- Staffing issues top the list of concerns for business leaders in law firms
- But they still hope to remain profitable in the years to come
(Reuters) – Business leaders at law firms are optimistic about client demand and profits over the next year, but growing worries about the escalating war for talents of lawyers and staff.
Recruitment 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 interviewed 55 COOs and CFOs of law firms in companies with 50 or more lawyers this fall.
Just over half of those surveyed (51%) said hiring and retaining lawyers was a ‘high risk’ to the company’s profitability, while another 35% called it a high risk. “Medium risk”. And 31% cited 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 survey respondents, respectively.
These results are very different from those of last year, when business leaders cited underperforming lawyers and the economy in general as the main risks to profitability, said William Josten, head of legal content at company at the Thomson Reuters Institute. The Thomson Reuters Institute shares the same parent company as Reuters.
Josten said the rapid rise in lawyer recruitment and retention as a top concern reflects how quickly the law firm talent landscape is changing.
Many large firms have increased starting salaries for partners from $ 190,000 to $ 205,000 this summer and have distributed large bonuses in an attempt to recruit and retain lawyers. Associate compensation increased 10% from a year ago, according to Thomson Reuters Peer Monitor Index, which helped push law firms’ direct costs by more than 7% in the third quarter 2021.
âWe’ll probably see three types of businesses,â Josten said. “Those who continue to follow [the associate pay] climb. Those who just decide to get off the merry-go-round. And those in the middle – they’ll try to follow the ladder, but they just won’t be able to. “
Business leaders at law firms have said they expect most practice groups to see increased demand, particularly in the areas of bankruptcy, family law, employment law and law. government. Most businesses also expect high or moderate growth in demand, productivity, billing rates and collections. And half of those polled said they expected their businesses to expand into new domestic markets in the coming years.
Law firms had another big quarter, but associate pay is taking its toll
Growth of law firms accelerates, with the richest firms in the lead
Reporting by Karen Sloan