Top-performing law firms are aggressively investing in their people and their culture to help achieve sustainable growth, according to the 2022 Dynamic Law Firms Report. Released today by Thomson Reuters, the report identifies factors that distinguish high-growth firms – Dynamic firms – from those that are challenged to keep up with the rest of the market, or Static firms.

The report examines how these two groups have performed over the past two years. Legal Current reviewed the report and is highlighting key takeaways.

  1. Money & culture matter in the ongoing battle for talent. Dynamic firms are having greater success at both the junior and partner levels by positioning themselves as the most appealing destination for talent. Among associates, Dynamic firms had turnover consistent with the rest of the market, while Static firms had significantly higher levels of turnover. Dynamic firms sharply increased lawyer compensation last year, especially for associates, whose compensation jumped 13.5%. Dynamic firms pay their average associate 18.3% more than Static firms. The report likened it to a pirate ship sharing the profitability spoils amongst the crew and “throwing vast quantities of jewels at their junior lawyers.”
  2. Factors beyond compensation play an important role in the talent war. Dynamic firms tend to have distinctively different cultures that embrace change, and their lawyers rate the firms highly for collaboration and embracing environmental, social and corporate governance (ESG) initiatives. Also, Dynamic firms are spending significantly more in areas such as recruiting and support staff, and their lawyers are far more likely to consider themselves as early adopters or innovators of technology. This combination of higher investment in people and a more collaborative, innovative culture is more likely to result in law firms where attorneys want to stay.
  3. Sustainable profit-per-equity-partner (PPEP) growth is key to future success. Dynamic firms had profit-per-equity-partner (PPEP) that were, on average, $580,000 higher than at Static firms. Dynamic firms are expanding their equity partner ranks at a significantly faster rate than the industry average, as well as more heavily aligning their overall compensation with firm performance. Conversely, Static firms are trimming equity partners, which boosts PPEP in the short term but does not contribute to sustainable, long-term PPEP growth.

For more on high-growth law firms’ strategies to grow profits and reduce talent turnover, download the 2022 Dynamic Law Firms Report.

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