If Hammonds had known about the frustration expressed by one of its number in the novel Fish Sunday Thinking, might it not have been able to take some preventative measures to spare yet more bad publicity? If Coudert Brothers had known about and understood the feelings of its London partners, might the one and a half century-old outfit still be with us today?
Human capital audits are not a luxury, they are a fundamental tool of management providing a detailed understanding of how your partners and employees – truly the only asset of any law firm – perceive the firm. People are the single biggest expense for any firm, so it makes financial sense to assess the stability of that asset regularly. How else can management be expected to understand the health of the firm? Anecdotal evidence is insufficient and even dangerous. The arc of distortion applies: ask the managing partner what morale is like and they might give it an eight or nine out of 10; ask a mid-ranking fee-earner in the engine room, and they might give it say three or four. But so what? Well, there is a good chance that, as a result, this mid-ranking fee-earner will decide to look for a job elsewhere. And when people leave, costs soar.
Recruitment fees bite, partner and support time is incurred in finding a replacement, business is disrupted and the effect on those who remain is less than positive. Even where staff do not leave, there are very real costs involved (even if they decide not to write books telling the rest of the world just how bad things are). Productivity, relations with clients and general ‘engagement’ in the firm are all affected. These costs are certainly harder to quantify, but no less real for that.
Law firms also need to be aware that the broader market is moving towards a more sophisticated approach to people strategy, and they need to keep up. Investors Chronicle recently recommended that investors put less emphasis on annual reports and accounts and instead find out information about leading indicators (employees, clients, operations etc). Similarly, the Balanced Scorecard school of measurement (which takes account of more than yearly finances alone) is sweeping the ‘outside’ world. Simultaneously, the Department of Trade and Industry is recommending that businesses provide more in the way of information about people and systems. Who knows what any new, improved Law Society might require? But engaging in headline-grabbing, publicity-driven ‘surveys’ is not the answer.
First, your people see them for the puff they are, which can strengthen resentment. If you know that this is not a great place to work, hearing your superiors tell you it is, and then asking you to tell the outside world that it is, is going to grate. Second, such surveys lack depth and any kind of analysis as to people’s opinions, particularly in the context of the competitive market.
Furthermore, such an exercise does not make sense. People will not tell the truth, even if you run the audit anonymously. Firms are inherently conflicted in this respect: for as long as you remain responsible for someone else’s career, pay and status, you will never get the full, open and honest quality data, nor the response rate, that exercises run by third parties achieve. Moreover, what about the quality provided by the firm? How do you know which questions get to the bottom of the real issues – those that will have an impact on the bottom line, now and in the future? How, from the inside, can you meaningfully provide analysis as to what the data you have collected actually means? How will you get a sense of how what you are doing compares with what your competitors are doing? It is easier and more sensible to get the experts in.
Human capital audits, when properly run, are vital management tools. In the light of recent events, every firm should be looking to them as a method of assessing financial and reputational well-being. As the soon-to-be ex-partners of Coudert would doubtless agree, it is always better to put fences at the top of the cliff rather than ambulances at the bottom.
Joanna Keeling is a member of the advisory board of Couraud Consulting