FORTUNE – In late 2012, top law firm Cravath, Swaine & Moore announced its year-end bonuses, setting the bar for law firms around the country. Ranging from $10,000 to $60,000, the bonuses took a significant leap from those of the last two years. A number of other firms quickly followed suit, including Skadden Arps Meagher & Flom, Simpson Thacher, and Sullivan & Cromwell. But while many leaders in the legal world insist that big bonuses are necessary to attract and retain top talent, lawyer turnover rates tell a different story.
Despite a history of paying high salaries and large bonuses to their attorneys, law firms suffer from notoriously busy revolving doors. According to the National Association for Legal Professionals Foundation, in 2010, firms with 251 to 500 attorneys lost 19% of their associates, with the top reason for departure listed vaguely by firms as “work quality standards were not met.” (Those with 100 attorneys or fewer lost an average of 20% of their associates.) Compare that turnover rate to the 2-3% at Fortune’s 100 Best Companies To Work For (granted, a few of those companies are law firms). What are law firms doing wrong?
Associates leave for many reasons. Poor management is one factor. As one mid-level associate at Schulte Roth & Zabel said, “The general sentiment when people leave is, ‘thank god I don’t have to deal with this abuse anymore.’ Because at the end of the day, it’s constant abuse or fear of abuse.”
Blogs like The People’s Therapist and Life In Big Law have become popular platforms for associates to vent their frustrations, commiserating over everything from forced last-minute vacation cancellations to the perceived inability to ever say no to a supervisor. A recent Michigan lawsuit may provide some cold comfort to these associates. According to Dean Altobelli, a former partner at Michigan firm Miller Canfield, partners feel the pain, too. In a suit filed last month, Altobelli claimed that he was forced out of the firm by managers who promoted “a culture of fear and intimidation.”
Considering the money law firms invest in every newly hired attorney, it would make sense for partners to pay closer attention to lawyer satisfaction. But according to Gerry Riskin, founding partner of law firm consultancy Edge International, “most firms are oblivious” to attrition costs. “That expense is unacceptable, yet firms have been accepting it,” Riskin says.
Aside from salaries and bonuses, law firms spend thousands of dollars recruiting and training each associate, often paying for bar exam preparation courses, moving expenses, and continuing legal education. So when a lawyer walks out the door, that investment walks out with him. The high turnover model may be a self-fulfilling prophecy, according to Peter Sherer, a professor at the Haskayne School of Business in Calgary, Canada. It’s possible, he says, that partners don’t want to devote the time to properly manage or develop any particular associate because they expect that associate to leave within the next couple of years, which in turn, may lead to those lawyers leaving faster.
Most law firms are led by attorneys who have never been formally trained to manage others. According to Riskin, even the best lawyer can turn out to be a terrible leader. “You can’t manage using lawyer skills,” he says, adding that partners need “to accept that the approach to management is entirely different than the practice of law.”
Lawyers, Sherer notes, are certainly not the only professionals that often lack these skills. “The best engineer isn’t necessarily the best manager or team leader.” As these professionals climb the ladder, they have to rely more on other people to help them and “that’s a different set of skills.”
Many firms, though, have begun to offer leadership training to help partners and senior associates learn the management skills law school didn’t teach them, yet it does not appear to be a top priority. In a 2011 survey by NALP Foundation, firms with 251-500 attorneys ranked law practice management training (e.g., firm operations, leadership training, and management skills), on average, as the ninth of 14 possible attorney development priorities, making it more important than individual career planning but less important than client relations, formal mentoring, and lawyer integration (i.e. getting the attorney acclimated to the office).
At least two law schools — Harvard and Georgetown — have recognized this training gap, and have launched programs to teach their law students business skills. In addition to a heavy focus on building leadership, teamwork, and collaboration skills to help attorneys “make the shift from lawyer to leader,” Georgetown offers a Partner Compensation Workshop, which, for example, instructs students on “rewarding stars while also addressing the needs of non-rainmaking partners” and “ensuring that compensation supports the firm’s strategy, culture, and talent-management philosophy.”
For partners looking to hold onto their best lawyers, the solutions may be surprisingly simple: Treat your associates like adults. Involve them in the business of the firm. Don’t be a jerk. Stop yelling. And give positive feedback when it is deserved. As Riskin put it, “You cannot help people perform better by buying a bigger whip and bigger boots.” In other words, if you treat your associates better, they will do better work. Or, as the Schulte associate put it, “It’s not even a question that when I like someone personally, I want to impress them more.”
This approach seems to be working for Munger, Tolles & Olson, ranked by Vault as the No. 1 firm in partner-associate relations and the No. 7 best law firm to work for in 2013. By putting associates on management committees, for example, and sharing the firms’ financial statements with the rank-and-file (usually a privilege only enjoyed by partners), the firm shows some respect to its attorneys and teaches them some business basics. And because the firm uses a “free market system” that encourages associates to find their own work by approaching partners for assignments, partners have an incentive to behave themselves.
“That is a motivating factor for our partners to be good people to work with,” says Munger managing partner Sandra Seville-Jones, “because they know that in order for them to attract the resources that they need for their cases or transactions, they need to be seen as good team leaders.”
Law firms writing those big bonus checks ought to take note: associates are looking for more than just the fattest salary package.