Want to Increase Bottom Line, Law Firms Should Raise Salaries

following is adapted from The Case for Culture, How to Stop Being a Slave to
Your Law Firm, Grow Your Practice and Actually Be Happy by Eric Farber. 

Turnover in business is rampant and frankly it
is killing your bottom line.  Two major
factors are at play, first, more than 50% of employees in the United States are
looking for a new job, second, the cost of turnover has been said to be as high
as ten times the annual salary of an employee. 
That is a lot of money.  So,
often, when people are trying to build a great culture in a company (and a law
firm is a company) I suggest look at
your employees salaries and most small and medium law firms need to raise them
up.  Not only does it let people know
you’re serious about keeping good people, but you’re serious about keeping them
happy.  Frankly, when it comes to skilled
employees, like most things in life, you get what you pay for. If you want to
attract the best talent to your law firm, lawyers and otherwise, you’re going
to need salaries to match.

I know what you’re thinking: “I already pay my
people enough! I can’t afford to pay them any more.”

To that I would say: can you afford to have a
revolving door of employees? To lose your star players to your competition? To
never attract talented lawyers, paralegals, assistants, operations and in the
first place?

It can be difficult to budget for higher
salaries, but as I’ve experienced at our firm, the extra cost is worth it for
less turnover, more motivated employees, and sharper talent. Here’s a closer look
at how raising the pay can transform your employees’ performance.

Give People a Reason to Stay

In the seminal book on growing a practice, You Can’t Teach Hungry: Creating the
Multimillion Dollar Law Firm
, John Morgan writes, “If people are leaving,
you’re either not paying enough, or you’re a jerk.”

I tried the not-jerk option first at our firm,
as I didn’t believe we had the cash to pay enough. Not being a jerk was the
cheaper choice, and it aligned with my goal to be a better boss. We had some
success, but our turnover was still very high. 

And as I have learned, if you have high
turnover, it is the highest hidden cost you have.  It is estimated the loss of a good employee
is 10 times their base salary!  That’s a
lot of money on your Profit & Loss Statement.

The start of our transformation was not easy
and it took time.  First, I looked at how
we operated, what we wanted from our law firm, and the legacy we were trying to
create. We evaluated our pay structures, stopped the complicated incentive programs,
and committed to paying everyone as much as possible, with as many benefits as

If that meant we, the owners, had to take a
lot less home, so be it. We began with the frontline jobs. We explained to our
lawyers what we were doing and that, if it worked, they would also see large
salary increases as we worked up the ladder. Our most junior people got
immediate raises, and we rolled out pay increases to everyone else over a short

Now that we’d shown our employees we were
committed to retaining them—and willing to pay for it—we had to fine-tune
exactly how much this change should cost the company.

How Much Should You Pay?

Even if you’re on board with increasing
salaries, you might be wondering just how much to raise the bar. The answer
depends on several factors including geographic location, the employee’s
experience level, the role being considered, and more.

To determine the salary increases, I looked at
the cost of living in San Francisco’s Bay Area, where we’re located, for the
demographic we employed. I researched what other workers’ compensation firms as
well as general law firms paid for those positions. It quickly became clear
that this approach wasn’t good enough. Our area has one of the lowest
unemployment rates in the country, and our support staff could easily get jobs
in any industry. They weren’t confined to law.

I finally considered what it would take to
make people happy with their pay
rate. Although we gave instant raises, it took several iterations to bring our
pay structure to a point where it makes us and our employees happy. In a few
cases, salaries doubled. Some roles started at thirteen dollars an hour, just
above the minimum wage for our area. They now pay as much as twenty-five
dollars an hour or more.

Don’t Forget Benefits

While benefits aren’t a substitute for a good
salary, they’re still important and can go a long way toward improving your
employee retention and satisfaction.

First, we assessed health insurance at our
firm. Early on, we couldn’t find the cash to immediately increase health
insurance contributions, so we committed to annual increases, which gave us
time to find the money. In the meantime, I went on a mission to find benefits
that were out of the ordinary. I found a retirement program that shifted much of
the burden of the cost of retirement accounts from the team to the
company.  We started simply paying for
the program and not match up to 4% for anyone in the program (it’s offered to
everyone at the company).  We also
stopped treating the lawyers differently, our original health care insurer had
company contributions for the lawyers at a different level than the other
employees.  We stopped that and now
everyone has the same plans and the same level of contribution.  Our company contribution has increased almost
every year we have been in business.

Raises, great benefits and increases in health
and retirement contributions have helped drastically reduce our turnover.
People started to believe that our mission was more than just corporate
bullshit. We were taking action to try and make them happy. That made them want
to stay and work harder to help our firm succeed.

Even when done gradually, increasing pay and
benefits cost money. Initially, I believed we couldn’t afford to increase pay
rates, but here’s what I learned: If you can’t pay enough, you shouldn’t be in
business. You have to figure out how to pay your people well to attract the
best talent and retain your highest-performing employees.

No Substitute for Good Pay

Remember, there’s no way to get around this
fact of business: if you want the best talent, you need to pay for it. Increase
your salaries and go the extra mile to find out-of-the-ordinary benefit
packages, and you’ll easily attract and retain the talented employees you want
for your team.

For more
advice on improving your law firm bottom line by creating a great place to
work, you can find
The Case for Culture on Amazon

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