War for Talent: The next big thing?

Aric Press, in an editorial in the December 2005 issue of American Lawyer, summarizes the 2005 law firm leaders survey as, "the war for talent has returned" on two fronts:  managing associates (who, with increasing frequency, don't have a chance a making equity partner) and attracting profitable and rainmaking lateral partners. 

Consider the facts:

• With an economic recovery, law school enrollment has peaked, and is expected to decrease over the next few years.
• Law students are increasingly looking to careers outside of law firms
• Law firm attrition is atrocious:  1% of associates leave after their first year, 14% of associates leave after their second year in law firms.  In large law firms, 37% of associates leave by their third year of practice. 
• I've heard that every time an associate walks out the door, $500,000 - $700,000 in investment goes with her/him and it takes an average of $300,000 to hire a good third year associate to take her/his place.   Yikes!  Do the math.
• Associate first year salaries are leaping again, 2005 bonuses reached record highs, and competition for top associates and laterals is fierce, especially for strong diverse candidates.

Law firms ARE their people.  It is their ONLY asset and differentiators.  Recruitment, retention, professional development and coaching will be the next big thing in law firm management.  Compare strong recruitment, retention and professional development to ANY OTHER cost saving measure and its effect on profitability. 

What are you doing to make your firm a great place to work?  What is your firm doing to create a sustainable environment for great people to thrive?  How is your firm preparing LEADERS to enable personal growth and institutional health for retention?