Tag Archives: Biglaw

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Evolution of Legal Billing Practices: Navigating Competitive Pricing in Today’s Legal Landscape

The legal industry is at a crossroads, driven by AI, industry consolidation, and evolving client expectations. As we transition from 2023 into 2024, legal professionals wrestle with key pricing concerns: “Am I overcharging? Am I undercharging?” These questions were spotlighted in the recent Twitter vs. Wachtell lawsuit, revealing the intricate dynamics of legal billing practices.

Billing pressures persist in our profession. Achieving a 100% realization rate seems like a distant dream. To navigate these uncertainties, we explore the current trends in legal billing, offering insights for legal professionals grappling with fee structures. A comprehensive understanding of your billing methods can alleviate some pressures of our dynamic profession.

For decades, the hourly rate model has been the bedrock of legal pricing. It assigns monetary value to an attorney’s time and expertise. While it serves complex cases well, it often faces backlash due to cost unpredictability and potential inefficiencies.

In contrast, the flat fee model offers a transparent, predefined cost, eliminating unpredictability. Ideal for routine legal work, it can, however, fall short when dealing with complex cases with unforeseen twists.

To stay competitive, it’s crucial to understand the nuances of industry trends, competitor rates, and client expectations. Regular reassessment of your fee structure ensures you neither overcharge nor undercharge your clients. It also highlights when an overhaul of your billing strategy is due.

The future looks promising for hybrid models that integrate the strengths of both hourly and flat fee billing. These models offer a guaranteed base payment with the option for an hourly rate for additional work. The emergence of value-based billing models shifts the focus from time to perceived value, radically altering our billing perceptions.

The Twitter vs. Wachtell case underscores the importance of understanding and adapting to these evolving trends. Legal professionals must remain current with changing dynamics to ensure fair treatment for clients and appropriate compensation for their work.

Keeping a pulse on competitors’ strategies, regularly evaluating your own billing practices, and adapting as necessary will be essential as we delve into 2024. These shifts will significantly impact the operations of law firms and the value delivered to clients.

Navigating competitive billing practices in this demanding landscape can lighten our professional burdens. By ensuring we’re appropriately compensated, we can stake our claim in the fluctuating terrain of the legal industry while delivering high-quality services to our clients.

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Career Advancement in Legal Profession: Exploring Lateral Moves and Reasons Lawyers Switch Firms

Countless attorneys experience satisfaction with their current law firms. However, a perplexing query often surfaces: “Why shoulder the challenge of starting anew or abandon established relationships?” The primary motivation behind such a decision lies in career progression. Progressive lawyers steering their professional journeys recognize the pitfalls of complacency and strive for career evolution that should be accompanied by amplified satisfaction. Though the present conditions might be conducive, they constantly evaluate – can they improve further elsewhere? Delve into these 12 compelling reasons triggering lateral transitions in law firms and assess whether these circumstances echo your professional situation.

  1. Aiming for Improved Partnership Opportunities: Often the driving force behind lateral moves in law firms.
  2. Desiring Less Pressure Towards Partnership: Not everyone aspires to be a partner. An alternate role with reduced up-or-out pressure might be more appealing.
  3. Craving Substantive Work: Are you prematurely categorized into a specific specialty?
  4. Seeking Increased Responsibility: Does your firm’s culture overly value hierarchy?
  5. Yearning for Enhanced Client Interaction and Business Development: Firms have diverse outlooks on associate participation in client development.
  6. Preference for Diverse Industry Exposure: Are you more inclined towards corporate interaction rather than dealing with financial institutions?
  7. Choosing Smaller Boutique Law Firms: Particularly among litigators, boutique firms could offer more sustainable hours and smaller, personalized teams.
  8. Caught in a Demanding Project: Predominantly observed among litigators. Sometimes, a switch to a different firm becomes the only feasible solution!
  9. Relocating to a New City: Are you contemplating a move to a new market for enriched work exposure or client interaction?
  10. Incompatibility with Colleagues: The overarching culture of your firm might not align with your personality or career aspirations.
  11. Eyeing Government or In-House Roles: A lateral transition could pave the way for your dream in-house or government role.
  12. Striving for Better Compensation: A transition to a firm offering industry-standard or even higher remunerations might be possible.

A skilled legal recruiter can provide valuable insights considering your unique experiences, seniority level, prevailing legal market conditions, and anticipated industry trends. After evaluating your options, you might decide to continue with your present firm. The critical point to remember is: take the reins of your career and professional development. Whether you choose a transition or remain with your present firm, ensure it’s a conscious decision, not a mere default option.

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Promoting Diversity in Law: A Strategic Guide for Navigating the Post-Affirmative Action Legal Landscape

Impact of the Supreme Court’s Decision on Diversity in the Legal Profession

The Supreme Court’s decision ending race-conscious affirmative action in college and law school admissions has sparked a reevaluation of efforts to promote racial diversity, not just on campuses but also in the workplace more broadly. In the legal profession, as in many industries, the Court’s stand puts in jeopardy the progress that has been made over the last several years. This moment challenges those of us who believe in the value of a diverse profession to think creatively about opportunities to redouble our efforts.

The Role of Legal Recruiters in Upholding Diversity in Law Firms

Legal recruiters have a role to play—consistent with the law—in mitigating the impact of what we expect will be a reduced number of diverse graduates from the nation’s most prestigious law schools. We have an obligation to press ahead on our long-held vision of a profession that better reflects the diversity of our country.

Recent Progress in Racial Diversity Within U.S. Law Firms

In recent years, law firms have made undeniable progress on racial diversity, even if the pace of change has been slower than we would wish.  NALP’s Report on Diversity in U.S. Law Firms found that in 2022, the representation of Black associates at major U.S. law firms grew by half a percentage point, to 5.8%, and the proportion of Black summer associates rose by 0.7 percentage point, to 11.9%. Moreover, for the first time, women of color achieved representation of greater than 10% among lawyers overall.

The Influence of the Mansfield Rule on Law Firm Diversity

This progress is partly attributable to active efforts like the Mansfield Rule. Modeled after the National Football League’s Rooney Rule, which requires teams to interview diverse candidates as part of the head coach hiring process, the Mansfield Rule presses law firms to consider “a broad slate of talent – including at least 30% underrepresented lawyers – for leadership positions.” Firms committed to that standard can become Mansfield Certified. Of course, it remains to be seen whether Mansfield and similar efforts will persist in their current form following the Supreme Court’s decision.

Challenges to Racial Diversification in Law Firm Partnership Ranks

Disappointingly, among the law firm partnership ranks, racial diversification has appeared to be stagnating even without the added burden of the Supreme Court’s new holding. NALP found no statistically significant growth in equity partners of color in 2022. The top echelon of the profession remains its least diverse segment.

Strategic Steps Legal Recruiters Can Take Amid Reduced Law School Diversity

So how can search firms like Lateral Link continue to drive progress, even if law school classes become less racially diverse in the immediate future?

Deepening Partnerships with Law Schools and Alumni Associations

First, we can deepen our partnership with law schools and their alumni associations, curating creative ways to support diverse students in their efforts to navigate the legal recruiting landscape successfully. Our goal should be to equip the diverse students who are admitted—even if the numbers are smaller—with sufficient knowledge and inspiration to make it to elite law firms.

The Power of Personal Interaction and Mentorship Programs

There are countless opportunities to connect with and educate students, according to Amy Langan, Lateral Link Professional Development and Law School Relations Manager. “In our experience, student affinity groups are highly receptive to hosting speakers from the recruiting sector.” Examples of potential presentation topics include interviewing tips, how to choose a practice area, market-specific updates, and how to pursue a non-traditional legal career. As legal recruiters, we have a birds-eye view of the legal industry nationwide, and we can share with law students our insights about job opportunities in the cities that they are targeting for summer and permanent associate positions. Amy notes that “we can visit HBCU law schools, and we can sponsor or attend job fairs known to attract diverse students. Showing up and being visibly supportive makes a real difference.”

Tailored Mentorship: Fostering Success for Diverse Students

In addition to giving presentations in larger settings, recruiters can help facilitate more tailored one-on-one mentorship, for example by helping to pair lawyers and legal recruiters with students who are members of diverse affinity groups. The Orange County Korean American Bar Association (OCKABA) offers an example. Lateral Link Senior Director Christina Ahn co-chairs the OCKABA Mentorship & Outreach Committee, which pairs law student mentees with attorney mentors based on the student’s interest and the attorney’s practice area. Attorney mentors regularly offer personalized insight into how to advance successfully in a law firm setting.

Collaborative Partnerships: Supporting Racially Diverse Attorneys

Second, legal recruiters can partner with law firms and State Bar Associations to jointly assist racially diverse attorneys to thrive at all levels of seniority, in a manner that remains compliant with the Court’s ruling. Recruiters bring substantial intelligence to the table, with knowledge both of what law firms are looking for in potential lateral hires and of the individual needs of diverse candidates. An example of a forum where this knowledge can make a major contribution is the Texas Minority Counsel Program—the premier client development, networking, and CLE event for Texas attorneys. Open to everyone, the program’s mission is to increase opportunities for diverse attorneys, and to expose organizations to the legal talent of diverse attorneys in Texas.

Curating Initiatives for Diversity in Law Firm Partnerships

In the particular context of law firm partner opportunities, legal recruiters can work with firms to curate new initiatives that comply with the Supreme Court decision and, at the same time, ensure that partners of color can thrive in the law firm platform. Specifically, legal recruiters can work closely with law firms to help them prioritize diversity in partner recruiting and retention.

The Importance of Intentionality in Diversity Efforts

Now more than ever, legal recruiters have to be intentional about being part of the solution. Just hoping for the best will not create diverse and inclusive legal communities. Being intentional may at times entail discussing sensitive issues that impact diverse partners disproportionately, such as origination credit formulas, lateral partner integration, and diversity, equality, and inclusive initiatives at each of the firms we work with. Sometimes these conversations may generate a measure of discomfort or resistance, but recruiters need to use our access to advance the discussion of these essential matters.

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Adapting to Market Shifts: U.S. Law Firms in Hong Kong Rethink COLA Strategy

At least three top-tier US law firms in Hong Kong are currently planning to phase out Cost Of Living Adjustment (COLA) allowances within the next two years, and others are discussing doing the same. The plan is to reduce the payment by 50% in 2024 and to zero by 2025. At least one firm has announced the change internally office-wide, while two others have apparently made the decision internally but have yet to announce to their associates and counsels in Hong Kong.

Will this work? Time will tell, but history suggests these firms are facing an uphill battle to phase out COLA in Hong Kong. This isn’t the first time firms have made moves to rein in COLA. Similar plans have been deployed during previous down cycles. The problem is that unless every firm in the market ends the practice, associates will simply move from firms that reduce COLA to peer firms that maintain it.

If the current hiring downturn lasts for an additional two full years, it is conceivable that no firm would see an advantage in maintaining COLA, while others are phasing it out over two years, and using that policy to attract lateral talent. But a downturn of that length, with both soft and hard hiring freezes going on for three total years, would be unprecedented. It is more likely that the hiring market will pick up in due course at some point in 2024, reestablishing the tight supply dynamics that led firms to offer significant COLA allowances in Hong Kong in the first place. If that happens, firms will have a strong incentive to use COLA as a recruiting tool. And the firms now planning to stop paying it may find themselves reconsidering, especially when their star associates may consider moves next year as their COLA begins to be phased out.

Around ten years ago, two top US firms in Hong Kong made plans to have a three-year tail on their COLA for their US associates, whereby COLA would only be in effect for an associate’s first three years at those firms’ Hong Kong offices. However, around seven years ago, when the scheduled end to COLA for their star associates was looming, both firms quietly continued providing COLA after the three years. One of these two firms completely abandoned the idea of the three-year tail.

Unsurprisingly, firms would rather not make substantial COLA payments, especially in the current down market. There are presently very few associate openings in Biglaw offices in Asia—a major deviation from the norm. Some firms perceive this rare hiring downturn as an opportunity to implement change.

Cost of Living Adjustments: Why Biglaw Offices in Asia Pay US Associates More Than Any Other Region

The market for US-qualified Biglaw associates in Asia has long been unique. As in other regions, Biglaw firms are looking for candidates with top academic credentials and deal experience. But in addition, they look for local language skills—most commonly, fluent Mandarin. This combination of attributes shrinks the eligible candidate pool, and under normal market conditions, competition for the relatively limited number of associates who check all the boxes is intense.

That’s why firms have for many years paid so-called Cost of Living Adjustments (COLA) to US-qualified associates working in Asian offices. Describing these payments as COLA is a misnomer, in that they bear no particular relation to cost of living (which is typically in Biglaw Asian markets roughly the same or slightly lower than in New York). Further, there are substantial tax windfalls for associates who land in tax havens such as Singapore and Hong Kong. This is true for both US taxpayers and non-US taxpayers, although the latter’s tax windfall is much larger than the former’s.

Instead, COLA is more accurately understood as simply an increase in base pay, rather than being tied to any cost of living adjustments or living expenses in general.

How much COLA do firms pay?

Before getting into the numbers, allow me to offer some context about my background. I recently joined Lateral Link, but my close association with Biglaw offices in Asia goes back nearly two decades, and over 500 attorney placements have been made in Asia, mostly at top-tier and second-tier US firms.

The table below presents the typical range of annual COLA (in US Dollars) in Hong Kong. To keep things simple, I have listed a Low, Medium, and High value, along with the number of firms paying at that level, among what we consider to be the top 20 US and UK law firms in Hong Kong. Please note that these COLA numbers are basic and do not include additional COLA allowances paid to associates who have children (a minority of firms in Hong Kong do this). Further, it is likely that by this time next year, there will only be one firm in the “High” range, with one of those firms considering lowering COLA a bit and one of those firms planning to phase out COLA. Outside of the handful of firms considering to phase out COLA, there has been no move to lower the COLA below the current low-end range ($60,000 to $95,000) in the Hong Kong market. This has been the range of COLA for the top 20 firms in Hong Kong for more than ten years.

LocationLow (11 Firms)Medium (6 Firms)High (3 Firms)
Hong Kong$60,000 – $70,000$75,000 to $85,000$90,000 to $95,000

One might assume that COLA is for Americans moving to Asia as expats. In the mid-2000s when the COLA system was more basic and the US law firm offices in Asia were very small, that was basically true. But the picture today is more nuanced, especially in Hong Kong—the most competitive market for associate hiring.

COLA is typically offered to attorneys that are in a “US team” (e.g., US Capital Markets, M&A, FCPA, etc.) usually (but not always) led by US-trained and qualified partners. Keep in mind that members of such teams are not necessarily Americans. Many associates are native to the region but are qualified as US lawyers. So a native Hong Kong citizen with an American JD (and with no obligation to pay US taxes) will earn COLA despite living in his or her home jurisdiction.

There are also numerous UK and Australian qualified associates at US firms in Hong Kong that work on US teams and get COLA, regardless of whether they are admitted in any US state.

Interestingly, a minority of US law firms in Hong Kong provide COLA to all or most of their solely Hong Kong-qualified associates. These lawyers are admitted to practice only in Hong Kong and typically grew up in Hong Kong, or at least have been living in Hong Kong their entire legal career. They work side-by-side with US-qualified colleagues who receive COLA, and their firms want to retain them. Accordingly, at these select offices, COLA has effectively transformed into increased base pay for all associates across the board.

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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.

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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.

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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!

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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.

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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.

Featured, Market News, Newsletters, Tips

Applying AI to Legal Recruiting: New Tools for Efficiently Matching Firms and Candidates

With everyone talking about ChatGPT and the implications of AI tools for the future of various professions, now is an opportune time to consider how AI might change legal recruiting. We at Lateral Link have been actively engaging with this question for years: in fact, we have a sister company called Haistack.AI that is developing AI products for the legal recruiting industry.

So for the latest episode of the Movers, Shakers & Rainmakers podcast, we invited Haistack.AI Chief Technology Officer Michael Heise to discuss the possibilities and limitations of AI for law firms and legal recruiters. Mike educated us on the likely implications of AI for our industry and described the logic behind the product that Haistack.AI is currently building.

Mike is a seasoned legal tech innovator with a deep understanding of Biglaw firms. Prior to joining Haistack.AI, Mike held software leadership roles at Cooley and Covington & Burling. As he explained on the podcast, he is married to an attorney, and it was his wife who first sparked his interest in legal sector innovation.

AI can be a valuable tool

Mike explained that AI has the potential to assist lawyers with a broad range of tasks. For example, a litigator could rely on AI tools to set out the basic structure of a brief, allowing the lawyer to dedicate more of her time to the higher-value tasks of refining arguments and tailoring them to be most persuasive based on the unique facts of the case. As Mike puts it: “AI is not going to replace you. The person who knows how to effectively use AI is going to replace you.” AI tools will become increasingly sophisticated, but human judgment will remain essential for crafting the strongest and most original arguments.

Similarly, AI is well suited to help recruiters—both within firms and outside them—to more efficiently identify high-potential candidates. By reducing the time a recruiter spends on manually trawling through candidate profiles, AI can enable the recruiter to gain a deeper understanding of the high-potential candidate pool and the relative strengths of the candidates within that pool.

The Haistack.AI vision

As an example of how AI promises to make recruiting more targeted and efficient, Mike described the product that the team at Haistack.AI is building. It entails creating three essential models: (1) profiles of lawyers currently working at the firm that is using Haistack.AI in its hiring process; (2) profiles of lawyers working outside that firm; and (3) profiles corresponding to the specific roles for which the firm is recruiting. By comparing the profiles of lawyers previously hired by the relevant practice group and office with the profiles of external lawyers, the algorithm can instantly generate a list of high-potential candidates and an explanation for why those candidates appear to be a good fit. Moreover, the AI will use Lateral Link data to screen out candidates whom the firm has previously considered and determined not to be a fit. Finally, the tool will give some indication of the extent to which the leading candidates are likely to be in demand at other firms seeking to fill similar vacancies, alerting the hiring firm to the need to move quickly where a candidate is likely to be in especially high demand.

With the assistance of the Haistack.AI tool, the recruiter managing the search will immediately see how the algorithm matched a candidate’s qualifications and experience to those of current members of the group. This is where human judgment comes in. The AI accelerates the first step of identifying a shortlist, but the law firm’s recruiting and attorney professionals must assess whether the shortlist fits their needs, through interviews and other more traditional evaluations.

Mike noted that in addition to generating lists of promising candidates, the Haistack.AI tool could also help identify current members of a firm who are in especially high demand relative to what the broader lateral market is seeking. In alerting a firm to attorneys who are at greater risk of leaving, the tool can help nudge a practice group to be more proactive about taking steps to keep valuable team members happy.

AI is not a panacea

Mike also explained the importance of recognizing the limitations of AI and of not buying into the excessive hype that frequently surrounds promising technologies in their early stages. AI will not solve all hiring problems. To take just one example, the inputs for AI models like the ones that Haistack.AI are building are composed of historical data — the models are designed to replicate the firm’s past hiring decisions. To the extent the past hiring was suboptimal, such as through failing to hire qualified diverse candidates, the AI tool will not correct the problem. Instead, it is important for the human users to be thoughtful about patterns in past hiring that they do not wish to replicate and make an active effort to change them.