Article published in Solicitor?s Journal Vol 150 no3.? 2006
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An expensive failure rate
A huge amount of time is spent on attracting and developing appropriate contracts for lawyers when they join a new firm. Probably as much time as is spent advising the firm?s clients on a contract for their senior executives. Yet despite all of this legal work as well as a stringent interview process research shows that around forty percent of ALL lawyers/managers in a new job FAIL1.
The result is that additional and expensive time must be allocated to successfully divest the firm of the failing individual and recruit a replacement. The direct costs can account for 2.5 times the salary (management time, search company fees, training etc).? However, the hidden costs can be far higher. Research estimates that the lost opportunity costs of senior hire failure can be as high as twenty four times the base salary 2
The question to ask is, ?How many failures could a firm suffer before the bottom line was being seriously affected?? What projects would have to be put on hold, what expansion will be jeopardised?
In most successful businesses if you told the managing partners that one of their processes was only 60% effective they would probably make huge efforts to improve the situation. So, why do the statistics for new hire failure remain so unacceptably high?
One of the major problems can be of perception. HR will report that the attrition rate for a firm is 5%. To most firms this is probably an acceptable figure until one translates it into financial terms.
Take a firm with 100 people on an average salary of ?40,000. If 5% leave in any one financial year then the cost of replacement, at 2.5 X salary, amounts to ?500,000.? However, the lost opportunity costs at 25 X salary of one senior individual at this salary amounts to a staggering ?960,000.
However with planning the situation can be significantly improved. Firms can introduce transition processes and models that significantly increase the chances of success and with a positive affect on financial results.
The first step is to ensure that the firm recruits an individual with the best chance of success. Yet despite psychometric tests, interviews, assessment centres too often the candidate that is selected doesn?t reflect the business situation that needs managing.
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For instance:?
One would assume that a law firm requiring a new partner would ensure that the correct legal knowledge and skills are held by a successful candidate. However, there needs to be other considerations:?
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- Appointing a change catalyst without explaining that strong aspects of the firm?s culture that need to be retained could cause internal friction.
- Appointing a new partner to ?Turn around? the firm in a short time period with little consultation when in fact ?Restructure?, with greater time allowed for consultation, would be more appropriate.?
Therefore the first task is to identify the business situation.? What is expected to happen in the short, medium and long-term?? What would constitute success and how will such success be measured?
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To reduce the risk of failure further the firm?s management style should be discussed. How the firm prefers to take decisions and what types of decisions must be referred upward.
Other information that a new appointment needs to understand revolve around the culture:
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????????? What aspects of culture must be preserved and what can be changed?
????????? What behaviours does the organisation expect from the new hire?
????????? What change programmes have worked in the past and what has not?
????????? What does the firm view as a success and what does is not?
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New partners know that they have a short time to prove themselves and will often seek to introduce ?Quick wins?. The result can be that processes and systems that have worked in the past are airlifted and introduced into the new job. Often this is done without taking account of the culture or the people and generally produces quick wins that are isolated from the long-term results that are required.
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I recently came across a new HR manager called Helen who during an early team meeting asked her people to consider some quick wins that would ?Make her look good? to the managing partners. Her team informed her that she could save thousands of pounds by removing the free canteen lunch for part-time staff. An email confirming this was sent to all part-time staff. That day the senior partner arrived home to find that his wife, who worked part-time in the accounts department, had not cooked him dinner. ?You don?t give me lunch so I?m not cooking you dinner? She said. The free lunch was restored.
One action that improves the chances of success is creating coalitions. There is the need to develop relationships with the boss and the team. However, too many individuals spend too much time on these activities whilst ignoring colleagues that will be needed to provide help or co-operation at a later date.
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A firm can usually help identify the key players within their organisation. Those people that control budgets, those that supply goods or services and especially opinion makers.
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New hire failure is expensive and can seriously affect the financial well-being of a company and lose clients. However, the risks can be significantly reduced with a well thought out transition policy that allows the new hire as well as the firm to communicate with each other. Such success will allow firms to concentrate on attracting new clients and that actually help with business growth.
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1 Anne Fisher, Don?t Blow Your New Job,? Fortune June 1998
2 Brad Smart, Topgrading, 1999, p50, Prentice Hall Press