Canadian Lawyer

w w w . c a n a d i a n l a w y e r m a g . c o m F E B R U A R Y 2 0 1 9 19 Law firms are failing their people. When firms make decisions driven by short-term thinking, culture suffers and retention rates drop. The dark psychology of the billable hour and current-year profit-per-partner has a significant impact on firm-wide happi- ness. Short-term thinking about human resources means firms do not invest in the right human capital at the right times, leading to talent shortage and increased stress. Retention suffers because internal advancement and the prospect of "partnership" are set aside in favour of short-term profit-taking. We are not giving our people what they need to stay and succeed. All of this points to a clear path. Law firms must restruc- ture as sustainable long-term businesses that can attract and retain the right kind of talent for the emerging legal market. To do this requires two things: changing our corporate busi- ness model to promote long-term thinking and changing our regulation to allow us to compete for and motivate the right kind of talent. In terms of the corporate business model, law firms need to move from the "capital-in, capital-out" model that favours short-term thinking toward an equity-based model that encourages long-term growth of the business. We must open our equity doors earlier so that the generation that best understands technology and user experience is encouraged to come, to contribute and to stay. In my own firm, we have recently converted to an employee-owned corporate model for these exact reasons. Starting at the time they are called, lawyers are allocated rights to acquire shares based on a valu- ation formula driven by the two key drivers of law firm suc- cess: how profitable the firm is and how well we are doing at developing firm (instead of individual rainmaker) goodwill. Retiring lawyers can sell down their shares at the same valua- tion over time, meaning they have a lasting interest that keeps them invested in long-term planning. This first change — a move to a broad-based employee- owned corporate model — is not easy. It asks the most pow- erful partners to question deeply held assumptions about contribution, to question their own entitlements and to cede control. It asks all lawyers to build a collective instead of individual books and to sacrifice short-term rewards for long-term incentives. It is a hard path, but one essential for a firm's future success. While fixing law firm capital structures is entirely within a firm's control, extending ownership to non-legal talent is not. The list of potential key players is long: business and HR executives, technology professionals, project managers, accountants, business process specialists, design-thinkers and administrative professionals, to name a few. Our competitors are winning the battle for this talent because they can attract, retain and align key talent (irrespective of specialty or back- ground) around a common goal through ownership in the enterprise. Unfortunately, law firms do not currently have this option. Even if we can set aside our egos and admit that non-lawyers play a meaningful role in firm success, we are prevented by regulation from opening our capital structures to attract and retain this talent. Without this important tool, we are giving our competition a head-start in the race towards improved access to legal services and better client service — the foundations of our professional mandate. To help law firms compete on these important fronts, we need to open our ownership rules to allow for non-lawyer employee-ownership. I am not talking about jumping with both feet into a wave of law firm IPOs, but instead looking to existing, tested and trusted rules. For example, the British Columbia Legal Profession Act permits law-firm ownership by relatives of lawyers and may soon permit law firm owner- ship by licensed paralegals. Extending these rules to include employees of a law firm while they are employed by the firm would be a safe and incremental change, yet one that sets up our profession to succeed in the modern legal market. This type of important policy change requires us to come together as a profession and encourage our law societies to support regulatory amendments that allow non-lawyer employee ownership. If we are not able to fiercely compete for the right talent — including offering them ownership of our enterprises and treating them like equals — we will continue to give our competitors that running head start. For me, this regulatory reform is the most essential innovation, and the biggest opportunity, facing our profession. Rob Miller is CEO and co-founder of Miller Titerle + Company, an employee-owned law firm that values long-term thinking, continu- ous improvement, openness, happiness and authenticity. Legal News at Your Fingertips Sign up for the Canadian Legal Newswire today for free and enjoy great content from the publishers of Canadian Lawyer, Law Times, Canadian Lawyer InHouse and Lexpert. Visit www.canadianlawyermag.com/newswire-subscribe THE LATEST NEWS THE BEST COMMENTARY DELIVERED WEEKLY FOR READING ON ANY DEVICE ntitled-3 1 2019-01-17 12:08 PM

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