Attorney recruitment fears temper law firms' bullish outlook

Office workers are seen at a largely empty central business district as Singapore returns to the work-from-home regime due to surging cases in the coronavirus disease (COVID-19) outbreak, in Singapore September 27, 2021. REUTERS/Edgar Su/File Photo
  • Staffing issues top the list of law firm business leaders' worries
  • But they still expect to remain profitable in the coming years

(Reuters) - Law firm business leaders are optimistic about client demand and profits over the next year, but they’re increasingly worried about the escalating war for attorney and staff talent.

Recruiting and staffing issues were the top three risks to law firm profitability cited in a survey released Tuesday by Thomson Reuters and Georgetown Law’s Center on Ethics and the Legal Profession, which polled 55 law firm chief operating officers and chief financial officers at firms with 50 or more lawyers this fall.

Slightly more than half of respondents (51%) said lawyer recruitment and retention is a "high risk” to firm profitability, with another 35% calling it “medium risk.” And 31% listed poaching of staff by competitors as a high risk to profitability.

Associate salary increases were listed as a high or medium risk to profitability by 29% and 46% of the survey respondents, respectively.

Those results are markedly different from last year, when firm business leaders cited underperforming lawyers and the general economy as the top risks to profitability, said William Josten, manager for enterprise legal content at the Thomson Reuters Institute. The Thomson Reuters Institute shares the same parent company as Reuters.

Josten said the rapid ascension of attorney recruiting and retention as top worries reflects how quickly the law firm talent landscape is changing.

Many large firms increased starting associate salaries from $190,000 to $205,000 this summer and have doled out big bonuses in a bid to recruit and retain lawyers. Associate pay is up 10% compared to a year ago, according to Thomson Reuters’ Peer Monitor Index, which helped push law firms’ direct costs up more than 7% in the third quarter of 2021.

“We are likely to see three types of firms,” Josten said. “Those that continue to keep up with [the associate pay] scale. Those that just decide to get off the merry-go-round. And those that fall into the middle — they’ll try to keep up with the scale, but they just won’t be able to.”

Law firm business leaders said they expect most practice groups to see increased demand, especially in the bankruptcy, family law, employment law and government sectors. Most firms also project high or moderate growth in demand, productivity, billing rates and collections. And half of respondents said they expect their firms to expand into new domestic markets in coming years.

Read more:

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Law firm growth accelerates, with richest firms in the lead

Reporting by Karen Sloan

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Karen Sloan reports on law firms, law schools, and the business of law. Reach her at karen.sloan@thomsonreuters.com