Five Takeaways from the 2022 Report on the State of the Legal Market
Law firms can’t just keep throwing money at the growing talent war. That’s among the key findings of the 2022 Report on the State of the Legal Market, published today by the Center on Ethics and the Legal Profession at Georgetown Law and the Thomson Reuters Institute.
The report relies on data from Thomson Reuters to review the performance of U.S. law firms and break down the factors that drive the need for firms to take a longer-range, more strategic view of their market positions. Legal Current examined the report and is highlighting five top takeaways.
5. Firms have recovered from the worst of the pandemic. The report notes the law firm market has rebounded strongly and firms are performing well financially despite the ongoing pandemic. Demand soared in 2021 following a disappointing start, driven primarily by real estate and corporate practices. Litigation is one of the major practice areas that is still below pre-pandemic levels. Firms continue to raise rates aggressively, helping push profitability to record levels.
4. The industry is experiencing record-high turnover. Associate compensation is surging at double-digit rates – some of the highest levels in more than a decade – driving up costs for firms. Yet retention has plummeted despite compensation hikes. Attorney turnover has risen to record levels for firms, “edging dangerously close to losing almost one-quarter of their associates in 2021.”
3. It’s about more than money. The report analyzed turnover patterns and found that firms with the lowest turnover are not necessarily those with the highest compensation growth. In fact, they tend to have the lowest compensation growth among firms in the market. The report concludes that the “loyalty lawyers feel to their firms and their willingness to work hard is not simply, or even primarily, driven by compensation.”
2. It’s also about more than workload. Lawyers now have different attitudes and expectations than they had before the pandemic for deciding whether to stay in their current positions or leave. Attorneys at firms with the lowest turnover billed an average of 51 more hours per year than their counterparts at firms with the highest turnover. Many lawyers, especially younger ones, may now be giving higher priority to intangible factors, such as feeling appreciated and recognized, as well as work/life balance and mental wellbeing.
1. “The traditional law firm response of just throwing more money at the problem is not likely to work as well going forward.” The report identifies additional issues that law firms need to tackle, such as hybrid work and operational efficiency. As firms move to a hybrid model, they will have to decide how to manage key areas including equitable assignment of work, mentoring, evaluations, career advancement, and maintaining firm culture. Finally, the report urges firms to expand the agile approach used to transition to remote work into other operational areas, such as managing support staff and improving financial practices, including billing and collections.
For more insights on law firm strategies for 2022, download the full report.