 |
 |
 |
 |
 |
 |
 |
  |
 |
 |
 |
To enhance profitability and grow their business in an increasingly competitive landscape, law offices are bolstering their efforts to recruit and retain legal professionals who possess in-demand skills and experience. This has proven to be a considerable challenge due to several major trends in the marketplace. These trends include increased competition for attorneys in high-demand specialties, a supply and demand imbalance, declining U.S. law school enrollment, increased movement of midlevel associates, the opting out of seasoned talent from the firm environment or the profession completely, and the impending retirement of Baby Boomer generation attorneys.
Law Firms Compete for Associates in High-Demand Practice Areas
To attract graduates from the leading law schools as well as midlevel associates, many law offices have begun using compensation as a primary recruiting tool. This is particularly the case among large and midsize firms specializing in high-demand practice areas such as bankruptcy, litigation and corporate law. While the trend began with large law firms in New York City, compensation for high-demand, first-year associates reached record levels in 2007.
There is already evidence that increases in first-year pay have triggered a ripple effect up the associate chain, since firms typically give corresponding increases throughout their ranks. The Robert Half Legal 2008 Salary Guide projects that second-year associates at large firms in the U.S., for example, can expect to see an 8.2 percent increase in starting salaries, while attorneys with four to nine years of experience will see their starting salaries at large firms go up by 7.4 percent, to as high as $192,750. These figures are national averages; in some markets, associate salaries exceed these levels.
This does not appear to be a situation that impacts all first-year associates, however. Attorneys who specialize in high-demand practice areas, graduate at the top of their class, or come from the elite law schools are in strong demand and are the primary beneficiaries of the stratospheric salary increases.
But whether this trend of spiraling associate salaries will help firms attract and retain the best attorneys, in fact, remains an open question. In light of recent economic fluctuations, it remains to be seen whether these increases will continue.
The Supply and Demand Imbalance
Higher salaries may enable some firms to outbid others for talent, but they do not address a more fundamental problem – a shortage of candidates from top law schools with experience in high-demand specialties. This is especially true in the area of patent litigation, where firms are scrambling to find qualified professionals. A particularly complex and fast-changing specialty, patent and IP litigation requires attorneys with very specific knowledge and credentials.
Annually, U.S. law schools produce about 40,000 graduates. Of that number, about 6,500 graduates are from the top 20 law schools. A survey by the National Association for Law Placement (NALP) reveals that only 28 percent of graduates offered a job by a large law firm (over 250 attorneys) decide to accept since fierce competition for associates is resulting in multiple offers for many students. The demand for newly minted lawyers with the most sought-after skills and a top-tier education will likely continue to outpace the supply.
Declining U.S. Law School Enrollment
Law school enrollment in the U.S. began to fall off in 2004 and, according to the findings of the Law School Admission Council, reached a new low in 2006, when the number of applicants decreased by 7.4 percent, the largest drop since 1995. Diminishing law school enrollment today may mean fewer lawyers in the future, which should prompt firms to closely guard and nurture the talent they already have. But as the fourth trend shows, long tenure with a single firm is not characteristic of the careers of most associates.
Midlevel Associates on the Move
Among law school graduates who take a job with a large firm, the NALP survey shows that 46 percent leave within three years (up from 43 percent two years ago) and 62 percent leave by the end of their fourth year. Although a certain level of attrition is built into law firms’ business models and is seen as necessary, NALP reports that 51 percent of these departures are unsolicited and unwelcome by the firms from which the associates are vacating.
Much of this lateral movement occurs despite a reportedly high level of overall job satisfaction. On a scale of 1 to 5, associates surveyed by NALP reported a satisfaction score of 3.81 But apparently they can’t resist the aggressive recruiting of firms that are trying to overcome the shortage of qualified candidates by rounding out their ranks with partners and midlevel associates from competing firms.
Source: Generation Y - What Millennial Workers Want: How to Attract and Retain Gen Y Employees. Robert Half International and Yahoo! HotJobs
For many midlevel associates, the movement is not lateral, but out of the firm environment – or the profession – completely. The declining number of seasoned attorneys is another development causing dark clouds on the hiring and retention horizon. The NALP survey showed that attrition among sixth-year associates was at 78 percent.
A Massachusetts Institute of Technology Workplace Center study, meanwhile, found that women leave firms in larger numbers than men at the associate and partner levels. Among minority associates, attrition rates are even steeper.
Seasoned attorneys opt out for many of the same reasons that others make lateral moves, including changing priorities, a search for different opportunities and the desire for better work-life balance. Other drivers of attrition include market forces beyond the control of individual attorneys, such as decreased demand for a particular practice area or staffing practices that may aggravate attrition, such as the failure by many firms to help associates develop critical business or employee management skills that would enable them to rise through the ranks.
Because attrition has historically been a cost of doing business, the financial impact of unwanted or excessive attrition can be severe. It has been estimated that the economic cost of losing talent may range from $300,000 to $700,000 per departing attorney.
The Demographic Wild Card
As the Baby Boomer generation enters retirement over the next 10 years, businesses of all types will be confronted with a shortage of millions of workers and will compete for a smaller pool of younger workers with less experience and expertise. The Bureau of Labor Statistics projects a flat growth rate of less than 0.5 percent for the U.S. workforce during the next 60 years. The current challenges in the market are prompting more firms and law departments to re-examine and revamp their approaches to recruitment, professional development and retention. In many cases, law offices’ new hiring strategies are already counteracting some of the effects of the trends.
