Is the Talent War Over?

Since March 2020, the data privacy team at Lewis Brisbois Bisgaard & Smith has worked remotely, handling client breaches from a variety of locations and only going into the office on an as-needed basis. This is because of the diffuse nature of cybersecurity legal services, says practice group chair Sean Hoar, which relies on the group operating around the clock from a variety of locations.

When Hoar’s 44-member group relocated to Constangy, Brooks, Smith & Prophete at the beginning of this year, the team’s virtual work preference was a “unique” arrangement that leaders at labor and employment-focused Constangy were happy to agree to.

“We’re treating this group as both a virtual office and a practice group,” says Neil Wasser, chairman of the executive committee at Constangy. “It’s going to be fully integrated group that works together daily as a virtual office. We think it is reflective of how we’re going to see law firms work in the future.”

The Lewis Brisbois to Constangy move, one of the largest lateral group moves in the first month of 2023, indicates that, under the right circumstances, firm leaders are still willing to allow the kind of workplace flexibility that firms had no choice but to accept over the past several years. If the COVID-19 pandemic showed that remote work was a viable stop-gap solution, the frenzied pace of deal work that prompted 2021′s hiring boom kept it going by tilting labor market dynamics in candidates’ favor.

Neil Wasser, chairman of the executive committee at Constangy;. Courtesy photo

However, as receding demand for legal services and correspondingly legal talent sends the seesaw tilting in the opposite direction, the willingness of law firm leaders to accommodate the workplace preferences of candidates is now an open question. Industry observers and firm leaders say the visible manifestations of the recent “war for bodies” have become rare and reserved for the most in-demand hires.

“For really strong associates, meaning well-trained with strong academic credentials, there are always opportunities, particularly in secondary cities where access to those candidates is not always as abundant,” says Maura McAnney, a Pittsburgh-based recruiter with search firm McAnney Esposito.

McAnney says it’s still a “candidate’s market” in some practice areas, as many law firm partners have come to enjoy the flexibility of working from home, and those same partners aren’t going to expect associates to do something different. But “generally speaking,” she says, there has been a view toward getting back to the office at least on a flexible basis, though many firms aren’t willing to ask lawyers to be in five days per week.

Many law firms and corporate legal departments have missed out on candidates because of “scheduling issues” associated with in-office and remote work, McAnney says, attributing this to the widespread adoption of flexible work arrangements that were rare prior to the pandemic. And now that remote work has been rolled out across the industry, McAnney predicted “that’s not going to change.”

“Lawyers want as much flexibility as they think they can get,” McAnney says. “Not all need or want massive amounts of flexibility, but for those who do, there’s not as much willingness to be flexible as [firms] were when clamoring for bodies.”

While law firms are less willing to tolerate remote hiring, except for the most in-demand laterals, and hiring standards have largely returned to their traditionally narrow scope, signing bonuses for associates have become unheard of and year-end bonuses at Am Law 50 firms were muted in 2022 compared to the previous year.

For example, during this most recent year-end cycle, the lockstep “special” bonuses of 2021 were withdrawn in favor of enhanced payments for “exceptional contributions” or for those exceeding a certain minimum hours threshold.

“Most of the offers I’ve seen in the fourth quarter did not contain signing bonuses,” says Kate Reder Sheikh, a Bay Area associate recruiter with Major Lindsey & Africa. “They were common in 2021 and they will be largely absent in 2023. I think it’s only for associates and partners who live in rarified air, as opposed to anyone with a functional knowledge of a practice area.”

Kate Reder Sheikh, partner with Major, Lindsey & Africa. Courtesy photo

Sheikh says the bar for hiring candidates set by firms “is back up,” as firms return their focus to elite law schools and peer firms for recruiting. Sheikh says firms are reluctant to hire outside of their market or set policies that allow attorneys and staff to work remotely.

But for “really talented lawyers,” Sheikh says, “there will be incentives to make big moves and that exists at the associate and the partner level.”

War For Talent vs. War For Bodies

Michael Heller, CEO of Am Law 100 firm Cozen O’Connor, draws a distinction between the “war for talent” and the “war for bodies.” The former is ongoing as Big Law firms will continuously lean into their core practice strengths regardless of the broader economy, while the latter played out in 2021, when firms needed more hands on deck to handle the volume of deal work.

Heller notes that firms are still willing to hire remotely in today’s war for talent, if they fill a need that can’t be filled by other means, but overall candidates tend to have less leverage than a year and a half ago.

Even though his “strong preference” is for lawyers to be in the office, Heller says he recognizes the value of hybrid work when it comes to productivity, work-life balance and the ability to bill more hours on a flexible basis. And there’s always risk to mandating a policy that will cause lawyers to look for more flexible employers.

That’s particularly the case for litigation, which has overtaken corporate and transactional work as the most in-demand area of practice in the last several months. This trend is expected to continue through 2023, although firms continue to invest in core deal-making practices required to service their clients, even if they aren’t as hot as they were in a booming economy.

And partner moves haven’t fallen off to the same degree as associates because partners are the “engine for continuing to build the firm,” says Michael Ellenhorn, CEO of lateral research firm Decipher. He says firm leaders will continue to hire partners to make up for attrition that comes from retirements and departures.

Michael Ellenhorn, co-founder and general counsel of Decipher Global.

“If you decide to take a pause in hiring, you will find yourself in a hole in 18 months,” Ellenhorn says. “And that’s not a trajectory that firms generally want to find themselves in.”

When firms bring on a partner, they do so with an eye toward their long-term tenure at the firm, not just that partner’s return on investment for the next 12 months, says Erica Lehman, co-founder of New York-based headhunting firm Erica Robert Associates, which focuses on recruiting for the Am Law 50.

“You simply need to have deep benches with the best talent; it doesn’t matter what kind of market we’re in,” Lehman says. “Clients of these firms expect the level of expertise. Our firms are always going to be as hungry to acquire talent in some of these premium practice areas, whether or not it’s necessarily the best time in the market.”

In bankruptcy practices, lawyers with 10 years of experience are especially in demand, says Natalie Ramsay, chair of the bankruptcy and restructuring practice at Connecticut-based firm Robinson+Cole, pointing to bankruptcy filings by crypto trading platforms and retailers as driver.

“Traditionally those partners would stay at a Wilmington law firm for their entire career. Now we’re seeing movement.”

Natalie Ramsey, co-chair of Robinson+Cole’s bankruptcy group. Courtesy photo

And while her firm’s recruitment focus is on finding a cultural fit with a candidate rather than placing a premium on compensation, money still plays a factor, according to firm leadership.

To ward off departures to higher-paying firms, leaders at Robinson+Cole raised associate salaries 6-13.5% at the start of 2023. That followed a raise to associate salaries that took place in July of 2021 “because everybody was fighting for the same people,” says Rhonda Tobin, the firm’s managing partner.

“We just did another bump up of our salary scale on Jan. 1 to make sure we’re staying competitive, even though we are going into an uncertain year,” says Tobin, who compared wages to the firm’s peers around the nation. “We are still in a lockstep scale and we felt there was too much compression among our classes.”

Beyond Compensation

After sinking significant resources into lawyer compensation over the last two years, law firms have found that more money hasn’t necessarily led to better retention. McAnney, of McAnney Esposito, says one of the unhappy side effects of salary wars has been to cause candidates to focus on compensation rather than long-term career planning.

Due to bidding for partner-level talent and the soaring profits firms have enjoyed in recent years, recruiters for Am Law 50 firms say partner compensation has become so stratified that firm leaders are moving toward more complex compensation models to avoid dissatisfaction among differently-paid partners.

“Firms are grappling with how to retain top rainmakers while also keeping everyone else. That’s caused partner compensation to increase across the board,” Lehman, of Erica Robert Associates, says.

Lehman says that some firms wait to see what a partner is offered in the lateral market before matching and other firms find themselves having to restructure their entire compensation system just to make sure a key rainmaker doesn’t leave.

“As firms find a way to continue to balance their rainmakers while also keeping everyone else happy, there’s going to be some fallout,” Lehman says.

Lehman says she tries to steer away candidates from this “gold rush” of responding purely to financial incentives when evaluating a potential firm to join. For their clients, she says, “it’s more about finding a balance where people feel appropriately compensated and not being taken advantage of and feel like they’re not valued.”

Rob Delicate, another co-founder of Erica Robert Associates, says compensation is always a data point in a candidate’s decision, but it’s rarely the sole driver. Instead, he and Lehman encourage candidates to look for firms with superior cross-marketing opportunities.

This attitude may be taking greater hold among law firms as many have looked to other means of attracting and retaining legal talent, such as investment in mental health support and business development.

“Associates weren’t asking for salary to go up,” says Kandice Thorn, a former Big Law associate who founded a video production firm providing professional advice to lawyers.

“They were asking for better hours and a better work-life balance,” she continued. “From the associate’s perspective, the money was nice, but the flexibility was valued higher to them in many ways and had a more lasting value.”

Abby Read, who joined Haynes and Boone last summer as the firm’s first-ever wellness manager, says the firm’s lawyers are the “most receptive population” she’s ever worked with when it comes to the demand for mental health support.

However, it’s taken a while for law firms to use mental health support as a type of retention tool because the legal industry has been so thoroughly wedded to compensation as a means of retaining employees.

“Summer associates and first years who come in, they have tons of questions about everything that goes on related to wellness,” Read says. “That push, and the fact that law schools are placing an emphasis on this, as well, means we need to prioritize mental health and stress.”

Compensation and office returns may be levers more firmly in the grip of law firm management but, as firms increasingly lean into culture, the generational push for more rational work environments, including the type of work lawyers do and for whom, will be issues firms can’t clamp down on.

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