Legal firms need to lift their game to attract and retain talent

The loss of partners and other fee earners is causing law firms pain, but the solutions are clear.

Most firms reported they expect to raise remuneration in 2022.

Firms that can provide an environment with sustainable targets for partners and strong fee earner attraction will win the war for talent both at partner and fee earner level in 2022.

At the partnership level, domestic insurance firms returned outstanding growth rates in the Australian Partnership Survey numbers. Perhaps not surprisingly, given fires, floods and pandemic, those with the strongest growth rates are also predominantly insurance firms – Gilchrist Connell (23 per cent full-time equivalent), McInnes Wilson (12.4 per cent) and Moray & Agnew (8.4 per cent).

Other winners in partnership growth were Keypoint Law (9.8 per cent) and Colin Biggers & Paisley (6.6 per cent). Keypoint Law offers a unique pandemic-proof business model as an aggregator of sole practitioners and CBP merged with Logie-Smith Lanyon. CBP also has a successful insurance practice.

Non-insurance domestic firms generally suffered a net partner loss with the notable exception of Addisons who undertook a succession plan successfully, achieving more than 5 per cent growth. Most firms were marginally negative, with the largest losers Macpherson Kelley and McCullough Robertson. On the international front, Dentons grew by 5.7 per cent and Squire Patton Boggs by 3.7 per cent.

Of the traditional top tier firms, Clayton Utz experienced the same growth, adding by a rate of 2.55 per cent and MinterEllison lost a similar percentage of partners – 2.3 per cent – mainly due to the departure of the five-partner private equity team.

The rate of female partner growth was notably twice that of the growth of partnerships generally in this survey period, a testament to the effect of targets, most apparent in the top tier where many firms have reached above 30 per cent female partners. A few partnerships are above 40 per cent (Lander & Rogers, Keypoint Law, Cooper Grace Ward, Swaab and Seyfarth Shaw). In the women equity partnership stakes only Swaab, a boutique firm, has achieved gender equality. Traditional top tier King & Wood Mallesons exceeded 30 per cent, however several prominent firms are still in low double digits and at those low levels, attraction of lateral female partners is difficult and the more successful strategy will be internal promotion (Baker McKenzie, Squire Patton Boggs, Thomson Geer, Mills Oakley and Holman Webb).

Shaaron Dalton is a partner at legal industry consultants Eaton Strategy + Search.

Fee earner numbers contracted in top tier and international firms during the period, belling the cat on the major challenge for law firms in the next six to 12 months. The elite talent pool from these firms can command more than twice their Australian remuneration in many other jurisdictions and those markets are aggressively headhunting them.

High-performing partners are telling Eaton Strategy + Search they are hurting due to staffing shortages and departures; they are turning work away. Anecdotally, clients have moved their work from firms with longstanding relationships due to staff turnover affecting quality. Such pressures are a trigger for partners to move. Equally, at the non-partner fee earner level, understaffing is felt strongly.

So what are law firms offering to attract and retain fee earners and partners in this competitive market? Most firms reported they expect to raise remuneration in 2022. Leading the way we see the first salary rises from Lander & Rogers at 16 per cent, Gadens at 15 per cent and Gilbert + Tobin with 10 per cent increases plus further bonuses, setting the bar.

Law firms have been slow to listen but with increasing numbers of women in leadership and partnership and fee earner levels, they seem finally to be understanding they need to match government and corporates in supporting their people better through their parenting years or they will lose them forever.

This year firms’ offerings included: fertility leave (DLA Piper), increasing parental leave to 26 weeks regardless of primary or secondary caregiver status (KWM and Gilbert + Tobin) and leave for stillbirth and miscarriage (Gilchrist Connell) to mention a few. Firms also made a foray into child care and holiday programs for children of employees during lockdowns to support parents working from home.

Firms have also given staff paid recharge days and extra paid leave opportunities and even ongoing commitments to extra days off during the year (Allens, Seyfarth Shaw, Hall & Wilcox, Lander & Rogers).

As admirable as these changes and holistic support offerings are, they will not solve the problem of staff shortages in the top and international firms. That is a globalisation issue and therefore structural in nature.

The ongoing staffing crisis has some way to play out and we predict a volatile situation for the profession featuring a lot of movement both at partner and fee earner level for the foreseeable future.

Shaaron Dalton is a partner at legal industry consultants Eaton Strategy + Search