Human condition

How committed is your future employer to flexible working? What happens to lawyers not embedded in the partnership track? Lawyer 2B looks at the changing face of law firms and their approach to HR issues.


Human conditionIf anything highlights the ever-growing importance of HR issues in the legal market, it is the news broken by Lawyer 2Bs sister title The Lawyer (14 March) that Simmons & Simmons was considering a revolution in its partnership structure. Simmons is looking at introducing flexible working for all lawyers, regardless of practice area or gender.

The move is aimed in part at stemming the flow common to most firms of lawyers with three to four years post-qualification experience (PQE). The news was mirrored by Freshfields Bruckhaus Deringers vote to make it easier to remove underperforming partners. And on almost a daily basis, The Lawyer reports on partners moving between firms and assistants joining partnerships.

All these issues go to the heart of HR and are highlighted by the findings of The Lawyers second HR survey. This year The Lawyer surveyed the UKs leading law firms in greater detail than ever before about their HR teams roles and issues. The responses are based on information correct to the end of the 2004 financial year, and reflect a representative sample of top 100 and smaller firms.

Diversity

It will come as no surprise that one word dominated the research: diversity. In general business life, the campaign to promote women and ethnic minorities to leading positions has never been stronger. The Higgs Review in 2002 and the Tyson Report in 2003 both looked at improving the top management of the UKs leading companies. Recruiting from a more diverse mix of candidates was high on the list of recommendations. The Higgs Report also recommended that boards should draw more actively from groups not traditionally represented on boards such as human resources.

The Law Society operates its own diversity access scheme, providing support to potential lawyers who must overcome particular obstacles to qualify. According to the Law Society, those obstacles could relate to social, educational, financial or family circumstances, or a disability that makes the goal of qualifying as a solicitor an especially challenging one.

It is the word on everyones lips these days, but the survey reveals how successful law firms attempts to widen the mix of their lawyers have been. The answer appears to be: not very.

For one thing, 22.5 per cent of the law firms that responded have no formal diversity policy. The results also highlight how the levels of both women and ethnic minorities in firms tail off as they progress through the ranks (see tables, right). From an encouraging average of 64 per cent of female trainees, only 25 per cent make it through to partnership.

Reading through the results of the survey, there is also an impression that diversity, and in particular questions concerning ethnic origin, is where the nerves of the HR respondents failed them. There are many blanks. But in their defence, it may be that these statistics are simply too hard to get accurate figures on.

According to one high-profile HR head, 57 per cent of the people in my firm wont answer that question. The firm is among the most international in the City, but the HR director is talking about only the London office. Even taking that into account, she admits that getting a meaningful response to that question would be all but impossible.

Indeed, had we put the question to the firms overseas offices, we might have had an even lower response. In France its considered an insult even to ask the question, says the HR head.

But several firms are challenging the diversity status quo. Simmons introduced an ethnic diversity questionnaire in its London office in November 2004. HR director Anita Tovell claims the move was client-driven, explaining that were regularly being asked about the make-up of teams in terms of diversity.

The firm also set up an international diversity forum last year, chaired by senior partner Janet Gaymer. Simmons is among the most international in the City, with 19 offices throughout Europe, Asia, the Middle East and the US. Consequently, there is a myriad of cultures that the firm felt required a central body to coordinate. According to Tovell, the forum is a huge asset.

Merit-based approach

For most firms, though, making meaningful headway on diversity is difficult. The Lawyers statistics on diversity dont surprise me in the least, says Malcolm Lewis, HR head at Trowers & Hamlins. I went to a diversity presentation at the Law Society [in March], and it was quite obvious that there was really a diverse selection of entrants into the law, though more so at the non-City firms. But it relates to the wider debate on the reform of the entry requirements. Is it really necessary to do this, because youre already getting a diverse range of trainees? If you look at whats happening at assistant and partner levels, it seems the problem lies within the structure of the law firm rather than at the entry level. The law remains a white, male-dominated profession.

Lewis believes firms need to adopt a more enlightened approach. Which means more part-time working, home working and so on, so that women arent so disadvantaged.

Trowers is among the most diverse firms proportionately. It has four part-time partners and two female partners on its management board. Also, the firmwide head of finance and head of corporate is a woman, Jenny Gubbins.

We have a very high proportion of female partners, says Lewis. It hasnt happened by accident and neither has it quite happened by design. Its somewhere in the middle. The acid test to diversity is whether the firm really promotes on merit or not, regardless of who you are. Its absolutely the case that, in some other firms, female and ethnic minority partner candidates are overlooked or ignored.

As Lewis concedes, in some cases this problem is partly down to the size of the firm. In bigger City firms its often more difficult to know who the best people are and they have to go on the recommendation of the department. In a smaller firm, even one of our size, pretty much everybody knows whos really performing and who isnt.

Flexible firms

The head of HR at Herbert Smith John Lucy agrees that the main problem the legal market faces with regards to diversity is not recruitment, but retention.

Our male/female intake is roughly 50-50, says Lucy, but it tails off quite dramatically. Its further up the chain where the reform is needed.

In the current The Lawyer UK 100, Herbert Smith had 28 female partners out of 198, 11 of which were equity. It is a ratio of 14 per cent female.

So, if attracting women into the law is not the issue, the question is: why are they leaving? Obviously, a large part of it is family-related, and thats always going to be the case, says Lucy. But [law firms] need to be asking ourselves: are we flexible enough?.

Herbert Smith, the pioneer of the 360 appraisal, is among the most progressive firms on HR issues. It has had the flexibility to cater for, among other things, part-time partners for several years. Some 11 per cent of its lawyers are from ethnic minorities. We have a vast number of Asians, but very few black lawyers, says Lucy. We dont count Australians, Kiwis and South Africans as ethnic minorities. We dont make that decision. We ask them and they either tick that box or they dont.

Lucy says he does not know why the firm has so few black lawyers, but admits there is clearly an issue around educating people. Look around the City, he says. There are still not that many black lawyers or bankers. So initially a number of black people may not see a career in the City as a viable option.

It is a point echoed by Alex Van-Hattum, head of legal recruitment at Burges Salmon. She points out that, as well as cultural barriers, the location of firms can have a bearing on the ethnic make-up of its applicants. Mainly London or Birmingham firms will be likely to get a higher proportion of ethnic minority applicants than we do in Bristol, she says. We dont get a large percentage of graduate ethnic minority [applicants] because there isnt a great proportion of ethnic minorities in Bristol. It can be a turnoff.

At a recent seminar on diversity hosted by executive search company Veredus, a delegate suggested that one way around the problem was to ensure any organisation had an ethnically diverse interview board, regardless of who it was they were interviewing. In the City, that can be tough. We only have two ethnic minority partners, so that makes it rather difficult, says Herbert Smiths Lucy.

Age of reason

Discrimination is not all about sex and race. An equally topical issue is age discrimination. The opposite end of a lawyers career from the training contract is just as important, and many firms are looking at ways of easing out underperforming partners or those that want a change of pace.

Several firms have schemes that move them to of counsel status or retain them as consultants, occasionally on a part-time basis if requested. Others offer soft-landing programmes and change-of-status schemes. Of those that do not offer schemes, 25 per cent say they have considered it and only 37.5 per cent say they have not.

A relatively common practice is for firms to offer financial schemes, as much as a years pay, to encourage older partners to leave the equity or firm so-called soft-landing or step-aside schemes. Only 16 per cent admit that they have such a scheme in place, with 63 per cent saying they do not.

According to Manches partner and employment specialist Stephen Levinson, any firm offering partners financial inducements to step aside may need to rethink them ahead of next years implementation of the European Commissions directive on equal treatment. We currently dont have any age discrimination laws in the UK, but we will have from 2006, he says. If a partner only gets the money for going at a certain age, then that potentially could be discriminatory. I certainly know of one blue-chip law firm and a top four accountant that have such schemes.

Another option to easing people out is offering more flexibility in the first place. Simmons, strong on diversity, is also among the most progressive firms at handling partners whose personal ambitions and preferred method of working might not fit the traditional law firm template. Under Gaymers guidance, the firm has introduced its own step-aside scheme, whereby any partner at any time can step out of the equity if they need or want to take it easier for whatever reason. Since its introduction, two male partners have taken up the option. The scheme allows partners to come out of the equity permanently or for a period and then return, having taken the pressure off for a while. Its a unique scheme, claims Tovell.

Partnership track

For most assistants, the most important feature of any HR survey is to see if the firm across the road is offering more or doing things better. But we deliberately made this survey entirely non-attributable, so we are unable to dish the dirt. But we can offer a snapshot of some key indicators.

Such as the level at which, on average, a performance-related element kicks in to an assistants remuneration. The Lawyer found that for 37 per cent it was after just one years PQE. For 5 per cent it was there automatically at trainee level. At Herbert Smith, the merit element for assistants kicks in at one and a half years PQE. Several years ago the firms legal policy group debated the stage at which a lawyer has enough miles on the clock to make separating them from their peers based on performance meaningful. Originally we were at two years, says Lucy. Then we thought this potentially disadvantages those weve identified as stars. It could be seen as fairly elitist, I suppose.

The survey backs up anecdotal evidence that most firms operate a two-tier equity structure and that most single-tier firms are contemplating changing to two tiers. Seventy-nine per cent operate a two-tier partnership system, with a salaried or junior equity level before reaching full equity. Only 13 per cent promote assistants into the equity straight away. Also, the average time a junior equity partner has to wait before making the grade is between two and three years (53 per cent). A still-chunky 24 per cent of firms keep their junior equity partners waiting for more than four years.

We asked firms whether they charged for trainees time, with a resounding 79 per cent saying they did. However, before getting carried away with the high levels of utilisation among the UKs leading firms, it is worth noting the reaction of one HR head to that finding: We do [charge for trainees time] and wed say we do; but in practice, its one of the first things written off if a client challenges a bill.

The picture is reasonably rosy for any law student looking for a training contract. While 53 per cent of respondents say they anticipated their graduate intake as staying the same over the next three years, a third (32 per cent) are expecting an increase.

Benefits

A decent benefits package is one of the factors that secured South West firm TLT Solicitors a place in The Sunday Times best companies to work for list. The firms HR team was closely involved in the application process, which saw more than 600 organisations fill out a six-page questionnaire on all aspects of its business. As managing partner David Pester says: Benefits are increasingly an attraction for recruitment these days. But one of the things The Sunday Times research highlighted was that we dont currently offer private medical insurance across the firm, so thats something were now reviewing.

The range of benefits on offer from the firms that responded to our survey is reasonably consistent. In fact, when it comes to benefits, law firms are fairly dull. There may be different plans for partner level, but below partner the rewards are fairly standard.

The days of the final salary pension are certainly over. Not a single firm that offers a pension offers this variety, and not a single respondent says they have ever offered this. Seventy-nine per cent offer pensions with defined contributions, averaging between 3 and 5 per cent, but the contributions do reach 10 per cent (depending on age) in a couple of firms.

Not every firm offers a bonus, either. Thirty-two per cent offer no financial incentives, while those that do offer schemes are fairly evenly split between ones offered on an individual (29 per cent) and firmwide (34 per cent) basis.

Whatever next?

The final question we asked was about the future. What did the legal markets leading HR professionals see changing in relation to the HR policies of the next few years?

For many it was an opportunity to air a personal wish list. Answers included the introduction of a new, fully integrated HR computerised information system and embed centralised HR software combining recruitment, induction, appraisals, training and staff departure. Other responses were rather firm-specific, such as uncertainties in PI market.

It seems the toughest HR problem facing law firms, though, is not internal at all. Rather, it is the endlessly increasing flow of employment-related red tape spewing out of Downing Street. As one HR head says: “Our real problem is keeping up with Tony Blair”.