What Law Firms Can Learn From the Unprecedented Hiring Market of 2021
February 5, 2022
2020 was the year of The Great Pause. While law firms did not turn to layoffs as seen in previous downturns, they hit the pause button on hiring almost entirely. By the end of 2020, firms were awash with cash, low on talent and beginning to see signs of a recovering market.
In 2021, law firms of all sizes in all cities found themselves locked in a battle to recruit and retain highly skilled lawyers amid demand for litigators and M&A and corporate transactional lawyers. Since then, law firms have been scrambling to replenish their attorney ranks.
Firms used the pandemic slow-down as an opportunity to add lateral talent to their firms in the third and fourth quarters of 2020, allowing them to enter 2021 at an advantage. As we reported in our 2020 State of the Legal Industry report, the fourth quarter of 2020 brought an uptick in lateral hiring at all levels due to a steadier influx of client work and opportunities. Lateral hiring was also happening at record-breaking paces due to the wider use of technology. Interviews were being conducted remotely and quickly for the first time.
In order for law firms to win the race for talent in the competitive hiring market of today, they’ve had to both pull out all the stops both financially and creatively to attract the top-level talent that they need. We began to see firms paying upwards of 50% to outside recruiters, some turning to their alumni networks and offering cash bonuses for successful hiring referrals. Their money strategies didn’t stop there. Law firms have offered outsized signing bonuses in an effort to lure attorneys to their firms.
However, without a long-term strategy in place to combat departures, firms were at risk of losing their own talent as quickly as they hired laterals.
A successful retention strategy could greatly help firms win the talent war as many of them have scrambled to stay ahead of the defections, which can cause a major disruption in matters and productivity.
Some firms saw success with this strategy, but some did not. However, one thing is clear; the hyper-competitive market for law firm talent is showing no signs of slowing down in 2022.
As of December 31, 2021, our jobs database showed nearly 12,000 open legal positions – the most at one time that we have seen since we started tracking jobs – and as of the time of writing this report, we’ve eclipsed the 12,000 job mark for the first time.
In addition, the in-house market is experiencing a hiring frenzy of its own. Companies, in virtually all industries, need to hire more lawyers, creating additional competition for law firms in this war for talent.
Big Law is turning again to financial incentives to attract talent by increasing starting salaries. With recent reports of firms offering $215,000, it begs the question “how high can they go?”
In 2021, firms tried offering signing and special bonuses, shortening the partnership track, created new positions to challenge the previously flat law firm model, sent lawyers to MBA- development programs, and others even paid off candidates’ law school loans in an effort to distinguish themselves from the competition.
As law firm strategist Michael Short from LawVision noted on one of our webinars, “2021 was a confluence of a number of change-driven influences on the legal industry that created an evolutionary period for law firms. There are many opportunities for law firms and leadership in the industry to take advantage and succeed. The gap between the winners and losers in the industry is widening on a daily basis.”
But did it work?
For some candidates, yes. For others, firms’ approaches to remote and flexible work were at the top of their list (in addition to bonuses and raises of course). It’s clear that compensation isn’t everything anymore. Nor is the prestige factor or the name on the door.
As Trish Lilley, CMBDO of Stroock, Stroock & Lavan said, “The battle for talent – from both the recruitment and retention perspectives – now hinges much more heavily on culture, on inclusivity, on agility. Firms that have responded to pandemic-driven business conditions by creatively re-envisioning work across the spectrum – from meaningful onboarding and professional development to robust leadership training and benefits offerings – will pull ahead of those laboring within “before-times” structures. The Great Resignation has demonstrated that money – while key – isn’t everything to everyone. Firms need to give people compelling reasons to come and to stay.”
Although business is booming for legal recruiters, stiff competition for talent and fast-paced searches means that cultivating relationships and access to relevant data matters more than ever. The legal industry has been very resilient during COVID and the increase in client work across practices has left many firms without the necessary lawyers to staff these matters.
Everyone – from big firms to boutiques and everyone in between is racing to find talent to fill their open positions. But winning the recruitment race isn’t the only thing to consider. Retention is key for law firms. With associate salaries at record highs and incentive bonuses unlike anything the industry has seen, a strong retention strategy will help firms maintain their ranks, ensure continuity in client teams and see a return on their lateral investments.
Another major challenge firms face is how to develop and retain their valuable associates in a hybrid work model. It’s too soon to say if remote/hybrid work model will be a long-term change for law firms, or what effect it will have on associate development and law firm culture.
And finally, among all the challenges law firms face with regard to diversity, recruitment is the easier problem to solve than retention.
Our research shows that diversity retention rates aren’t improving – the gap remains the same – and law firms aren’t increasing the numbers of female and minority partners despite hiring more entry-level diverse associates.
As Laura Leopard, CEO and Founder of Leopard Solutions, noted, “We look to data to tell a story such as what happened and why. We have measured the great hiring pause of 2020 and the hiring resurgence of 2021. We have seen law firms adapt to a pandemic world and prosper. Now the question is, what will they become post pandemic? Lessons learned by necessity could be forgotten as the world returns to a new normal. A hiring frenzy and salary raises are reaching new highs, but it is not sustainable in the long term. Firms are beginning to see workers embrace a ‘work to live’ rather than ‘live to work’ motto. This could be the greatest threat to the old law firm model. Will they adapt again to survive?”
Download the full 2021 Leopard State of the Industry Report for more insights about the unprecedented legal market.