The Thomson Reuters 2022 Report on the State of the Legal Market names the recruiting and retention of legal and professional staff as the biggest challenge for law firms in 2022. Financially, law firms have rebounded from the early days of the pandemic; in 2021 firms saw a four percent increase in growth, compared to 2020, and a one percent increase from 2019 (a more realistic comparison after the drop in demand due to the pandemic). However, law firms are facing challenges similar to those seen within the broader job market, and are not immune to the effects of the great resignation. In a 2021 survey of 55 U.S. law firms by Thomson Reuters and the Georgetown Law Center, executives named talent-related issues—lawyer recruitment and retention, poaching of staff by competitors, and increasing associate salaries—as the top three greatest risks to firm profitability in 2022. For reference, in 2020, talent-related risks did not even appear within the top five.
As expected, associate compensation, across the market, has been increasing rapidly. At the close of November 2021, there was an 11.3 percent increase (as a rolling 12-month average) across market segments and, within the Am Law 100 elite firms, compensation increased by more than 15 percent. But firms continue to see record levels of turnover. This means that for all of the compensation outlays, the total growth in lawyer headcount is minimal (1.5 percent growth). And at the end of November 2021, across the market, turnover reached 23.2 percent (on a rolling 12-month basis), which is significantly higher than the pre-pandemic 2019 rate (18.7 percent). Among the Am Law 100 firms, turnover was slightly higher (23.7 percent) and among the Am Law 200 and mid-size firms slightly lower (22.1 and 22.0 percent, respectively).
Associates’ attitudes towards work and life are clearly changing. In The American Lawyer’s 2021 Mid-level Associates Survey, which included nearly 4,000 respondents from 77 Am Law 200 firms, 27 percent said they would leave their firm for higher compensation and 60 percent said they would consider leaving their firm for an improved work-life balance. These results are likely related to a year of particularly long working hours as demand for legal services grew, in addition to the blurring between work and life due to the pandemic. The report notes that the push-back to long working hours was more apparent among younger associates, and that middle-aged lawyers (aged 40 to 60) were comfortable working 10 percent longer hours.
In response, firms should look beyond increasing compensation to improve associate retention. Below are initiatives that some firms are exploring to curb turnover:
Offering more interesting or high-profile work, mentoring, and/or faster promotion sequencing
Updating compensation metrics, moving away from billable hours, to a task and quality-oriented system
Providing wellness, counseling, and stress-management programs
Offering social, recreational, and team-building activities to promote a collaborative and close-knit office culture
While these activities and initiatives may start to improve associates’ firm loyalty, the Thomson Reuters report calls out a need for more meaningful change to improve retention, saying “Achieving that goal will require firms to reimagine their structures and operations in the post-pandemic world to provide the real “glue” that we know is necessary to bind people to organizations—feelings of value and meaning in their work, feeling appreciated and recognized, having opportunities for growth and personal satisfaction, and believing that they are making a contribution to something larger than themselves.“
Find the full report here: 2022 State of Legal Market Report