The War for Talent in Professional Services Firms
The war for talent has arrived for professional services firms. Read this article to learn more and discover 5 key actions your firm can implement to engage and retain talent.
June 20, 2023
The war for talent has arrived for professional services firms. Read this article to learn more and discover 5 key actions your firm can implement to engage and retain talent.
June 20, 2023
Typically, the bigger the dip, the bigger the bounce. Many forecasters now tip GDP across the G7 to accelerate in unison over the coming year, with the US to lead the charge with 6% growth. These market conditions suggest we look set for a lengthy rebound (perhaps with bumps) and a sustained battle for talent.
The talent war in professional services firms is particularly aggressive at the moment. This is because many firms remained highly profitable through the downturn and now find themselves fighting for talent through the upturn.
The talent war is being evidenced by some audacious recruitment moves, ranging from job offers without interviews, to massive pay hikes and promises of near full-time remote working to lure regionally based professionals to city firms.
Incumbent firms are fighting back, with generous promotion rounds, repayment of COVID-19 pay cuts, and pay increases and bonuses. Some firms are also reaping the loyalty dividend earned by great leadership through the pandemic.
The pandemic has made this a different kind of talent war, with a range of new factors requiring attention and action.
One of the most significant factors is that the ties that bind partners and employees are likely to have been loosened by remote working. Simon Keller, professor of philosophy from the University of Wellington, and an expert in loyalty, described this in conversation with us:
Usually, people’s loyalty is stronger when it’s to particular people and embedded within a structure or way of life. So as more people are separated from their colleagues and have work routines that are more solitary and self-driven, they may be more prepared to take their talents elsewhere.
Finding solutions will be important because resuming pre-pandemic levels of remote working isn’t an option for PSFs. In law, 92% of workers want to work remotely, at least in part. In finance and auditing, 91% want remote working options. Additionally, fears held by PSF leaders of productivity losses from remote working were not realised. There simply isn’t a case for refusing flexibility.
There’s a hint in Keller’s statement about what firms can do to ameliorate the retention risks associated with remote working. Some of the more effective tactics, which we discuss later in this article, include embedding new structures and routines, deepening relationships between managers and employees, and ensuring that ‘remote’ doesn’t equal ‘solitary’.
With large numbers of people working remotely and wanting this to continue in some form, firms will have fewer people physically together at once than ever before. There is a risk that remote working will lead to proximity bias in favour of those who are present. It’s not hard to imagine remote workers being at a disadvantage.
Opportunities to connect, socialise and build rapport will be harder for remote workers. We know that junior lawyers and accountants have really struggled through the enforced work from home period on this front, as they haven’t had intact relationships to leverage. For some, out of sight has meant out of mind. Leaders and managers will naturally gravitate to those they know, see and speak to spontaneously, and may become suspicious of those they cannot closely monitor (time sheets may be an unlikely saviour for some here). Firms will need a plan to engage, develop and retain all partners and employees, regardless of the hybrid model.
How firms handled the onset of the pandemic and continue to address it forms part of a corporate folklore that may impact retention.
Some firms were able to move employees out of the office and into the home seamlessly. They had already invested in technology, implemented flexible work policies, and had partners and employees who knew how to make dispersed teams work. Other firms were ill-prepared in terms of technology, policy and leadership.
Reflecting this range of experiences, a divide has emerged in how people perceive their firms. Employees who are presently turning down lucrative offers to move may well be doing so based on their trust in their incumbent firm, which was increased through these uncertain times.
This divide is reflected in leadership experiences too. Some leaders have shown real empathy, paying attention to wellbeing, client stress, family circumstances and living arrangements. The message from many leaders to partners and employees was “we care about you”.
Unfortunately, not all firms got this right. KPMG got it spectacularly wrong when its UK Chairman, Bill Michael, told 500 staff on a video call to “stop moaning” about the impact of COVID-19. It was a callously indifferent remark that went viral. Michael resigned as a consequence and damage was done to the firm. How much? The talent wars will tell us.
This talent war may be accompanied by significant market disruption and a raft of new talent competitors. The Economist, describing what history says about post-pandemic booms, suggests that there will be a surge at the start and that a whole new range of businesses will form to exploit opportunities from the pandemic or the recovery Some of the brightest talent currently working in professional services firms will leave for these opportunities, perhaps in uncomfortably large numbers if the surge is big.
Professional services firms can focus on five priorities to deliver a successful hybrid model and engage successfully in the war for talent.
Many firms are still uncertain about the look of their new hybrid work model. While some leaders want a full return to the office, others insist hybrid models and flexible working options are here to stay. Will we see a cohesive firm-wide position, or will groups be left to decide an approach? Will we see fault lines emerge across traditional firm divides: partner and non-partner cohorts, and client-facing and business services teams? Whatever the case, firms need to decide and communicate a model for flexible working, knowing it will change over time.
McKinsey reports that the uncertainty is causing anxiety. It contends that organisations with clear communication about their work model are seeing strong levels of well- being and productivity, and that communicating about the future can drive performance outcomes today.
We see an opportunity to link this new way of working to a new EVP (employee value proposition) – one anchored in purpose and culture. Compensation will be an important part of the EVP, as some employees may have a new attitude to savings, but it will be just one part of the picture.
Hybrid working requires new or improved skills at all levels. For leaders, new strategies are required to deal with a changed world and emerging opportunities. For managers, the ability to nurture a productive, happy and dispersed team matters. For dispersed and asynchronous teams, clear communication is vital. This is just the start.
Every role in a typical firm has changed to some extent. Some roles may be lost.
Others may change fundamentally as they’re augmented by technology. If the pandemic has been an accelerant of change, as many argue, then not facing up to job redesign will be a mistake.
Once the role framework has been determined, the competency (contribution) framework used by your firm should be updated, as it should be for every major strategy update. With a competency framework aligned to a hybrid talent strategy, the right people can be placed, promoted and paid.
Compensation is surging in relative terms of importance to employees, perhaps an inevitable human response to the real and perceived financial stress of the pandemic. Firms won’t be able to satisfy all employees, so focusing on rewarding strategic contribution will become critical for ongoing profitability.
Hybrid teams are here to stay in one form or another: Accenture reports that 83% of workers surveyed say a hybrid working model is optimal. The same survey also revealed that 85% who said they can be productive from anywhere plan to stay with their company for a long time. If this is an accurate representation, firms might retain employee loyalty by giving their people the tools they need to work remotely and productively.
The right tools include productivity and collaboration tools. Productivity tools allow the employee to do their job. Collaboration tools brings the dispersed team together. Performance Leader software (supporting performance conversations, real-time feedback and objectives collaboration) allows this kind of connection. Software-enabled nudges and prompts mitigate against issues like proximity bias and other human failings that emerge in a distributed work model.
Partners and managers will be front and centre of retention strategies if firms are to ensure that ‘remote’ doesn’t mean ‘solitary’. They will be the connectors and need to be equipped with right skills to make those connections.
Conversations and coaching have been core competencies for leaders and managers for 20 years and remain key skills in ensuring care and consideration continues to be given to employees of distributed firms. Accenture describes this as building trust, so firms and people are “Net Better Off”. This approach encourages leaders and managers to support employees in six domains: financial, emotional and mental, relational, employable, purposeful and physical. To do this, partners and managers will need tools to engage and listen, to give and receive feedback, and to engage with employees on their goals (professional and personal) and career aspirations.
For partners, this also means adjusting the reward framework to ensure leading is properly measured, recognised and rewarded. Research conducted by Performance Leader in 2020 showed that partner KPIs and metrics remain heavily weighted to production measures.
Can we really expect partners to invest time in conversations and coaching (and in pursuit of these six dimensions) if we don’t reward this type of contribution? Sure, some of these elements will form part of a list of non-financial contribution factors considered peripherally once a year, but it won’t register fully for professional services firm leaders until it becomes one of a handful of key performance indicators.
Firms are finding their way with hybrid working. An appetite for experimentation and failure will be helpful to the constant evolution that will be required. From our own experience as a hybrid team spread across four countries and five time zones, two practices have significant appeal.
The first is a serious commitment to documenting and video-recording meetings and training activities. These are essential for asynchronous work. That asynchronous work could include overseas offices, flexible parenting arrangements, part-time work or job-sharing.
The second is the debrief (or After Action Review) as a means of making implicit knowledge explicit. A debrief is a structured conversation to review a project or matter. It considers what was supposed to happen (objectives), what actually happened (outcomes), why (explanation), and what should happen next time (learning). It can be applied to projects at specific intervals, which are usually milestones or at the project end. The debrief, used consistently by organisations interested in continuous improvement, but largely overlooked by professional services firms, has the capacity to draw out and share lessons learned among the whole team.
It is a much better tactic than relying on water cooler conversations, which are inherently limited. For juniors, it’s an opportunity to tap into expert knowledge. For senior professionals, it’s an opportunity to capture wisdom and experience. For firms, it’s an opportunity to retain knowledge, even when talent is lost.
The message from employee experience experts like Adam Hall from Willis Towers through the pandemic was “keep listening”. That message stays the same while firms grapple with new ways of working and the emergent talent war. Mistakes will be made but listening will help discover and resolve problems quickly. How your firm responds will determine its success in this new and different war for talent.
Performance Leader implements market leading performance and feedback software exclusively for professional firms.
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