Law firms have been adapting well to the new reality brought on by the COVID-19 pandemic. Though year-over-year results may be down at many firms relative to 2019, overall the worst was avoided, and in fact, a number of firms are close to or exceeding budget, as gleaned from my client interactions.
These results point to a meaningful uptick in recruiting activity that we are seeing in the third quarter and expect to continue into 2021, led by those firms with strong balance sheets, healthy cash flow, and successful and resilient practice mixes.
We are seeing activity across many practice areas, including health care, bankruptcy and restructuring, capital markets, finance and credit, civil and white collar litigation, and technology and intellectual property, among others. Firms are doing this to shore up areas of strength as well as to capture momentum in a current market marked by distressed investment opportunities, continued business innovation led by technology and life science sectors, and financing available in capital markets — including special purpose acquisition companies — and credit markets increasingly led by private funds.
Here are some observations to help guide law firms and their leaders through the current recruiting environment:
Be cognizant of your competition's recruiting activity, and take steps to retain your best lawyers.
As mentioned above, many financially stable firms are seeing this as an opportune time to capitalize on uncertainty and a desire among candidates to find a more financially stable home and where their practice is most strategic.
Law firms should be conscious of their competitors' recruiting activity, and that partners and associates are looking at how well their firm is competing and thus able to retain and attract talent at the partner and associate level. The recent trend of special bonuses for associates brings some firms' competitive advantage into sharp relief. For rainmaking partners, security in knowing they will be able to hold onto existing clients, serve them well and attract new ones is paramount.
There are steps you can take to help retain your best associate, counsel and partner talent. It is frequently written about, but bears repeating: It is not just about the money.
Define and live your culture. There is not one single cultural or compensation model for success. If you clearly define and live it, at least you will be assured of attracting and retaining the lawyers that share your values.
Associates are sophisticated and understand the odds of partnership and what being a partner means in today's environment — excellent work and judgment, and incessant business development, in equal measure. Respect your associates and counsel by being honest and transparent; help them in their careers, wherever their paths may take them. This commitment by firms includes a dedication to early mentoring, real training and detailed and real-time constructive feedback.
It is not enough that associates learn only by observation. Acknowledge and address the stresses of the workplace, particularly in our current remote environment, and explore the type of mental health and well-being services you can provide as a firm to all of your employees; there is a real mental health crisis brewing. Lastly, understand that maintaining connection — whether through virtual events or otherwise — is critical in today's COVID-19 environment.
The aforementioned principles apply to partners as well, but I would add that when considering their needs and welfare, firms demonstrate foresighted and not reactive leadership, manage finances for the full economic cycle, and have a clearly articulated firm strategy and plan to execute it. I would also add that firm environments that are perceived as siloed are viewed as less desirable and can undermine any other cultural successes you may have had.
Build on your strengths and diversify your expertise.
Embark on a strategy that makes sense for who you are as a firm — build on strength and diversify where you can to capture business during the full economic cycle.
Building around your strength accomplishes the twin goals of helping you retain and attract talent. The practice becomes a destination for clients and lawyers looking for a deep bench of expertise providing reliable, efficient and creative answers.
The most successful firms best leverage these practices by emphasizing and rewarding cross-marketing strategies that lead to lasting, penetrating ties with their client base. For example, a marquee litigator and an experienced restructuring team add value to a corporate practice; an agile mergers and acquisitions team and a finance team add value to a technology practice; a tested international disputes team adds value to an infrastructure practice.
When seeking to diversify, begin around existing and complementary practices that provide a proper foundation for counseling clients and supporting lawyers. It is difficult to build greenfield practices where the firm lacks existing expertise, credibility and complementary practices. It can be done, but requires substantial investment in rapidly building and integrating critical mass, and the long-term commitment to continue to invest in it.
For example, building a debtor-based bankruptcy and restructuring practice from the ground up requires a critical mass of lawyers with the experience to win mandates and lead these complex cases, not to mention the potential conflicts it might create with the firm's other lender-based practices.
Further, prognostication is not perfect, but build now in expectation of future trends. Those firms that invested in bankruptcy and restructuring practices in 2019 were ahead of the game, and though the COVID-19 may not have been anticipated, some correction in the economic cycle could have been, even if not timed precisely. So, prepare to invest.
If current political polling holds true, I would expect that following the election, regulatory practices such as antitrust and white collar practices will return to high demand. To this end, we are already seeing strengthening of these practices at law firms and on in-house teams.
In this time of financial and emotional stress, prioritizing culture becomes even more paramount. How are we reimagining culture in a new period of remote working? Take an honest appraisal of the glue that holds your firm together.
Law firms are service businesses characterized by the fluidity of its asset base — the people who originate and serve your clients. Why do people choose to work and stay at your firm? Who do you attract? The values you live go a long way in answering these questions.
It is not enough to be collegial; there is not a single firm that does not profess that. The behavior you reward is the behavior you get. That is not to say there is a one-size-fits-all model — there are different roads to success. What it does mean is walk your talk.
Do you reward an eat-what-you-kill mindset and open internal competition? Then embrace it and live it. Do you talk about the value of collaboration? Well, then make sure your compensation system is structured to reward and thus encourage collaborative efforts.
Also consider and evaluate the cultural values underlying your associate mentoring, diversity and mental health support programs. And perhaps most importantly, consider what behavior your most prominent and successful partners exhibit, and ensure it aligns with where you want to be culturally.
Adjust onboarding procedures for integrating new hires during the pandemic.
Firms must acknowledge that remote working presents unique challenges to integrating new talent. The best interview processes allow candidates to meet a wide range of future colleagues and to develop a personal bond ahead of any transition. There is a limit to how well virtual meetings accomplish this, but firms are adapting in different ways, including combinations of remote meetings followed by in-person, socially distanced, face-to-face meetings in later rounds.
Integrating virtually does present obstacles, but it can be done with the technology at hand and with the return of support staff and lawyers to physical offices that began to open in the summer. Just as you may have adjusted your processes for taking on new clients during the pandemic, you can similarly modify your procedures for onboarding new hires.
Be prepared to answer questions from prospective partners.
Partners considering a transition will have questions about their new prospective platform, and firm leaders must be prepared to answer them, including the following:
You can expect the coming year to be one of intense competitive activity, led by those firms who are foresighted, best managed, financially secure, agile and driven by vision.