing department and a website. But let’s be honest. They all sort of say the same thing. The point of being purpose-led is that it is about so much more than pixels on a screen. Purpose is lived in the world through action. It’s felt by clients and the outside world, but also by the talent in the elevator each morning.
Purpose has to be authentic, and it has to be true, and it’s why your lawyers get out of bed in the morning to come to work. Purpose defines the strategic actions you take as a firm. But also the actions you don’t take.
In Part II of this article I’ll dive a bit deeper into what a purpose-led law firm might look like, based upon our own IDEO experiences helping to design purpose-led companies. I’ll also explore the actions a purpose-led law firm might take to establish a true talent advantage in the crowded legal marketplace.
Next elevator up, please!