Staff turnover hurts, but beware of keeping people at all costs

[Australasian Law Management Journal,Finance & Accounting,General Management,Strategy & Leadership] June 25, 2019

Efforts to minimise employee turnover may be counter-productive because the truth is that some people may not be the right match for a particular firm, while the investment in them may outweigh their benefits to the practice, writes Rob Knowsley.

Readers will have noted that a lot of commentary within the profession focuses on the high cost to firms of turnover of personnel.

The turnover figures quoted are often massive, and no doubt scary to some. However, too often the message appears to be that it is best to keep people in the firm for as long as possible. The common view is that this is the fairest and most supportive approach for the team member, while also being good for the firm in the long run. Quite often, though, that is simply not the case.

Some team members may not be particularly good for the firm at all. The sum total of their positive contributions, financial and otherwise, may represent a very poor return for the firm given the full scope of what has been invested in the person.

Investment, and poor returns, may continue until the team member eventually leaves of their own volition, or when the firm belatedly realises the damage being caused and takes action.

Hold ’em or fold ’em

In assessing whether a team member will cause more damage if they leave or stay, managers must also take into account possible negative impacts on other team members. The risk is that less-than-satisfactory team members with greater years of experience may be the only ‘mentors’ available. They can easily pass on the worst aspects of their contributions to unaware, inexperienced teammates, who, at least initially, naturally look up to them.

It is vital to react when it becomes apparent that a team member will never be a proper fit. Remember, too, that they will probably be a lot happier, in the short and long term, elsewhere.

So, how do you find the happy medium, the sweet spot, whereby your team members enjoy what they are doing, progress their careers well, and contribute fully to the team and the firm’s financial strength?

Obviously, the starting point in looking for the answer is deciding what ‘contributing fully’ means for your firm. People tend not to stay in jobs for long periods these days. Unless your firm is interested in being a mere training centre, you need to be clear as to how you expect each individual to contribute; otherwise you run the risk of just making smaller and smaller losses each period until they leave. You need to be thinking about the role of ‘this particular team member … in our unique firm’.

Set clear performance expectations

In earlier columns, I addressed the folly of focusing most of your expectations for staff on the fee-producing component. At a time of greater workplace flexibility and agile working, using billing levels as the key means of monitoring performance is an even more unsophisticated approach than it was in the past.

Key performance indicators for each individual must be clear, while reporting, feedback and assessments of staff must be comprehensive.

Through quality communication, management must also demonstrate that it truly cares about working together on the development of individuals so they can be the best that they can be. This is in their best interests and those of the firm.

It is rare for a person to not want clarity around what is expected of them. In order to keep improving, they also want to know what leaders in the firm feel about their performance.

Most people do not perform well if there is no clarity about what is required of them. So, avoid at all costs ad hoc feedback that is replete with mixed messages and lacking in consistency and constructive guidance.

Identify your pain points

Such staff management should tie in with the overall strategy for your firm. For most small-to-medium-sized firms, a good starting point for business strategy and a business plan is to identify the business’s weaknesses. There is a pretty consistent ‘quartet of pain’.

1. Poor utilisation of team members (as mentioned earlier).

2. Pricing that is lacking in skill and confidence (leaving fees on the table far too often).

3. Credit management/fee disclosure by rote, whereby a lack of communication skills and a lack of confidence reduce effectiveness (this impedes cash-flow and the ability to charge fully).

4. Inadequate business development, particularly around the communication of relevant, helpful information to contacts (enquiry levels are sub-optimal for enough work of the right type and fee levels to be converted, with too much work being taken on that will perpetuate the vicious cycle).

Too few principals recognise that being too busy themselves, without being very effective, is a trap that has major consequences for the practice as a whole. Often, too much of what they do ends up being recovered at rates that do not reflect their experience and skills.

At the same time, by not delegating strongly and effectively, they can leave employed team members with too little client file work to do, with plenty of valueless time in the key zone after break-even.

A firm will get dramatically better outcomes if principals, in particular, are more effective after break-even and ensure that the firm is being run properly. The flow-on effect is that employed team members should also be able operate effectively after break-even.

Clearly, having key people in the firm who are not maximising the value of their time, along with a leveraged team with considerable valueless time, is not a sound basis for financial health. Break-even is where losses finally cease, but profits have not yet begun to emerge.

In this scenario, which is all too common in small-to-medium-sized firms, the people who should be designing proper expectations for each team member (and consistently communicating them to help everyone around them be the best they can be) are too busy doing other things.

As a result, is it at all surprising that some team members who would be happier with their ‘future freed up’  seem to fly under the radar and remain in the firm for far longer than they should?

Rob Knowsley is the principal of Knowsley Management Services. He is a high-performance coach and facilitator with four decades of experience that has been dedicated to assisting law firms and their individual lawyers and managers as they seek to maximise their return on investment from reasonable inputs of time, money and other resources.