The risks of poor employee retention

Lockton share their latest risk management article on retention rates following the ‘great resignation’.

Many firms have felt the disruption and financial impact of "The Great Resignation" in the period post-pandemic, but I wonder how many might now be experiencing wider-reaching implications. As one of the panel solicitors for the Master Policy, we at Brodies have seen the impact that a lack of continuity in the workforce can have on a firm's exposure to the risk of claims and complaints materialising.

All other things being equal, any firm with a high rate of employee retention should be better positioned to provide clients with a consistent service and high quality of advice which, hopefully, fosters client loyalty and repeat business. High employee turnover makes this working model much more difficult to achieve. Vacancies in a firm, especially at key positions, can be problematic, as can the transition period between employees leaving and others replacing them. It gives rise to a number of potential risk management issues.

Recruitment and training put pressure on the operational and financial resources of a firm. There is often a temporary dip in productivity while departing employees serve notice periods and new employees are hired and acquainted with their new role. Any workforce that is under resourced or operating in a state of disruption for any significant period is at risk of morale plummeting, stress levels increasing, a reduction in efficiency, disengagement, and generally an unhappy workplace culture. This can intensify stress in what is already often a stressful job, increasing the risk of burn-out and ultimately encouraging even greater rates of resignations. The cycle repeats. Perhaps we have the last few turbulent years to thank for shining a light on the importance of recognising health and wellbeing as a risk management issue. Can the same be said for our approach to managing the other risks associated with low employee retention?

The risks are clear. It is more challenging to sustain client loyalty without a consistent solicitor-client relationship and a lack of continuity is one of the factors frequently aired by unsatisfied clients. It may not be an eligible basis for a complaint to our professional regulators, but it is precisely the type of situation which can tip the balance for a client escalating another issue which they may otherwise have let pass. Essentially, it can be the straw that breaks the camel's back. Given that the Scottish Legal Complaints Commission can award compensation up to £20,000 (albeit awards of this level are not the norm), this sort of risk factor ought not to be overlooked. Whether in-house or to the regulators, any complaint is a huge drain on management resources.

Of potentially even greater concern is the increased risk of critical information being missed when files are passed from solicitor to solicitor. A client's instructions can be overlooked or misunderstood by someone unfamiliar with the client and the transaction or case, especially if those instructions could be open to a degree of interpretation or are not properly documented on the file. Not only is this a ripe breeding ground for a negligence claim; there may be a difficulty in producing documentary evidence or a consistent voice to testify in defence of the actions (or inactions) of a solicitor. Real life scenarios include missed diary entries for a break clause in a lease and a prescription deadline not being forwarded to a new file handler. More nuanced is the assessment of how a witness might perform being lost when a file is handed over and that concern manifesting at proof. What might be considered as minor issues in these scenarios in fact had sizeable financial and reputational consequences.

Employees leaving an organisation to pursue opportunities elsewhere, and 'the ball being dropped' between the departure of one person and the arrival of another, is probably the most common situation where these sorts of risks materialise. However, parental leave, long term absences and retirement pose the same challenges, with some more unexpected than others. Handover notes and communicating key dates is essential to mitigate the risk of vital information being overlooked. The early reassignment of cases should be strongly encouraged, allowing the new file handler to get familiar with an instruction whilst still having recourse to the departing solicitor. Ensuring emails and telephone notes are recorded on a file; giving someone else access to your inbox and diary pre-departure; and maintaining a well organised file all help ensure a smooth transition.

The loss of knowledge and experience when key employees leave also has repercussions from a risk management perspective. Firms are, understandably, often keen to retain an instruction when the principal solicitor departs but, unless there is a suitably experienced alternative, that is a decision which might be regretted. All too often the Master Policy is called upon in situations where there has been a "dabbling" in an unfamiliar area of the law, or an error has not been rectified timeously due to insufficient supervision or oversight.

On that note, it would be wise to start succession planning at the earliest opportunity to help future proof the workforce. The ongoing training and preparation of individuals so they are ready to move into a more senior or critical role can also help mitigate the transitional risks mentioned. The Chartered Institute of Personnel and Development 2024 Resourcing and Talent Planning survey found that 31% of organisations only look six months ahead when it comes to workforce planning. Given it can take many months beyond that for a new recruit to reach full productivity, it is easy to identify a period of potential vulnerability for firms in which it may be more difficult to properly service clients. This in turn increases the risk of mistakes or oversights which can result in a complaint or claim.

The priority for most firms will be investing in effective employee retention strategies to help mitigate the risks and costs associated with high staff turnover, but planning for change should not be overlooked. Proactiveness is key: have a robust succession plan, refresh induction policies, promote good recording keeping, be mindful of overburdening employees, and ensure important dates are in more than one person's diary. These simple steps may not necessarily eradicate the potential problems related to high employee turnover, but they will certainly go a long way to minimising them. Employees will always come and go but if managed correctly, the risks highlighted are much less likely to come to pass.

Written by Jo Kelbrick, Senior Associate, Brodies. 

Article provided as part of a partnership with Lockton and the Society.