Partnership Survey: Closed borders keep talent out and limit law firm growth

Significantly, the gender balance in partnerships of all firms has improved to an average of 30.4 per cent – a milestone number, the first time a figure of above 30 per cent has been achieved.

Law firms in Australia have thrived through this pandemic period, so far.

As London, New York and Hong Kong open up and start hiring globally again, Australian law firms cannot continue growing while our borders remain shut to quality returnees and talent from other jurisdictions.

The news from the latest instalment of The Australian’s Legal Partnership Survey conducted by Eaton Strategy + Search is that most firms have experienced positive growth.

Growth in law firm profits has been strong for a number of years, off the back of a thriving deal and projects-driven marketplace, coupled with the rise in regulatory litigation, class actions and royal commissions – a boom time in legal services.

Add in the conditions of a pandemic, and lawyers have been slammed with new work.

Areas such as workplace law, property and construction law, biotechnology, cybersecurity and regulatory reviews have all come into focus during these pandemic times. Insolvency is also expected to grow with the cutting back in government stimulus and the changes in lending and leasing incentives and protections. New taxes and regulatory changes have also added to the surge in legal work.

Wherever there is uncertainty for business, there are lawyers.

Costs have been reduced with travel curtailed and downsized offices. Law firm profits are at a high not seen for decades.

For these reasons, firms of all sizes are recruiting and lateral hiring of partners has increased during the period.

Partnership numbers have grown at a rate of 4.3 per cent in the survey period, and fee earner numbers have grown by an average of 5.1 per cent. Top tier and international firms have grown their partnerships only marginally, continuing the trends seen since 2015 of plateauing partner numbers and higher fee earner to partner ratios compared with other domestic players.

A number of firms have increased equity partnership numbers in the six-month period and they are an eclectic bunch, including top tier, mid-tier, boutiques and internationals, showing the appetite for growth is across the board and that firms are able to promote, due to increased workflow and revenues adding to the pie. Top-tier firm Ashurst, internationals Jones Day and Squire Patton Boggs, large domestic mid-tiers Mills Oakley and HWL Ebsworth were joined by Gilchrist Connell, Maddocks, Piper Alderman, Russell Kennedy in welcoming multiple partners into equity in the period.

Gender balance

Significantly, the gender balance in partnerships of all firms has improved to an average of 30.4 per cent – a milestone number, the first time a figure of above 30 per cent has been achieved. Parity between genders is now likely to be achieved in 2035. Given 58 per cent of graduates and 58.6 per cent of fee earners are women the imperative remains to hasten faster.

The proportion of equity partners who are female has also improved, to 25 per cent overall.

This reflects some effort put into increasing women in partnership of mainly the international firms, where the rate was a dismal 18 per cent only three years ago.

Honourable mentions must go to the firms exceeding the bar with the proportion of their equity partners who are female at 30 per cent-plus. Boutique firms Banki Haddock Fiori and Swaab do exceptionally well on 66 per cent and 60 per cent, but Dentons – approaching one third – is a stand-out international.

Allens and MinterEllison lead in the top tier at about 32 per cent, closely followed by Gilbert + Tobin at 31.3 per cent.

The mid-tier stand-out is Hall & Wilcox with 31.2 per cent.

Grads are back

Naturally cautious in uncertain times, many firms took the decision to drop graduate numbers in the last survey period.

Numbers have grown 150 per cent since the last survey, almost to the heights of pre-pandemic graduate levels, demonstrating a strong recovery in confidence in the market.

The size of the increased graduate intake may also reflect some pre-pandemic planning for the brain drain to global markets, as talent acquisition teams are only too aware of those challenging times returning.

Profits at risk

Before the pandemic, Australian lawyers with three to six years of experience were highly sought after. The world’s leading law firms in the market hubs of London, New York, Hong Kong, Singapore, Frankfurt and Dubai could not hire enough of our best and brightest.

Australian law firms hired talent from other common law jurisdictions around the globe. Aided by Australia’s pre-pandemic immigration policies, many fine young foreign lawyers have re-qualified and made their career and home here as a result. Many of the Aussie expats also returned with their excellent cross-jurisdictional experience in the exchange, making them more valuable and heightening their career opportunities when they returned.

The heaviest hitters of the global marketplace are back, raiding Aussie fee earners. Australian firms will soon find it all but impossible to source quality talent. We expect soon to find law firms in the same situation as our hospitality sector, unable to offer services due to shortages of talent unless borders open.

Australian law firms have shown strong growth in all categories of the survey over the past six months which cannot possibly be sustained if we remain a “hermit kingdom”. Our borders must open as soon as possible.

Shaaron Dalton is a partner at Eaton Strategy + Search, which conducts The Australian’s biannual legal partnership survey.