Should your firm be trimming its ranks?
According to a recent industry report, nearly 60 percent of the 356 law firm leaders said that overcapacity is hurting their firm’s profitability.
What’s worse, 62 percent stated that demand for their services has not yet reached pre-recession levels. While some firms are addressing the problem by trimming their ranks, many aren’t doing enough. Is yours?
Law firms are not the only organizations to face a mismatch between the number of employees and productivity, especially after hard times. In fact, it may be hard to believe in today’s “Netflix and Chill” climate, but Netflix was on unsteady financial ground just a few years ago.
In 2011, the company decided to split into two, one for their traditional business model of DVD-by-mail and another for online video on-demand. After the announcement, Neflix lost 57 percent of their value in two months (HR). The market was betting against the company.
However, Netflix still managed to become the $61 billion company today and climbing into the list of top five most innovative companies (Forbes).
Some people attribute Netflix’s success to its unique human resources business model and culture.
On its website, Netflix explains:
“What is unique and special about Netflix is how much we:
- encourage independent decision-making by employees
- share information openly, broadly, and deliberately
- are extraordinarily candid with each other
- keep only our highly effective people
- avoid rules”
The key point here is the emphasis on people over process. Netflix highly values its most productive people. As a result, if an employee’s productivity or role at the company falls short, they have no problem firing them. In fact, Netflix strangely prides itself on its severance package (read its full statement about corporate culture here).
“We model ourselves on being a team, not a family. A family is about unconditional love, despite your siblings’ unusual behavior. A dream team is about pushing yourself to be the best teammate you can be, caring intensely about your teammates, and knowing that you may not be on the team forever.”
You may not be on the team forever, that much is true. Although Netflix does not abide by quotes, such as “cut the bottom 10% every year,” they do have continual performance evaluations, called “keeper tests.”
If you think “keeper tests” sound a lot like something out of the Hunger Games, you’re right. Masquerading around as the team mascot, “keeper tests” are simply a way to maintain a lean workforce.
A lean workforce is vital, especially for law firms excessively penalized by the recession. However, Netflix culture may not be the best for your firm.
There are other ways to let supply meet demand, and your firm should educate itself on all its options. Yes, a “keeper test,” may not be a bad idea (although the name could certainly use an update). However, make sure your measurements for overcapacity address both the long- and short-term.
Although firing unproductive or unnecessary legal associates may be necessary, consider best practices for temporary workforce rebalancing. Associates may be willing to provisionally work part-time, as opposed to being outright fired.
Incentivize associates of all ranks to bring in more clients. Include this as a measure of “success” on your own “keeper tests.”
Netflix claims, “We do not seek to preserve our culture—we seek to improve it.” And that is certainly a mantra to adopt at any firm.
Learn more about corporate culture and workforce management with the Center for Competitive Management (C4CM)’s CLE webinar, “How Many Lawyers is Too Many Lawyers? Managing Firm Headcount, Capacity & People Power for Increased Profits.”
The CLE webinar presents key capacity metrics, discusses staffing arrangements, and presents a path your firm can follow to develop a more profit-driven model for managing people, practices and technology.
Once you have managed your firm headcount appropriately, you will feel more free to Netflix and bill clients for higher profits.