2022 State of the Legal Market: What Will Be This Year’s Defining Factors?
Thomson Reuters will issue the 2022 Report on the State of the Legal Market next week, reviewing U.S. law firms’ performance over the past year and examining how firms are responding to current trends in the legal industry. The annual report is issued jointly by the Center on Ethics and the Legal Profession at Georgetown Law and the Thomson Reuters Institute, relying on data from Thomson Reuters.
Ahead of the 2022 report, Legal Current looks back at 2021 trends and explores which themes may continue shaping the legal industry in the year ahead. The 2021 report analyzed how the transition to working from home, increased use of technology to improve efficiency and reduce costs, and greater emphasis on work-life balance and employee wellbeing affected the legal market.
These were among the factors that defined 2021 for the legal industry, a year marked by an extraordinarily competitive hiring market. Several factors identified in the 2021 report shaped how the law firm market fared last year, and their impact was captured in thought-leadership reports published throughout the year.
The Q3 2021 Peer Monitor Economic Index found that the escalating war for talent was a growing drag on law firm performance. The report noted direct expenses surged 7.2%, driven primarily by spikes in associate compensation. It also revealed that even with rising salaries, firms had difficulty holding on to talent. Firms saw their attorney ranks turnover by an average of 14% over the previous 12 months.
These findings were reinforced in the 2021 Law Firm Business Leaders Report, which identified talent acquisition as the top threat to law firm profitability. By comparison, in 2020, underperforming lawyers and general economic pressures were cited as the highest risks; talent concerns didn’t make the top five. But law firm business leaders became increasingly concerned in 2021 with how to best acquire, retain, and compensate their attorneys.
As the talent war intensified, the Stellar Performance: Skills and Progressions 2021 Mid-Year Survey explored how lawyers’ work preferences have changed during the pandemic. The report found that nearly one in three lawyers would prefer to work fewer hours – a desire strongest among younger lawyers, particularly those under 40.
The Stellar Performance report also noted technology plays an important role in improving how lawyers manage their tasks, with many lawyers indicating automation tools should be a priority for technology investment.
This aligned with a finding of the 2021 Report on the State of the Legal Market that showed nearly 85% of law firms planned to increase their technology investment as the pandemic changed how legal professionals work. The 2022 report may reveal how firms used technology to enhance productivity, reduce turnover, and improve overall firm performance.
The start of 2022 brings new pandemic-related struggles for law firms to navigate, as the Omicron surge changes firms’ return-to-office plans and compels courts to cancel trials. And costs and competition in hiring and retaining talent continue to rise. Learn how firm leaders plan to manage another year of expecting the unexpected in the 2022 Report on the State of the Legal Market, out next week.
