Freedom for flexibility?

Flexible working has become a critical issue for firms, as legislation supports employee applications for part-time or home working. Many firms will fear the changes, but it may not all be bad news for those willing to make the most of the opportunities.

By Kieran Flatt

“Law firm gets taste of own medicine,” sneered a recent newspaper headline. The press had a field day when an employment tribunal found Herbert Smith guilty of direct sex discrimination, sex victimisation, unfair dismissal and breaches of regulations on part-time workers.

Michelle Langton’s case against the firm, where she had worked for six years as a business analyst and change manager, brought some highly embarrassing allegations to light. New line manager, George Kalorkoti, reportedly began to pressurise Langton, who worked part-time and partly from home, to revert to working during the firm’s “core hours”. Langton was told there was no flexibility to continue doing some work from home and that her childcare responsibilities were “not the concern of Herbert Smith”. Mr Kalorkoti told her that her future depended on whether she was “planning on having more children”. The tribunal also found one of the firm’s partners, Paula Hodges, to have victimised her during the grievance procedure in order to protect the firm’s interests.

The incident was already a serious embarrassment for Herbert Smith, but the firm’s unusual decision to appeal brought yet more unwelcome publicity – not least when the Employment Appeals Tribunal’s judgement – released on 24 October 2005 – upheld the lower court’s ruling. “In the 21st century, it is astonishing that a senior manager in a law firm could think that a woman’s career potential ends when she starts a family,” says Jenny Watson, acting chair of the EOC, which has taken up Langton’s case. “There is no reason why part-time and flexible working should not be available to people working in senior professional roles and the tribunal’s decision makes this very clear. By being so inflexible in its treatment of her, Herbert Smith lost a valuable employee.” In actual fact, the firm has been forced to offer Langton her job back, so this is one valuable employee the firm may not have lost.

Broader issues

The case between Langton and her erstwhile employer is a neat illustration of how easily one of the world’s most powerful law firms – which contains some of the world’s leading experts in the field of employment law – can become embroiled in serious and potentially damaging litigation over an employee’s rights to flexible working arrangements. Other firms of all sizes should sit up and take note.

When asked to comment on the Langton case by The Times, a spokesperson insisted that the firm “takes the issues of flexible working and female retention very seriously”. Two tribunal rulings now dispute this claim, but it would be grossly unfair to single out Herbert Smith as a pariah. The truth is that Mrs Langton could have experienced the same, or similar, discrimination at any number of other law firms.

Almost every firm has a positive-sounding written policy on flexible working but most could be far more proactive. Herbert Smith’s tally of 180 lawyers and support staff on flexible working arrangements is probably higher than average in the legal sector. “I think it is one of the most backward industry sectors,” says Anna Kavanagh, founder of Time4Balance, a consulting firm that specialises in flexible working issues. “The main reason for objection is that ‘the clients wouldn’t like it’. The firms believe that they are operating in a highly competitive market and the clients expect a 24/7 service. Although this is true to a large extent, there are other industry sectors to which these issues apply, but the sectors still find ways to implement flexible working practices.”

Kavanagh’s own legal career, at Simmons & Simmons, came to an end when the firm declined her application for flexible working and she decided to pursue the matter. Some practice areas within the firm were happy to accommodate flexible workers but the group she worked in was opposed. She spent a lot of time researching the issue of flexible working to support her application and, while she was ultimately unsuccessful in swaying her employer’s decision, she became enough of an expert in the area to start her own consulting business. Today her clients range from corporate giants such as Ernst & Young through to individuals who need help constructing a business case for flexible working.

Forced to change with the times?

According to Simon Slater, managing director of the First Counsel consulting firm, law firms are, like it or lump it, having to change with the times and are becoming more open to the idea of flexible working. “The fact is, this is demand-driven,” he says. “The people who are working for law firms [rather than by the people who manage them] are in the driving seat. Retention is now recognised as a key issue.”

Recruitment is expensive and entails a certain element of risk – particularly for a professional organisation such as a law firm, which is run on the expectation that fee-earning staff deliver high margins to the business. Slater says there is a strong motivation for firms to attempt to hold onto their talent – and those that do offer good opportunities for flexible working are not doing it for altruistic reasons.

Clearly, he adds, some firms have been more proactive than others in setting up flexible working arrangements. “They have restructured their management teams accordingly; they have invested in the necessary technology; and they are doing it in an entirely fuss-free manner. Others are in denial, or are making a real meal of it.”

Staff attrition costs more than retention

There has been remarkably little research into the issues of staff attrition and retention in the legal sector – which may explain why some firms are firmly opposed to flexible working. Some years ago, Stephen Cowburn, HR director at Beachcroft Wansbroughs, published a paper in which he calculated that replacing a lawyer who is two to three years qualified could cost about £147,000. This took into account recruitment and induction costs, and potentially chargeable time lost to the firm in finding a replacement and getting them up to speed on the billing front. For a firm with a far higher charge-out rate than Beachcroft, such as Herbert Smith, for example, the loss of chargeable time is likely to translate into an even higher replacement cost for experienced fee earners.

Kavanagh thinks that the real cost of replacing a qualified solicitor has at least doubled since Cowburn published his figures. Chambers, the legal publisher, more recently quoted a figure in the region of £300,000 for City firms and one HR director at a large regional firm estimates that the real cost to her firm is between the two figures, but closer to £300,000.

Either way, the cost of allowing flexible working pales into insignificance alongside the cost of replacing an experienced lawyer. Hence, maternity arrangements are adequate, even generous in some firms, Slater says, because staff retention is such a big issue. Training overheads for each fee earner represent a considerable upfront investment for law firms, so there are strong incentives for persuading people to come back to work. On the other hand, Slater argues that lots of firms are just paying lip-service to flexible working initiatives. These firms may be unconvinced that it is good for business to retain staff by offering flexible or home-working arrangements – or they may just have their heads in the sand. Kavanagh argues that they simply have not done the maths. If they analysed the costs properly, as the big merchant banks and global accountancy firms do, they would change their tune. Kavanagh points to banks and professional-service firms as businesses that have very similar working environments and cultures to a large law firm, yet are somehow able to make far better use of flexible workers, easily overcoming many of the issues that law firms fuss over.

Tangible barriers

Technology used to be a real, tangible barrier to flexible working. Prohibitive cost, poor (that is, slow and unreliable) system performance and a lamentable lack of user friendliness made it unrealistic and uneconomic for most employers to adopt more flexible HR policies.

The arrival of broadband internet, BlackBerries, Citrix, digital dictation and relatively low-cost virtual-private-network (VPN) systems has changed all that. E-mail has now become as portable as its ancestor, the telephone, while the cost of high-speed connectivity between office and workers’ homes is peanuts for most large law firms.

Nowadays, the total set-up cost for a home work station – including furniture, hardware, software, internet and wide-area network connectivity, a health-and-safety inspection, IT staffing and support costs, and management and quality assurance overheads – is in the region of £2,000 per head, according to Jeffrey Ng, IT director at Beachcroft Wansbroughs. Derek Southall, head of strategic development at Wragge & Co, adds that if savings in office space are factored into the equation, the cost to the firm may be even lower.

“There is an interesting dovetail between flexible working and disaster-recovery planning,” says Southall. “It seems sensible to give people the ability to work from home, because they will then be more likely to perform well and maintain client-service standards in the event of a problem at the office.” There is plenty of evidence to support this theory. After its New York office was destroyed in the attack on the World Trade Center in 2001, Sidley Austin Brown & Wood was able to maintain a reasonable service to clients because most of its fee earners were able to work effectively from home. At least one other firm in downtown Manhattan, which had a less flexible workforce, did not.

Technology is no longer a real barrier; indeed, for most firms it is an enabler. So what is holding them back? Do people really perform better in an office environment than they do at home? Slater, for one, is doubtful. “I have not seen any effect on billing but

I cannot help thinking that [flexible working] gives another reason for law firms to reconsider the ways that they measure performance,” he says. “If you allow flexible working, you become aware of the other contributions people are making. Partners tend to assume that if you are in the office, you are billing. Flexible working arrangements would encourage them to look at real profitability metrics.”

Few, if any, law firms have formally analysed or benchmarked flexible workers’ performance against the performance of their office-based colleagues. Indeed, Kavanagh, who is probably the UK’s leading expert in the field, says she has not come across a single firm that knows its own numbers well enough to know for sure. “Many firms do not even know their own staff attrition rates,” she says. Slater agrees that law firms should find new ways of measuring people’s performance and suggests that flexible working might force them to do so.

Linda Bellis, HR director at Wragge & Co, may not have commissioned any formal research but she has looked into the issues and is fairly certain that the net gain or loss in productivity or performance is negligible. “There has been no indication that flexible working leads to a higher or lower level of performance,” she says. “But if people are happier and more able to achieve a proper work-life balance, they become more well-rounded people and this is really important to us.”

What will the clients think?

Another factor that is often cited by law firms is client expectations. Quite simply, some law firms argue, it is a buyer’s market out there and many clients expect outside counsel working on their matters to be in the office during core hours. This may still be the case among more traditionally minded companies but, in general, clients’ expectations are changing. “Shell has an international business to run and I believe that flexible working makes business sense,” says Howard Taylor, senior legal counsel for the oil giant. “Our lawyers are an investment and it is much better to have the benefit of a person’s talent and expertise for three or four days a week rather than lose them altogether.” Taylor says he frequently instructs the offices of City law firms outside the UK. “Given that there is little face-to-face contact, it does not matter to me whether the lawyer is at home or in the office – or, often, whether a particular lawyer is available, so long as someone from the team can assist,” he says. “Modern technology often makes someone’s physical location irrelevant.”

Slater concurs, adding that a common complaint in the modern law firm – that managers and staff alike find it more difficult to work with home workers than with colleagues who spend their ‘core hours’ in the office – is more perceived than real. The root cause of these concerns, in Slater’s view, is that partners have a tendency to micro-manage their fee earners, which they cannot do when staff are out of the office. In the US, a few large clients, including Cisco Systems, have used the internet to completely re-engineer their legal functions, enabling them to actually increase the number of outside counsel they use, while managing them effectively. Any business based on an internet-delivery model will not care two hoots about working arrangements, as long as work gets done in a timely and reliable manner.

Southall says clients are fairly relaxed about their outside counsel adopting flexible working patterns. “But they do care very strongly about continuity in the workforce,” he says. “Increasingly, [law firms] have to demonstrate that they are flexible enough to retain people.” Wragge & Co promotes itself as a ‘relationship firm’, putting great emphasis on personal service in its marketing and business-development efforts. Southall says clients can easily get annoyed by too many personnel changes among the lawyers that advise them, so it is imperative to persuade solicitors to return to work after childbirth, especially if they have forged a strong relationship with a key client.

Management strategies for a flexible workforce

Kavanagh suggests a pragmatic approach. Professional firms trade on relationships and knowledge; it follows that the best HR strategy is one that is flexible enough to match up the profile of the workforce with the profile of the client. This would include bringing flexible workers into the teams serving clients like Shell, which understand and encourage flexible working.

“We developed a policy for home working before the flexible-working legislation came into existence,” says Ng. “We wanted to find a way of retaining and recruiting talented lawyers including people that did not want to return to full-time work.” The firm provides home working only to experienced lawyers and staff, in order to reduce the need for constant supervision. “For many people,” he says, “the actual performance has increased due to reduced interruptions.”

Kavanagh maintains that firms do not need tighter, or different, performance metrics to manage flexible workers. But Ng disagrees. “I wish I could say we don’t need them. It’s not so much about performance of the individual but more about the impact on the people on the same team working in the office. There are some practice groups with a number of people on flexible working arrangements and this can increase the pressures on the rest of the team members,” he says. Interestingly, some firms, such as Beachcroft Wansbroughs, make allowances for flexible working in their budget while others, such as Wragge & Co, do not.

Wragge & Co’s own staff demographics – 70 per cent female, 30 per cent male – effectively forces the firm to adopt a permissive approach to flexible working. Linda Bellis, the firm’s HR director, says the key to successful management of flexible working arrangements is to be completely honest upfront about what the firm expects and needs from each flexible worker and to ensure they have all the requisite equipment and training they need. As a litmus test, clients shouldn’t notice anything different, whether they are dealing with a home or office worker. Hence, a key condition imposed on flexi-working staff is that they do their utmost to be easily contactable on their days away from the office.

Bellis emphasises that flexible working opportunities should be offered to all, not just new parents. “We just do a rough calculation to assess whether or not it is reasonable for the person to work flexibly,” she says. “Having learnt some lessons, we no longer ask any questions about why the person wants flexible working; only whether it is going to work well for the business and the individual. Asking why can lead you into difficult territory.” For Bellis, it is irrelevant whether the applicant wants to care for a child or relative, or to take paragliding lessons. For instance, flexible working allows one Wragge & Co solicitor to play county-level cricket alongside his legal work.

The intranet is very important as a tool to help keep flexible workers in the loop, Bellis says. Regular face-to-face meetings are another must and attendance at staff functions, parties and away-days should be strongly encouraged. Health and safety compliance is not a major headache: an initial inspection of the home work station is required but subsequent annual checks can be done through self-assessment. Wragge lets staff sign their own forms, while Beachcroft sends a person with a clipboard to re-inspect.

So how will firms react to a statutory right to six months’ paternity leave? Some of them are taking the government’s proposals seriously.

Slater for one ventures that very few men will opt for a prolonged, unpaid break from their career – especially at a time when their wife or partner is unable to work. More likely, he says, if the right to six months’ paternity leave is successfully established, men will seek to trade in their right to unpaid leave for flexible working arrangements that allow them to spend more time at home while ensuring a continuity of income.

Wragge & Co’s Bellis is less certain that the impact of the proposed six-month paternity entitlement would be negligible. For instance, she thinks that some families might opt for the father to stay at home while the mother goes back to work first. Alternatively, there may be options for both parents to share the time off work. She admits that introducing six months’ paternity-leave entitlement into the firm’s working environment might throw up a few challenges. “But I am convinced that we could make it work for us,” she says.

There is a clear split of opinion in the legal industry – between firms that have embraced flexible working because they believe it to be good for business, and firms that will do anything within the law to resist it, because they feel it has a detrimental effect on office culture and productivity. Firms have different characters and it may be that both groups are largely correct in their estimation of flexible working and its impact on their businesses. But now, more than ever, the firms that seek to resist flexible working should exercise the utmost caution. The alternative is to end up in court, like Herbert Smith.