All posts by Lateral Link

Hybrid Work and Generational Divide: Navigating Differences in Modern Law Firm Practices

More than three years after COVID-19 upended where and how we work, law firm offices in some ways resemble the pre-pandemic normal. Attorneys mingle freely at in-person gatherings. Face masks and hand sanitizer have receded. But one thing is still starkly different: just how many desks are unoccupied on any given day.

Return-to-office policies are not uniform

One might have predicted that Biglaw firms would potentially use their return-to-office policies as a recruiting tactic that resulted in uniform policies given the fierce competition for talent and the ensuing (and somewhat uniform) salary increases over the past few years. The competition for talent has cooled as firms have learned to deal with COVID-19, however, and firms are moving towards bringing their attorneys back into the office on at least a hybrid basis. Superficially, it may seem that Biglaw has arrived at something approaching consensus: a survey released in January found that a third of Am Law 100 firms mandate three days per week of in-office presence, with another third encouraging three days in office. But dig a little deeper, and you find a surprising lack of convergence as firms determine what works best for their needs.

For instance, O’Melveny and Myers, like its peer firms, wants attorneys to spend more time in the office. But instead of specifying a set number of days per week, O’Melveny has announced an expectation that lawyers be present in the office for more than half the time over the course of the year. This policy emerged from a series of town halls and surveys, which delivered the clear message that flexibility was important to O’Melveny attorneys.

Even among the firms with a three-day mandate or expectation, there is no consensus on who chooses the days. Some firms have designated “anchor days,” either at an office or practice group level, where the whole team is expected to go in together. Several Morgan Lewis practice groups have recently mandated attendance on Tuesdays, Wednesdays, and Thursdays, justifying the decision in part by noting that summer associates will be in the office on those days. Meanwhile, other firms allow lawyers to choose any three days.

And then there is the matter of compliance. Despite supposed “mandates,” noncompliance has been widespread at many firms, with limited attempts at enforcement. Many firms have preferred carrots to sticks, offering incentives such as free lunch to entice lawyers to come in. But some have been more pointed, making payout of annual bonuses contingent upon in-office attendance. Firms taking that stand include: Simpson Thacher, Sidley Austin, Davis Polk, Cahill, and Ropes & Gray.

The generational divide

So why are we seeing a lack of convergence regarding a model for the future of work at law firms? A key factor is generational differences, particularly among seasoned attorneys and junior attorneys.

Firm and practice group leaders entered the profession under very different circumstances from those of today’s junior associates. Two or three decades ago, the notion of a lawyer routinely working from home would have sounded strange. The early-career experiences of today’s senior partners were defined by long hours in the office, yes, but also by substantial in-person mentorship and training.

Given that background, it’s unsurprising that firm leadership is eager for associates to return, both for cultural and developmental reasons. It’s difficult to build culture when attorneys are remote, and effective training in a remote setting is challenging. When law firm leaders consider how they became partners—by creating strong ties with the partnership while they were associates—they struggle to conceive of how a fully remote associate could build comparable relationships and successfully navigate the path to partnership. 

Meanwhile, at the base of the pyramid are Gen Z associates who graduated from law school during the pandemic and began their law firm careers in a fully remote setting. Now that these junior lawyers are (largely) expected to be back in the office, they miss the flexibility. I sometimes receive questions about whether it’s possible to find a fully remote job at a firm. One current Biglaw junior associate recently asked me if he could go to a smaller firm with a lower hours expectation and work remotely. When I brought up the professional development benefits of in-person work for early-career attorneys, he responded that he was not sure if he wanted to practice law long-term, let alone become a law firm partner. He also mentioned that he put a premium on work-life balance and flexibility, which he thought remote work could help him achieve.

This candidate is hardly alone. A recent survey of Gen Z attorneys found that 60% would sacrifice compensation for a flexible work schedule and just 23% aspire to be a law firm partner. Gen Z also prioritizes work-life balance and flexibility.

Having been a judicial law clerk for over a year and a law firm associate for almost five years, I also know that the first five years of practice are critical for skills development, even if partnership is not necessarily in your future. I benefited tremendously from in-person mentorship and training, and I still value my mentorship and training even though I no longer practice law. When candidates ask about fully remote positions, I tell them that some midsize and boutique firms do not have a formal policy for days in the office. But I advise them to consider various types of firms with hybrid schedules, both to keep all their options open and to accelerate their development of transferable skills, for if and when they do leave the law firm track.

Ultimately, the generations are each going to have to give some ground in acknowledgment of the other’s reasonable perspectives. It remains to be seen how firms will treat hybrid or remote work to promote work-life balance and attract (and retain) talent. Whatever the equilibrium is, we haven’t reached it yet.

The Rising Wave of Associate Salaries: Analyzing the Impact on the Legal Industry in 2023

An insightful recent examination of associate remuneration has unveiled a striking surge in first-year associate pay packets since 2021. As of the onset of 2023, the median base salary for a first-year associate touched the landmark of $200,000, a noteworthy escalation of $35,000 (+21.2%) from 2021. The figures also underscore the diverse effects of these raises across various firm sizes, geographical regions, and legal markets. This swell in associate remuneration carries wide-ranging ramifications for the legal industry, encompassing issues related to talent retention and acquisition, fiscal strains on smaller firms, and potential changes in client billing rates.

Escalating Salaries Across the Spectrum

The 2023 Associate Salary Survey has indicated a rise in first-year salaries across all firm sizes since 2021. Intriguingly, smaller firms, housing 100 or fewer lawyers, recorded the steepest growth in median first-year salaries, showing a 29.2% increase from $120,000 in 2021 to $155,000 in 2023. This trend suggests that even compact firms are feeling the heat to augment salaries to remain competitive in the race for legal talent.

Firms employing between 251-500 lawyers saw their median first-year salaries climb by 21.9%, from $160,000 in 2021 to $195,000 in 2023. Likewise, firms housing 701-1,000 lawyers witnessed a 20.6% increment, with median first-year salaries growing from $170,000 in 2021 to $205,000 in 2023.

The most substantial dollar rise was observed in firms with 501-700 lawyers, with median first-year salaries soaring from $155,000 in 2021 to $200,000 in 2023 (+$45,000), a 29.0% augmentation. This data points out that mid-sized firms are also making noteworthy adjustments to their salary structures to keep pace with the dynamic legal market.

In the case of the most sizable firms, those hosting more than 1,000 lawyers, the median first-year salary touched $215,000 in 2023, a 23.3% rise from $174,000 in 2021. While these firms were the sole entities to report such elevated median salaries, their sway over the rest of the market is substantial, as they account for 75.0% of all first-year salaries in this firm size category.

Overall, the salary augmentations in large firms, paired with rising inflation, have exerted pressure on smaller and mid-sized firms to amplify their salaries as well. This pattern illustrates the extensive effect of the “talent wars” and the market’s reaction to the escalating demand for proficient legal professionals.

Geographical Influence on Salaries

Geography continues to significantly influence salary variations across regions, cities, and states. The 2023 Associate Salary Survey provides analyses for 26 individual cities and additional states and regions, revealing a wide spectrum of law firm compensation. Median first-year salaries by city oscillate between $145,000 and $215,000.

Eleven cities now boast a median starting salary of $215,000: Austin, Boston, Chicago, Dallas, Houston, Los Angeles/Orange County, New York City, San Diego, San Francisco, Silicon Valley, and the Washington, DC area. These cities are spread across different regions, reflecting the flourishing legal markets in these areas.

In locations outside of the 26 major cities featured in the report, the $215,000 starting salaries are found less frequently. The highest median first-year associate base salary in these smaller U.S. cities and towns was in the Northeast ($170,000), trailed by the Midwest and West, both at $165,000. The South reported the lowest salaries, with a median first-year salary of $135,000. This regional disparity underscores the necessity of considering local market dynamics when setting salaries.

Moreover, the most commonly reported first-year associate base salary across all firm sizes was $215,000, accounting for 42.7% of all salaries. This further underlines the influence of major legal markets and large firms on salary trends throughout the industry.

The Ripple Effect on Summer Associates

The escalation in associate salaries also cast a significant impact on second-year summer associates. Their median weekly salary witnessed a robust growth of 13.4%, elevating from $3,075 in 2021 to $3,550 in 2023. This indicates that law firms are revising their compensation packages not only for full-time associates but also for summer associates to maintain a competitive edge in the legal talent market.

Furthermore, the rise in summer associate salaries could potentially sway law students’ decisions when choosing firms for their summer internships. Consequently, firms offering higher summer associate salaries may attract more high-achieving law students, further fueling the competition among law firms.

Beyond salary adjustments, some firms may also enhance the overall summer associate experience by offering unique professional development opportunities, networking events, and mentorship programs. These non-monetary benefits could serve as differentiating factors for firms in the eyes of law students, helping them attract and retain top talent amidst rising salary expectations.

Rippling Effects on the Legal Industry

Talent Retention and Acquisition: The rapid salary increases reflect the fierce competition for legal talent. Law firms must continue to offer competitive compensation packages to attract and retain the best talent.

Financial Strain on Smaller Firms: The salary increases in large firms and rising inflation have created financial pressure on smaller firms to boost their salaries. Smaller firms may need to explore alternative strategies, such as offering non-monetary benefits, to stay competitive in the talent market.

Regional Disparities: The geographical influence on salaries underscores the need for firms to consider regional cost of living and market factors when determining their compensation packages.

Impact on Clients and Legal Services: The increased salaries may lead to higher billing rates, which could affect the affordability of legal services for clients. Law firms may need to look for ways to improve efficiency and reduce costs to maintain client relationships.

The notable increase in associate salaries since 2021 underscores the fierce competition for legal talent and emphasizes the need for law firms to adapt swiftly. As the legal industry continues to evolve, firms must meticulously consider their compensation strategies and maintain flexibility to attract and retain top-notch professionals. If you’re seeking a more personalized understanding of these industry shifts and how they can potentially impact your legal career trajectory, connect with a Lateral Link industry expert. We are poised to provide you with tailored advice and guidance, helping you navigate your career in this ever-changing landscape and ensure you secure exactly what you’re looking for in your legal career.

Business Development for Women Lawyers: Strategies for Success

The current legal landscape—like the economy as a whole—is uncertain. 2022 was a moderately down year for major law firms, as compared to the industry’s remarkable 2021 boom. With firms bracing for what could be a challenging period, adopting effective approaches to business development will be more critical than ever.

This is especially true for women lawyers. Even in smoother economic climates, women confront particular challenges in business development and career advancement in the legal industry. In many practice groups, there remains a lack of female role models for successful business development. Strategies that have traditionally worked well for many male partners don’t always feel authentic and comfortable for women attorneys. More broadly, women often find that they must advocate more actively to receive origination credit and to receive fair consideration for equity partnership and for practice and office leadership positions.

For women associates and counsels, learning how successful women partners approach business development can be eye-opening. The transition to being responsible for developing business is a hard one to navigate for any lawyer. After years of focusing on the practice of law and becoming a highly competent attorney, it can be jarring to confront the reality that legal skills are no longer enough. The discomfort can be compounded for associates and counsels whose practice group leadership is heavily male. Mentorship from female leaders in the profession—including those outside your firm—is often invaluable. When it comes to developing business, there is no one-size-fits-all method for success. Exposing yourself to a diversity of styles and strategies can help you identify and pursue an approach that resonates with your personality, practice, and goals.

For women partners, the business development learning curve doesn’t stop. You have already received a vote of confidence in your ability to bring in clients, but delivering on that potential by growing a solid book of business requires targeted strategies. Business development success is key to increasing compensation, making the jump from non-equity to equity partner, or executing a successful lateral move to a more desirable firm.

On May 24, a virtual event organized by the Women Lawyers Association of Los Angeles (WLALA) Business Law Section will offer actionable advice for women lawyers interested in successful business development strategies. The program will address strategies for success for every woman lawyer: associate, counsel, junior partner, and senior partners leading groups. The moderated discussion will feature three senior legal recruiters, including Susan Agopian and Gloria Sandrino of Lateral Link.

Themes that Susan and Gloria will emphasize include the need for women lawyers to be intentional about business development and the fact that “business development” is “client development”—one client at a time. Focusing on individual clients is a must in today’s legal industry.

After decades of working closely with partners and associates at the highest levels of the profession, Susan and Gloria are well-attuned to what it takes to develop business as a lawyer. Business development planning is central to the partner lateral recruiting process, with candidates expected to present a compelling case for how they will bring clients to their new firm. So Susan and Gloria regularly discuss business development strategy in detail with successful partners—including many women—at a wide spectrum of top law firms. In addition, Gloria brings her perspective of a decade spent practicing M&A in NYC and Miami.

If you are interested in joining the conversation on May 24, please get your tickets here. Note that the session is free for WLALA members!

Navigating the Legal Industry: In-Depth Guide for Law Students and Legal Practitioners

Embarking on a legal career can be both challenging and rewarding. This comprehensive guide delves into law school, selecting a law firm, law firm life, the lateral market, and maintaining a successful career throughout. By understanding the intricacies of each aspect, you can make more informed decisions and excel in your legal profession.

Prioritize Your Law School Grades: Strong academic performance in law school is crucial for securing prestigious summer associate positions that can lead to permanent roles. Maintaining high grades throughout law school is important, as second- and third-year grades can impact lateral moves or in-house opportunities, especially for litigators. Prospective employers will request your transcript when applying for lateral attorney positions and, in some cases, even for partner candidates.

Consider a Federal Clerkship for Litigators: Aspiring litigators should consider the value of a federal clerkship, as it can enhance your legal career, particularly if you plan to work in a litigation boutique or prestigious law firm. A clerkship can be completed before starting your legal career or as a break from law firm work. For corporate associates, a clerkship may not hold the same weight and might not count towards your years of experience.

Choose a Prestigious Law Firm: The prestige of the law firm where you begin your career plays a significant role in your ability to lateral to another firm or move to a company. While smaller firms may offer better hands-on experience and training, prospective employers often prioritize candidates with experience in prestigious firms.

Select the Right Practice Area: Choosing the right practice area involves considering factors such as your personality, lifestyle, academic background, geographic preferences, and future goals. Assess whether you enjoy the substance of the work, can handle the personalities and work culture in a specific practice area, and have the necessary educational background and aptitude.

Understand Law Firm Structures: Understanding law firm structures, such as lockstep firms and two-tier partnership tracks, is essential when making career decisions. Lockstep firms may foster cooperation and have more institutional clients, while two-tier partnership tracks can offer opportunities to prove your worth as a business-building partner.

Manage Your Professional Development: Take charge of your professional development, as law firms may not always prioritize your long-term growth. Be proactive in seeking opportunities for growth and learning within the firm and externally, such as attending workshops, conferences, and networking events.

Stay Informed in Your Field: Stay updated on the latest firm and industry news to remain competitive and knowledgeable about your field. Be aware of emerging practice areas, firm financial performance, and potential opportunities for growth or lateral moves.

Prepare for the Lateral Market: The lateral market requires you to ensure your résumé, deal sheet, and firm bio are always up to date and easy to understand. Having a clear record of your experience and accomplishments can increase your chances of being contacted by recruiters and considered for lateral opportunities.

Invest Time in Interview Preparation: Invest time in preparing for interviews, researching the firm or company, and practicing common interview questions. Maintain a positive attitude during the interview process, avoiding negativity or complaints about current or former employers. Respond promptly to interview requests to convey interest and enthusiasm.

By understanding the intricacies of law school, selecting the right law firm, and navigating the legal industry, you can make more informed decisions and thrive in your legal career. Keep these tips in mind as you progress through your journey and remember to be proactive in managing your professional development.

Navigating Attorney Lateral Moves: Key Trends Shaping Today’s Legal Landscape

The legal landscape is continuously evolving, and Lateral Link’s extensive research into the trends and shifts in the United States’ legal market offers valuable insights. As we explore these findings, we’ll discuss the implications for both law firms and individual attorneys while highlighting specific firms that have been active in the lateral market.

Talent Wars: The Surge in Partner Hires

Between 2021, and the end of 2022, Am Law 200 firms made waves by hiring over 3,600 new partners. These talent wars at the partner and associate levels were the talk of 2022, but the origin of these new partners captured even more interest. For example, Latham & Watkins, and Kirkland & Ellis have been particularly active in recruiting lateral hires, reflecting a broader trend of expansion and increased competition for top talent. Across the Am Law 200, nearly 30% of all partner additions came from unranked firms, while just 12% came from Am Law’s Second Hundred firms.

Interestingly, Tier 1 Am Law firms (firms ranked 1-50 in the 2022 Am Law 200) primarily sourced new partner hires from Am Law 100 firms (59%). For instance, Paul Weiss and Skadden have strengthened their presence in the New York market, while Cooley and Morrison & Foerster have been active in expanding their teams in California. These top-tier firms added more new partners from unranked firms (11%) than from Am Law Second Hundred firms (9%).

Geographical Insights and Gender Dynamics

New York, Washington, D.C., and London remained the most active markets for partner hires. However, the percentage of Am Law 200 partner hires in emerging legal hubs such as Salt Lake City, Nashville, and Austin exceeded 10% of all Am Law 200 partners in each market, indicating growth in these regions. Firms like DLA Piper and Baker McKenzie have made significant hires in the Corporate sector, while Wilson Sonsini and Fish & Richardson have bolstered their Intellectual Property practices.

In terms of gender dynamics, men accounted for seven out of every ten partner hires. Notably, 78% of all women partner hires were made by Am Law 100 firms, demonstrating a potential focus on diversity and inclusion within these top-tier organizations.

Report Breakdown: Hiring Metrics

The report provides a detailed breakdown of hiring practices based on Am Law ranking tiers, Revenue Per Lawyer (RPL), Profit Per Equity Partner (PEP), and gender-based metrics. By examining these hiring trends, law firms can gain valuable insights into the competitive landscape and make strategic decisions to strengthen their market presence and service offerings.

Implications for Law Firms and Attorneys

The data from Lateral Link’s research has several implications for law firms and attorneys.

Strategic growth and competition: The increase in lateral moves highlights the need for law firms to plan strategically to remain competitive. By expanding their practice areas and market presence, firms can better position themselves in the evolving legal landscape.

Talent acquisition and retention: As competition for top talent intensifies, law firms need to prioritize both talent acquisition and retention. This can be achieved through competitive compensation packages, flexible work arrangements, and professional development opportunities.

The importance of diversity and inclusion: With an increased focus on hiring, law firms must also prioritize diversity and inclusion initiatives to attract and retain a diverse pool of attorneys.

Emerging legal markets: As the legal industry continues to grow and change, law firms must keep an eye on emerging markets such as Salt Lake City, Nashville, and Austin, and adapt their strategies to capitalize on new opportunities in these regions.

Navigating attorney lateral moves and understanding the key trends impacting law firms and legal professionals today are essential for success in the ever-changing legal landscape. By recognizing growth in specific practice areas, geographical hotspots, and the increasing demand for in-house and government roles, law firms and attorneys can adapt and thrive in the evolving market.

Embracing technology and innovation: Law firms need to keep up with advancements in technology and leverage innovative solutions to streamline operations, enhance client services, and stay ahead of the competition. Firms like Orrick and Reed Smith have been particularly proactive in incorporating technology and innovation in their practices.

Cross-border opportunities: With globalization and the expansion of multinational businesses, law firms must focus on cross-border transactions and disputes, and develop a diverse team with the ability to work seamlessly across jurisdictions. Firms like White & Case and Baker McKenzie have established themselves as global players by expanding their cross-border capabilities.

Focus on client needs: As clients’ needs become increasingly complex and specialized, law firms must develop niche practice areas and expertise to cater to these demands. For example, Winston & Strawn have developed a strong expertise in antitrust and sports law, while Ropes & Gray have made a name for themselves in private equity and asset management.

Collaborative culture: Creating a culture of collaboration and knowledge-sharing is crucial for law firms to foster innovation and deliver better results for clients. Firms like Goodwin Procter and Hogan Lovells have embraced a collaborative approach, enabling them to provide comprehensive solutions to clients across various industries.

Succession planning: Law firms must have a long-term vision and plan for the future, including effective succession planning and leadership development. By grooming the next generation of leaders, firms like Cravath, Swaine & Moore, and Sullivan & Cromwell can ensure a smooth transition and continued growth.

Understanding the key trends and adapting to the dynamic legal landscape is crucial for law firms and legal professionals to remain competitive and successful. By being proactive in their approach to talent acquisition, retention, diversity, inclusion, and strategic growth, law firms can rise to the challenges and capitalize on the opportunities that lie ahead in the ever-evolving legal market. As you navigate these challenges and opportunities, Lateral Link is here to guide you through your journey, offering expert advice and professional support to help you make the best decisions for your career and practice. With a deep understanding of the industry’s complexities and trends, Lateral Link is your trusted partner in shaping your future in the legal profession.

2023 Am Law 100 Rankings: A Comprehensive Breakdown

For top Biglaw firms, 2021 was an incredible year: gross revenue rose nearly 15%, while profits per equity partner grew almost 20%. Those growth rates were obviously unsustainable, so there is no great surprise that the financial metrics reported in the just-released 2023 edition of the Am Law 100 indicate a return to earth. 2022 was a roughly flat—for many firms, somewhat down—year. But considering the lofty heights reached in 2021, that actually isn’t so bad.

Collectively, in 2022, the AmLaw 100 attained:

  • Total revenue: $130.8 billion, up by 2.7%. 
  • Average revenue per lawyer: $1.16 million, down by 1.9%.
  • Profits per equity partner: $2.56 million, down by 3.7%.

For context, let’s compare the 2022 growth rates to the remarkably strong growth of 2021 and 2020, as well as the more typical rates of 2019:

Positive revenue growth paired with declining RPL implies that increases in headcount played a material role. Indeed, total AmLaw 100 headcount rose 4.7% (approximately 5,000 additional lawyers), with equity partnerships expanding by 1% (+207 equity partners) and the nonequity partner pool growing by 6.4% (+1,175 nonequity partners). This is consistent with our observations of the 2022 lateral market: even as deal work took a hit, 2022 was a reasonably strong year for lateral hiring.

Let’s now take a closer look at the three most important metrics — gross revenue, revenue per lawyer, and profits per partner — and the top 10 firms in each category.

Gross Revenue

Here are the top 10 firms in the 2023 Am Law 100 rankings, ranked by their gross revenue in 2022. You can access the full list here.

Kirkland & Ellis once again led the pack, widening its lead over Latham & Watkins, which maintained its second-place position despite a decline in revenue. There was little change to the top group, with Gibson Dunn entering the top 10 and Hogan Lovells dropping down to the 12th slot.

Most of the top 10 firms achieved revenue gains, but this was not representative of the broader Am Law 100. Although overall Am Law 100 revenue increased in 2022, 59 of the 100 firms suffered a revenue decline. This was a marked reversal from 2021, when every Am Law 100 firm increased revenue year-over-year.

Revenue Per Lawyer

Here are the top 10 firms in the 2023 Am Law 100 rankings based on revenue per lawyer. You can access the full list here.

It was not a great year for revenue per lawyer among the Am Law elite, highlighted by the 12% declines for Davis Polk and Simpson Thacher. Wachtell, Sullivan & Cromwell, Cravath, and Kirkland maintained their positions at the top of the table despite RPL decreases. Proskauer was the only new entrant into the top 10, with Quinn Emanuel falling to the 13th slot due to a 13% RPL decline—a notable hit in a relatively strong year for litigation.

Profits Per Equity Partner

And finally, the ranking we’ve all been waiting for: the top 10 firms by profits per equity partner. You can access the full list here.

The big news is that Kirkland has overtaken perennial champion Wachtell as leader of the PPEP ranking. Wachtell made history in 2021 as the first firm to exceed the $8 million PPEP mark. But a 13% drop in 2022—in the face of Kirkland’s 2% increase—has dislodged Wachtell from the top spot.

Wachtell’s percentage decline is not the highest among the top 10: that title goes to Davis Polk, which suffered a whopping 21% drop in PPEP. In the process, Davis Polk fell from the third slot to the fifth. New entrants into the top 10 were Skadden and Gibson Dunn. They displaced Cravath, which fell to 13th thanks to a 19% PPEP decline, and Cahill, which fell out of the Am Law 100 entirely.

In 2022, 9 Am Law 100 firms achieved profits per equity partner above $5 million (compared to 14 in 2021 and 6 in 2020). It wasn’t the year some firms might have hoped for, but even so, being an Am Law 100 equity partner in 2022 was still substantially more lucrative than prior to the pandemic.

Gain further insights and analysis on the 2023 Am Law 100 rankings by tuning in to our latest episode of Movers, Shakers & Rainmakers. This engaging Lateral Link podcast offers a deeper understanding of the legal industry landscape.

Biglaw Associates’ Buying Power: Exploring Salary Disparities & Cost of Living in Major US Cities

Like it or not, most Biglaw associates have returned to the office, with 90% of AmLaw 100 firms now encouraging or requiring a specific number of days per week of in-person work. In an environment where “work from anywhere” is no longer viable for most lawyers, and where inflation remains high, cost of living in the market where your office is located has become more important than ever.

Cost of living and salaries are closely connected in many industries. Some legal sector jobs exhibit that correlation. Consider as an example a federal judicial clerk with one year of practice experience and bar passage (i.e., paid at the Grade 12, Step 1 of the Judicial Salary Plan scale). Because federal judicial pay rates are adjusted based on cost of living, that clerk would be paid $102,489 in San Francisco versus $89,848 in Dallas.

In Biglaw, however, cost of living is largely irrelevant to salary scales. Top firms pay associates the “New York” rate in several “major” markets, including the Bay Area, Los Angeles, Chicago, Houston, Dallas, Boston, and DC. From a cost of living perspective, paying New York salaries in San Francisco makes sense. In Houston or Chicago? Not so much.

It’s good to be a Houston Biglaw associate

A November 2021 NALP analysis of median private practice first-year associate salaries relative to cost of living found stark differences in associate buying power. NALP calculated that Houston and Dallas first-year associates each enjoyed more than double the buying power of their New York counterparts.

NALP’s calculations may actually understate the advantage enjoyed by Houston and Dallas associates because NALP considered only the relative cost of goods and services. But Houston and Dallas don’t just offer lower prices, they also feature no state income tax. For highly paid Biglaw associates, tax savings can make a significant difference in enabling fast wealth accumulation.

CityBuying power index (NYC = 1.0)Marginal state + local income tax rate for single first-year Biglaw associate
Houston2.50%
Dallas2.20%
Chicago1.94.95%
Atlanta1.95.75%
Los Angeles1.69.3%
Boston1.65%
Washington DC1.58.5%
San Francisco1.29.3%
NYC1.010.73%

The NALP survey looked at private practice salaries overall, rather than Biglaw salaries exclusively. If the analysis had been limited to Biglaw offices, the results would surely have been somewhat different. But the broader point is unassailable: associate salaries are poorly correlated with cost of living.

Billing rates are a key driver

If cost of living isn’t driving associate salaries, what is? In short, billing rates. Houston and Chicago may not be high-cost cities, but they have plenty of clients willing to pay firms top-dollar rates. Viewed from that lens, paying top salaries in these markets seems fair: associates are being compensated for the value they create. Over time, as clients become more accustomed to the notion of top legal talent being based in regional cities, we expect to see more lawyers being paid New York rates in cities across the country, especially with Biglaw firms expanding aggressively in secondary markets. That’s not to say that median associate salaries in secondary cities will rival the New York level. But for lawyers with top-flight credentials, geographic arbitrage may become increasingly possible and alluring.  

If you’re a New York or Bay Area associate tired of putting up with relatively low buying power, you may wish to consider a lateral move to Texas, Chicago or Atlanta. If working from the beach in Mexico is no longer in the cards, at least consider the wealth accumulation potential of a lower cost city where firms pay New York rates!

7 Key Factors to Consider When Choosing a Law Firm: A Comprehensive Guide for Legal Professionals

The legal industry has evolved significantly, and selecting the right law firm requires careful consideration of various factors. In this comprehensive guide, we present an updated and detailed analysis of the 7 key factors to consider when choosing a law firm in the competitive legal and recruiting market, supported by relevant data and statistics to help you make an informed decision.

Firm Size: Assessing the Work Environment and Opportunities

When evaluating a law firm, size plays a crucial role in determining the work environment and available opportunities. Large firms (Am Law 100 and 200) typically offer a broader range of practice areas and represent 81% of total revenue generated by the top 200 law firms in the U.S. However, they may also involve longer hours, with over 60% of associates working more than 50 hours per week on average. Smaller boutique firms and regional firms may provide a more intimate work setting, focused expertise, and better work-life balance. Consider your preferences and evaluate which size firm aligns with your legal career goals.

Practice Area Focus: Identifying Firms with Strong Practice Groups

Certain practice areas are experiencing significant growth. For instance, the global data privacy market is expected to reach $158.2 billion by 2027, and intellectual property filings have increased by 10.2% in recent years. It’s crucial to identify law firms with strong practice groups in your area of interest, as this can impact your professional development and long-term career prospects. Research each firm’s reputation and track record within your chosen practice area to make an informed decision.

Firm Culture: The Importance of Diversity, Inclusion, and Work-Life Balance

Firm culture has become increasingly important, as law firms recognize the value of a healthy work environment in retaining top legal talent. According to a survey by the American Bar Association, firms with diverse and inclusive environments report higher retention rates and overall satisfaction. Investigate the firm’s commitment to diversity, inclusion, and work-life balance, and assess whether the firm’s values align with your own. Speak to current and former employees and attend legal networking events to get a feel for the company culture.

Compensation and Benefits: Evaluating Competitive Law Firm Salaries

Compensation remains a critical factor when choosing a law firm. The median salary for first-year associates at large law firms is $190,000, while smaller firms may provide competitive compensation based on their niche expertise or regional market strength. In addition to base salary, evaluate benefits such as bonuses, retirement plans, and health insurance to make a comprehensive assessment of the firm’s compensation structure.

Location: The Impact of Geographical Presence on Your Legal Career

Remote work has become increasingly common in the legal industry, with 74% of law firms offering flexible work arrangements. However, a firm’s geographical presence still plays a significant role in shaping your career. Major legal markets provide access to prestigious clients and high-profile cases, while smaller markets may offer lower costs of living and a better work-life balance. Consider your personal preferences and long-term goals when evaluating a law firm’s location.

Professional Development and Mentorship: The Key to a Successful Legal Career

Law firms that prioritize professional development and mentorship tend to have higher retention rates and more satisfied attorneys. A study by the NALP Foundation found that firms with structured mentoring programs have a 20% higher associate retention rate after three years. Investigate each firm’s commitment to training, continuing education, and mentorship programs to ensure a supportive environment for building a successful legal career.

Partnership Prospects: Assessing Your Long-Term Career Trajectory

As you advance in your legal career, partnership prospects may become increasingly important. According to the American Lawyer, the average time to partnership at large law firms is approximately 8.2 years. Assess each firm’s partnership track, including the average time to partnership, the firm’s expectations for partner candidates, and the overall partnership structure (e.g., equity vs. non-equity partners). A transparent and well-articulated partnership track can impact your long-term career trajectory and financial success.

In Conclusion: Navigating the Legal Landscape with Confidence

Choosing the right law firm requires thorough research and consideration of various factors. By evaluating firm size, practice area focus, firm culture, compensation and benefits, location, professional development and mentorship, and partnership prospects, you can make an informed decision that aligns with your personal and professional goals. The legal landscape is continuously evolving, and understanding the nuances of each firm can help you navigate your career more effectively.

As you embark on your legal career, remember that selecting the right law firm is just the first step. Staying up-to-date with industry trends and developments, networking, and continually reassessing your goals will help you remain adaptable and successful in the ever-changing legal market. Don’t hesitate to seek guidance from industry experts and peers, as they can provide valuable insights and support throughout your career journey. If you’re looking for personalized assistance in finding the right law firm or making a strategic career move, consider reaching out to Lateral Link. Our experienced legal recruiters can provide invaluable advice and connect you with opportunities that align with your professional aspirations. Visit Lateral Link’s website today to learn more about how we can support you in navigating the complex legal landscape and propel your career forward.

Navigating Compensation Trends in 2023: Ensuring Fair Pay in the Legal Sector

Over the past decade, the legal industry has undergone substantial transformations, prompting law firms and in-house legal departments to continually adjust their compensation strategies to attract and retain top talent. In 2023, evaluating whether you are underpaid is more crucial than ever, given the salary increments, shifts in bonus structures, and the emergence of new compensation models. This article delves into the prevailing compensation trends in the legal sector and offers insights on how to ascertain if your remuneration aligns with current market standards.

Grasp the Compensation Landscape

To accurately assess whether you are underpaid, it is imperative to comprehend the existing compensation landscape for legal professionals. In 2023, Biglaw firms have persistently elevated associate salaries, with first-year associates now receiving a market standard of $215,000. This rising trend encompasses all seniority levels, with eighth-year associates earning up to $375,000.

Partner compensation has also witnessed a surge, with average profits per partner surpassing $2 million at several distinguished law firms. In-house general counsel roles have experienced considerable salary growth, with chief legal officers at Fortune 500 companies earning between $700,000 and $3 million, contingent on the company’s size and complexity.

Benchmark Your Compensation Against Industry Averages

A practical approach to determining whether you are underpaid is to juxtapose your current compensation with industry averages. Resources such as the National Association for Law Placement (NALP) and legal industry publications furnish extensive salary data for diverse legal roles and practice areas. Bear in mind that compensation can vary considerably based on factors like firm size, location, and practice area specialization.

Evaluate the Significance of Bonuses and Benefits

Beyond base salaries, bonuses and benefits are instrumental in ascertaining total compensation. In 2023, Biglaw firms have consistently offered substantial bonuses, with year-end and special bonuses frequently reaching six figures for high-performing senior associates. Moreover, law firms and in-house legal departments have broadened their benefits packages, encompassing health insurance, retirement plans, and flexible work arrangements. To precisely assess your compensation, take into account the worth of these supplementary factors.

While examining your compensation, it is vital to recognize that base salary constitutes just one aspect of a comprehensive compensation package. Bonuses and benefits, such as health insurance, retirement plans, and vacation time, can substantially influence your overall earnings. Ensure that you incorporate these components when comparing your compensation to market standards, as they can significantly impact your total income.

It is important to note that not all Am Law firms adhere to the market standard for compensation, with some underpaying their associates. For instance, Gibson Dunn has faced scrutiny in recent years for not aligning with the industry’s compensation trends. Despite the firm’s renown for its high-profile cases and robust practice groups, reports indicate that its associate compensation packages have not paralleled the rapid salary growth observed at other Am Law firms. This disparity underscores the necessity of researching and contrasting compensation packages across firms, even those with esteemed reputations, to guarantee that you are justly compensated for your skills and expertise.

To accurately determine if you are underpaid, gather information on comparable positions within your specific practice area, location, and experience level. This data can often be sourced from salary surveys, legal industry publications, or through conversations with colleagues and recruiters.

Examine Your Compensation in Relation to Your Peers

Another valuable tactic is to compare your compensation with that of your peers. Networking and candid discussions with colleagues or alumni can yield invaluable insights into the compensation landscape within your practice area or region. Approach these conversations with tact and professionalism.

Consult an Expert for Guidance

If you are uncertain about whether your compensation aligns with the market, consider seeking advice from a legal recruiter. Knowledgeable legal recruiters, like those at Lateral Link, possess an in-depth understanding of the legal market and can offer tailored guidance based on your distinct background and career aspirations.

Discerning if you are underpaid in 2023 entails comprehending the current compensation landscape, contrasting your salary with industry averages, taking into account bonuses and benefits, appraising your pay in relation to your peers, and seeking expert guidance when necessary. As the legal industry continues to evolve, staying informed about compensation trends and engaging in open dialogues can help ensure your pay corresponds with your skills and experience.

If you suspect that your compensation is not commensurate with the market, or if you are exploring new opportunities with competitive compensation packages, contact Lateral Link today. Our adept legal recruiters can assist you in navigating the intricate legal market and discovering the right position that aligns with your professional objectives and financial expectations. Don’t leave your career and financial success to chance – let Lateral Link help you seize the opportunities you deserve.

Partner Group Hiring: A Common Alternative to Traditional Expansion Strategies

2022 was a difficult year for major law firms, with considerably reduced opportunity to drive profit growth as compared to 2021. It’s no surprise, then, that the more challenging environment is influencing firms’ strategies for expanding their partnerships. With reduced margin for error, firms are mindful of the risks inherent in the traditional methods of hiring individual lateral partners or of merging with another firm. According to our clients and many of the law firm leaders with whom we work closely, hiring groups of partners has emerged as a sweet-spot alternative.

Hiring partner groups is less risky than individual lateral hiring

Hiring partners in groups can mitigate many of the risks associated with traditional lateral hiring. Take cultural fit, for example. A lateral partner hire who turns out to be a poor cultural match can do real damage to the cohesion of a firm and, in the final analysis, undermines the very purpose behind their hire. A 2021 survey by ALM Intelligence and Decipher Investigative Intelligence found that 29% of firms have had a lateral partner leave due to cultural fit issues with other partners. Rather than take the risk of integrating a single new lateral partner, firms often prefer to bring on a group of partners with a proven ability to work together, expecting that the group will replicate its existing equilibrium in the new firm and, thereby, contribute as efficiently as possible to the bottom line.

Group hiring also arguably offers greater security that claimed portable books of business are real. Nearly half of respondents to the ALM/Decipher survey reported that the majority of their firm’s partner laterals underperformed in relation to their stated book of business. The survey found that more than two-thirds of law firms have had a lateral partner leave for this reason.

Group moves improve these outcomes significantly. When a group moves together, clients are more likely to move with them and there are several additional indicators that portables will be solid. These range from such soft indicators as the trust shown by associates, counsels, and service partners moving alongside their rainmaking colleagues to harder indicators available when cross-referencing the business case provided by each partner in their lateral questionnaires.

Lastly, group hiring is also more efficient, offering more bang for the buck and swifter growth than a piecemeal approach – saving both time and money.

Group hiring is more targeted—and certain—than pursuing a merger

In theory, the greatest bang for the buck expansion strategy is a merger; but although we have seen some merger activity this year among smaller firms, and some attempts among larger ones, too, the specter of failure often looms large and a firm may invest significant energy in the process, only to walk away with nothing (take, for example, the recent merger attempts between Shearman Sterling and Hogan Lovells or O’Melveny and Allen & Overy). Worse yet, failed mergers often attract unwanted attention from competing firms looking to take advantage of any resulting turmoil by siphoning off spooked talent – the opposite of growth! Group hiring is less complex than conducting merger talks and a deal is more likely to be reached. In addition, the hiring firm can be more selective about the partners it takes on. Underperformers are less likely to be admitted through a group hire than through a larger-scale merger.

Partner group hiring is ideal for secondary market expansion

As we have previously discussed, we are in the midst of accelerated Biglaw expansion into new or smaller markets across the country. Consider the options available to a firm committed to opening a new office in Miami or Austin or Salt Lake City, with no prior presence in those markets. While they may, in the past, have hired two or three individual lateral partners from local firms and transferred some of the firm’s current partners to the new office in the hope it all jells successfully, firms are now more inclined to hire a group of local partners and use that group as the anchor for the new office, to be supplemented by some internal transfers.

Mintz Levin’s entry into the Toronto market is one example. This week we learned that the firm’s new office will be anchored by a group of three partners from leading Canadian firm Torys. Mintz has also hired a Toronto-based Dentons partner who was previously at Torys.

Expansion into a new market is a high-stakes move, with considerable reputational risk. A group with existing local client relationships that already works together productively provides a strong initial platform. Firms’ desire to maximize their likelihood of success in new markets is a key driver of the partner group hiring trend.

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If you are interested in learning more about firms’ partner hiring strategies, please contact me.