The red-hot flow of talent between large law firms has cooled off in 2022, not only because law firms have slowed down their rapid hiring from last year. Individual lawyers are also choosing to stick at their present firms during a period of relative uncertainty, industry observers say.
Lawyers are becoming “stickier,” especially as the fourth quarter approaches, both due to individual prospects and because of more deliberate hiring from law firms.
Julie Jones, chair of Ropes & Gray, said while there is still some pressure on the lateral market, her firm’s attrition has been at pre-pandemic levels and lower since the end of the first quarter.
“Now that things have cooled and people have their heads about them, people aren’t leaving. I know it reflects a shift in the market. We’re no longer in that war-for-talent phase,” she said in an interview. “You always need to keep and invest in your talent, but we don’t have that frenzy, and we see that in our attrition rates.”
Lawyers who’ve seen business soften could be playing it safe. David Foltyn, CEO of Honigman, said in an interview that at the moment, his people “are a little stickier than they were last year.”
That could be because there just isn’t as much activity and incentives pulling lawyers away. It could also partly be seasonal, he said, nodding toward compensation systems that reward lawyers at the end of the calendar year.
“The way most firms are structured, partners are not advantaged by leaving in the fourth quarter,” Foltyn said. ”They need to be there to get their proper year-end, and my guess is the associates are waiting to see what kinds of bonuses they get.”
Indeed, lawyers themselves may be taking a wait-and-see approach as compensation season approaches, and because plenty of unknowns remain about the business climate in 2023.
“I would agree, and it would be a general statement, that 2022 seems to have been a more stable environment for us as law firm managers, managing less movement,” said Gerald Greenspoon, co-managing director of Greenspoon Marder.
The Bright Side
Overall, some law firm leaders say a scaling back from the talent-feeding frenzy last year has meant less attrition and more personnel stability this year, giving them the chance to rightsize from last year’s labor imbalance and, arguably, more leverage to do things such as chart office returns.
The slowdown on the lateral market has also allowed law firms to return to strategic hiring. They can now be a little more selective in trying to expand their practices, rather than just trying to find as many bodies as they can to keep up with them and eating the costs later.
“They’re asking themselves a few more questions related to hires,” said Tony Williams, a London-based principal at Jomati Consultants and former managing partner of Clifford Chance. “Particularly in the States, where salaries have gone up so much in the last couple years, you have to think, ‘Do I really want to add another quarter million of costs if I think things are going to slow down a bit? Or do I want to wait and see what happens?’”
At this point, barring a major downturn in the economy, law firm financials for 2022 are significantly “baked in,” Williams said. But 2023 is still a major question mark. Most firm leaders he’s speaking with are strategizing based on a simple rule of thumb. “Hope for the best and plan for the worst,” he said.
To be sure, the market isn’t entirely homogenous. The associate and counsel markets have stabilized in 2022, said Scott Yaccarino, a founding partner for New York-based Empire Search Partners. But in some corners of Big Law, including the very top of the market, lateral movement is still very active, he said.
“It’s not like we’re seeing freezes. It’s not like we’re seeing firms come and say, ‘Hey, we’re good, we’re not looking for anything,’” he said, adding, “it’s just a lot more sane right now.”
Greenspoon, of Greenspoon Marder, added that while his firm had its largest increase in new laterals this year, that’s an exception relative to the rest of the industry. “We, of course, enjoy stability, rather than the unknown,” he said.
Yaccarino said in an ideal world, there would be a perfect balance point of market and client demand that brings firms right to the brink of capacity without being an unsustainable pace. The pace last year was unsustainable for a lot of people, he said, but a lot of lawyers at elite firms would probably prefer activity to be at around 100% rather than, say, 75%.
“Law firm partners and certainly law firm management as a whole are fairly growth-oriented. So, although the frenzy of the market in 2021 and early 2022 caused plenty of stress and anxiety, at the end of the day, it also equated to business being up in a major way,” Yaccarino said. “It’s a double-edged sword because, although there are plenty of partners right now able to catch their breath, for successful law firm partners and management, it’s hard to say that’s their comfort zone.”