Following a hiring frenzy which saw firms onboarding from the bottom up with unrelenting pace and eyewatering salaries, it seems the curve has now peaked. With potential stormy waters on the horizon for law firms, the legal hiring market has been met with some turbulence over the past few months.
Whilst it is no surprise that firms have become a lot more strategic given the volume of hiring last year, the struggle to attract quality talent remains prevalent. Market data shows there were 1,137 lateral moves into AM Law 100 firms in the London market in 2021 and 1,513 lateral moves into the Lawyer Top 50 firms in 2021 across all associate levels and practice groups, accounting for around 17% of the London market.
So, what effect will a recession have on the legal hiring landscape? Whilst Magic Circle firms are already battling to compete with US and other international firms for the brightest talent, the slumping sterling against the dollar could further impact the Magic Circle’s ability to attract mid-level candidates.
With the great re-evaluation in full flow, associates are generally either chasing a higher salary or better work-life balance, so anything left in the middle is difficult and target hours are being scrutinised. Whilst most US firms in London set an exchange rate at the start of the year, it will certainly be interesting to see the outcome of this years’ review.
Those firms following a flexible exchange rate model will have seen sterling salaries climb. Will we see an influx of talent to US firms implementing this model, or will this drive said firms to consider fixed exchange rates? The Americanisation of the London market is now well and truly here, if it wasn’t already here before.
Consistency in brand perception is another important consideration to be made when weathering a stormy period. Law firms now more than ever need to balance their external brand perception and reputation with the realities of best managing practice day to day. This was particularly prevalent during the Global Financial Crisis, when reputations were easily tarnished by mass layoffs – several large law firms struggled to hire in the post-recovery years due to perceived insecurity of their platforms.
This reinforces the need for a shift to strategic hiring among most firms this year and to learn lessons from mistakes made during the GFC. Hiring processes are now taking a slower pace meaning the race to ‘finish first’ has now turned to a skillful game. Now, instead of hiring in bulk, there will be more demand for talent that has considered their previous career moves and aligned career goals.
As some law firms start to feel the squeeze, they should consider maximising existing talent and retooling associates who are in quiet practice groups. For example, many firms may wish to redistribute associates into their restructuring department, which is likely to soon see a boom in business if there are difficult months ahead.
This cross-practice flexibility has already been implemented in some of the consultancy firms and is a model some law firms will be looking to follow. Associates tend to be more adaptable at the start of their careers, particularly with the incoming changes to the Solicitors Qualifying Examination, and this generalist flexibility can better serve law firm partners and their clients.
The pandemic has already forced law firms to make some changes, but the future-proofed law firm will need to be a lot more flexible in a rapidly changing market. A new incoming generation against a variable economic backdrop will bring to light pressures on pay, hiring processes and rigid staffing models, that will force new ways of running and building a law firm. Have lessons been learnt from the GFC? Time will tell.