Talent, law firm culture and Professional Indemnity Insurance (PII) premiums – what is the link?

The legal industry sees newly qualifieds at some of the larger firms beginning their career on salaries over ￡100K. Yet we’ve all heard of highly paid senior lawyers abandoning lucrative positions in The City – does it have to be that way, a cycle of boom and bust, earning and burnout?

To a certain extent, recruiting and retaining high quality staff has always more than just about remuneration. But now we are in a new era, where mental health and work /life balance are front and centre post-COVID. It is as if we have emerged from a hibernation with a willingness to explore new options. That could mean changing firms, or choosing a completely new profession or career path.

Many clients have told us of interviewees now asking about their firm’s ESG credentials, how fast they can be promoted, what are the Employee Benefit and Wellbeing programmes in place, the availability of flexible working etc. All the things that firms once thought of as nice fluffy things to have are now fundamental criteria in assessing which firm to join.

Of course, everyone’s needs, aims and aspirations are different. It is important to understand employees’ preferences to ensure we retain and attract the right staff. There is a need for flexibility.

A model for understanding career choices and employees’ key drivers

When I was at school (many years ago) maths teachers taught us to write QED, the abbreviation for the Latin quod erat demonstrandum (which was to be demonstrated) at the end of mathematical proofs, to indicate that the proof of the argument is complete.

In the early 21st century, QED came to mean something else.

According to Sir Digby Jones, Chair of ICI and the CBI, people go to work on a “QED principle”.

• Q is the quality of work done
• E is the environment in which you work
• D is, quite simply, for dosh.

Clearly, if one was to use a "Career Mixing Desk" we would all want to set the levels for each of Q, E and D to 10, the best or maximum possible. But as our careers develop and we become more experienced; as our goals and desires change; as our relationships develop, these levels change. Some change through our own drive and decisions, some due to external forces. It is also often the case that, as they increase or decrease, each of the three factors can influence the others.

Some firms may score highly on all three factors but for many they may not be able to compete with the financial packages now being offered to a section of the profession. As such, I would suggest they need to focus on their own firm’s strengths. Many are now increasingly emphasising the family feel of their firm, the friendly supportive atmosphere and chance to develop ones career while doing good work for clients in their community.

Although we have certainly seen the focus shift to E over the past few years, will inflation and the cost of living increase encourage people to sacrifice Q&E to ensure D continues to fund their lifestyle? What effect will that have on wellbeing will this have? And how does this affect the firm’s risk management approach?

Why PII insurers take a keen interest in legal firms’ culture

PII claims rarely come from lack of knowledge of the law. It is, on the whole, due to an individual not following process or coping with an unrealistic workload.

People who are stressed or unhappy are more likely to make an error that results in the PII claim. Equally, I have all too often seen senior people who already have a full workload overloaded with other supervisory responsibilities without the time to do both of those responsibilities well.

Working as I do as a Professional Indemnity Insurance broker and Risk Management advisor we know PII underwriters are interested in a firm’s culture particularly how they treat, support and supervise their staff.

Experience indicates that firms with lower staff turnover tend to be more profitable (in the long- term) and have fewer PII claims. As a direct result of the pandemic we now see many Risk Management and HR departments working far closer together than previously - there are clear benefits of doing so. Firms that can demonstrate their positive culture in this regard are more likely to have more options when they come to renew the PII.

So what can be done? How do you make employees happier?

A recent study by Oxford University’s Said Business School has highlighted that “Workers were about 20% more productive in weeks when they were happy as compared to weeks when they were unhappy. But they were not spending more time in the office or taking shorter breaks. In fact, they were simply more efficient with their time.” They went on to say “We also saw a stronger link between happiness and productivity in sales that were more complex...... This suggests happiness works mostly by way of raising the emotional and social skills of employees. And it is precisely those skills that are increasingly relevant as we look towards the future of work.”

If we look at this issue from a broader scale, studying a proprietary Gallup data base of 1.8 million employee engagement surveys we find that happiness correlates very strongly with customer loyalty, productivity, profitability and low staff turnover. The happiness of employees is clearly far more than just a moral imperative.

The study identified 5 key areas to improve happiness. (You can find these online but I want to discuss a couple of them.)

• Their first was improving managerial skills and empathy. People often quit their bosses, not their jobs. People want a manager that listens to them and has empathy. Elizabeth Rimmer highlighted this in our recent roundtable when she explained that the feedback Lawcare received showed that wellbeing was vastly improved by having frequent one to ones between Manager and fee earner.
• Secondly to publicise positive contributions made where staff nominate their peers. This gives recognition for exceptional work that might otherwise have gone unnoticed.
• Thirdly, and unsurprisingly, Hybrid working, flexi time etc. Employees are happier to be given greater flexibility over how and where they work.

Finding Solutions

At Howden we understand the challenges you face and are here to help in any way we can.

Our market leading teams in both PII and Employee Benefits & Wellbeing work closely to provide meaningful guidance and support in this area. Our considerable client base also speaks volumes to the knowledge we possess and are willing to share. This knowledge and experience enables me and our risk team to provide thought provoking sessions to law firm manager to factor into their own plans for the future.

So why not reach out and see if we can make a start at helping you solve your problems?

Colin Taylor