State of the Legal Market Report: Predicting the Factors That Will Shape 2023
Ahead of the 2023 Report on the State of the Legal Market – the annual report issued jointly by the Center on Ethics and the Legal Profession at Georgetown Law and the Thomson Reuters Institute – Legal Current is looking back at the trends that shaped the industry in 2022. The 2023 report, which Thomson Reuters will release next week, relies on data from Thomson Reuters to explore the performance of U.S. law firms and the factors that firms should consider for a long-range, strategic view of their market positions.
The 2022 report, issued last January, included some expected results for 2021, such as how firms had rebounded strongly from the worst of the pandemic, but it primarily focused on the industry’s retention crisis, including record-high turnover and the need for firms to address it other than monetarily. As Roy Strom noted in Bloomberg Law coverage of the 2022 report: “Its findings were unexpected. The firms with the lowest turnover had associates working longer hours and making less money than those with the highest turnover.”
Jean O’Grady also emphasized recruiting and retention efforts in report coverage in Dewey B. Strategic: “The talent war is not limited to lawyers. Competition for business professionals is heating up. One surprising chart in the report provides a roster of activities that lawyers would prefer to leave to business professionals including recruiting, KM, training and D&I activities.”
These findings were reinforced in the Q4 2021 Peer Monitor Economic Index, now known as the Law Firm Financial Index, which predicted 2022 would be “the year of talent.” And they mirrored findings in The Law Firms Competing for Talent in 2022: Will Lawyers Stay or Will They Go? report, which explored how attorneys decide whether to remain at their current firms or pursue other opportunities, based on analysis of law firm financial data and interviews with thousands of attorneys.
The “Stay or Go” report found that attorneys ranked factors such as firm culture, a clear career path, feeling supported in their work, and flexibility on when and where to work as more important than compensation or workload. This echoed the 2022 State of the Legal Market Report findings, which noted the “loyalty lawyers feel to their firms and their willingness to work hard is not simply, or even primarily, driven by compensation.”
Now, all eyes are watching to see how these trends will play out in 2023 with a potential recession weighing on law firm leaders’ minds. What will be the defining factors in 2023?
Amid ongoing economic uncertainty, it’s tough to gauge what lies ahead. The competition for talent remains a key concern for law firm leaders, though law firm layoffs and smaller bonus payouts may be the new normal rather than rising associate salaries.
Beyond competing for talent, law firm leaders are navigating return-to-office arrangements, hybrid environments, and the impact of inflation. Find out how firm leaders plan to manage these and other factors in the 2023 Report on the State of the Legal Market, out next week.