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Every generation needs a revolution, according to Thomas Jefferson. For the first time in a generation, law firms have a strong platform to initiate full-scale radical change in the way lawyers are recruited, rewarded and retained and in the way law firms manage themselves.

Without change, the increasing fault lines in the legal profession may reach breaking point. However, the real question is will law firms rise to the challenge or will they leave it to the next generation to save it?

Generation Y is unlike any of its predecessors. It cares less about money, security and status than any previous generation. If law firms continue to act in the false hope that raising salaries alone will solve the structural problems of our profession, I suspect they will exasperate it.

Allen & Overy (A&O) might have (intentionally or unintentionally) saved law firms from their own worst enemy: themselves. For the past few years the magic circle has set the benchmark for associate salaries, with the implied message being: match us or lose out to us.

For the first time in a long time, the response to A&O’s pay hike was not to match the rise but to ignore it. As one partner of a leading non-magic circle firm said: "It is their funeral. Let them have it."

This may in fact be the time when the rest of the market declares enough is enough. After all, inflating your cost base is not the shrewdest form of management. Instead, law firms now need to define what McKinsey terms their ‘employee value propositions’. It is time for the non-global firms to differentiate themselves on factors other than base salary. Every managing partner should ask himself ‘what compelling reason is there for someone to join my firm?’

Law firms need to take steps to make themselves better places to work. It does not necessarily mean more money and it may not mean fewer hours. It does mean feeling valued and equates to believing that your contribution can make a difference. I spend my working life meeting lawyers who believe their contribution is deemed worthless.

It is time for law firms to build their cultural capital. I attended a seminar recently and learned that the public figure that managers would most like to have as a personal coach is Richard Branson. This does not mean sending a firm’s partners up in a hot air balloon (although the assistants might vote for it) but it might mean building a coaching culture that supports the needs of Generation Y.

At this seminar I learned that most organisations are not very good at catching people doing something right. Conversely, we are very good at catching people doing something wrong and shouting about it. I am reminded of the time when I interviewed a partner who had never been appraised or received any feedback but claimed he was highly regarded. When I asked him how he knew of his high regard, he replied: "They would let me know if they were not happy." Is it any wonder that Generation Y is walking out the door? The misalignment between the cultural values of today’s lawyers and those of their managers is larger than ever before.

Turning to salaries, the impact of the age discrimination laws may not be as inconvenient as many of us first thought. If we can truly start thinking about the skills required for a particular job, we might just be able to move towards a more merit-based pay structure. This might lead to a lawyer being paid what he or she is worth rather than based on his length of service.

In a similar vein, bonuses are not a panacea. Bonuses bunch retention, they do not enhance it. I work in a recruitment organisation which has almost zero staff turnover, although I was previously employed by a global organisation where we braced ourselves for resignations on each bonus payment date. Of course, we must move towards merit-based pay combined with bonuses as the latter are controllable costs that firms can switch on and off. Firms with less turnover than the magic circle and more modest profitability should not try to create a cost base that matches them.

I do not believe this is A&O’s funeral. The firm has embraced a mix of higher salaries coupled with bonuses. Crucially, it has suggested that it will be accompanied by a shift in cultural values. The latter part is what will define its success in retaining more of its lawyers.

Generation Y wants more flexibility in their working patterns, the opportunity to work from home, the possibility of working abroad and the desire to be free.

If you are thinking this is unrealistic gobbledygook then you are probably a partner and possibly the one needing to pay the most attention. You are unlikely to be part of Generation Y and that is why people are probably leaving your department and firm. They think you do not care and believe you are incapable of empathising.

I recently stumbled on a quote which sums up not just the power of Generation Y but the global war for talent — "talented people need organisations less than organisations need talented people". It is time for a revolution.

Gavin Sharpe is a consultant at Shilton Sharpe Quarry.

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