Tag Archives: Legal Industry Trends

Law Firm Mergers: Analyzing the 2023 Trends and 2024 Forecasts

The landscape of law firm mergers in 2023 revealed significant developments, characterized by a series of strategic consolidations. These trends not only reshape the current legal market but also set the stage for further transformations in 2024.

2023 Merger Landscape: A Quantitative Overview
In 2023, the legal industry saw 48 law firm mergers, a slight increase from 44 in the preceding year. This uptick underscores a growing interest in strategic growth and market diversification, particularly among large firms and in cross-border consolidations. For instance, the year witnessed notable cross-border mergers, doubling from two in 2022 to four, and mergers involving large firms (with over 100 lawyers each) increased from two to five, as reported by Fairfax Associates.

Notable Mergers and Strategic Expansions
High-profile mergers, such as the combination of Allen & Overy and Shearman & Sterling, highlighted a trend towards global expansion, particularly for UK firms eyeing the U.S. market. Regional mergers also made headlines, with the largest domestic merger being between Cleveland-based Ulmer & Berne (175 lawyers) and St. Louis-based Greensfelder Hemker & Gale (140 lawyers), signaling a strategic move towards creating ‘super-regional’ entities.

Challenges and Considerations in Large-Firm Mergers
Executing mergers among large law firms presented its challenges. Aligning firm cultures, client portfolios, and operational strategies are crucial for a successful integration. Such complexities are indicative of the nuanced approach required in larger consolidations.

Shift in Focus: Boutique and Regional Firms
Smaller and mid-sized firms showed an increased propensity for mergers as a strategy for combating slow growth and rising operational costs. This shift indicates a broader recognition of mergers as a key strategic tool for sustaining competitiveness in a challenging market.

2024 Projections: Continuing Trends with New Dynamics
The legal sector in 2024 is anticipated to continue witnessing mergers, albeit with a nuanced shift. Larger firms are showing a preference for organic growth through internal development, suggesting a more balanced approach to expansion.

Economic Factors Influencing Mergers
Economic conditions, such as market fluctuations and inflation, continue to influence the merger landscape. Firms are increasingly using mergers as strategic responses to these economic challenges, showcasing the importance of adaptive strategies in the legal sector.

Regional Dynamics
The regional distribution of mergers in 2023 also offers valuable insights. States like California, Chicago, and Pennsylvania emerged as hotspots for merger activities, underlining the importance of understanding local market dynamics in strategic planning.

The 2023 law firm merger trends and the 2024 outlook reflect a dynamic approach to growth and adaptation within the legal industry. As firms navigate the global market, mergers remain a pivotal strategy, especially for smaller and regional firms. Concurrently, larger firms are diversifying their growth strategies to include both mergers and organic development.

Engage with Our Experts for Strategic Growth
To effectively navigate these trends, consult our industry experts at Lateral Link. Our team offers in-depth knowledge and practical experience to help you understand these market shifts and their implications for your firm.

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Maximizing Career Potential Through Pro Bono Work: A Lawyer’s Guide

In the fast-paced legal world, finding time for pro bono work can be challenging, but the benefits are well worth it. The need for pro bono services is great, and those who lend their expertise free of charge to serve the greater good often find the work rewarding and satisfying, both professionally and personally.

In fact, it’s for these reasons that pro bono hours have been on the rise in the past several years. According to a recent study, overall pro bono hours have been on a steady climb, with 4.2 million hours in 2015 rising to 5.45 million hours in 2020​​. In 2022, the AmLaw 200 firms contributed about 5.01 million hours of pro bono work, a slight decrease from the 5.45 million hours in 2020 but an increase from 2021​​. This trend underscores the importance of pro bono work, and below we discuss in detail exactly why providing pro bono services can enhance one’s professional and personal development while also serving those in need.

Pro Bono Work: It Makes Us Happy
There is a Chinese saying: “If you want happiness for an hour, take a nap. If you want happiness for a day, go fishing. If you want happiness for a year, inherit a fortune. If you want happiness for a lifetime, help somebody.” Throughout history, the greatest thinkers have suggested that happiness is found in helping others. This notion is supported by scientific research, including a study by Titova and Sheldon (2021) in The Journal of Positive Psychology, which found that efforts to make others happy can increase personal happiness more than focusing on oneself​​​​​​. Helping others may be the key to living a life that is not only happier but also healthier, wealthier, more productive, and meaningful.

Expanding Legal Expertise Through Pro Bono
Beyond serving the greater good, pro bono work is an opportunity for lawyers to diversify their experience and improve their skill set. It also gives lawyers the chance to pursue an area of law they are passionate about. Doing so will not only make you a more well-rounded attorney, but it will also better serve your existing clients by having an understanding of different types of matters and the different walks of life they come from. What’s more, pro bono work often gives younger attorneys more hands-on experience than their primary (paying) practice. For example, a litigator who has never argued in the courtroom or a corporate lawyer who has never directly drafted or negotiated contracts can take on pro bono cases to gain practical, first-hand experience. These experiences are crucial for skill development, especially for lawyers early on in their careers.

Networking and Team Building
Pro bono work is an effective strategy for building stronger bonds with colleagues and for broadening professional networks. Collaborating with colleagues from other practice areas/departments on pro bono matters can forge new relationships and strengthen camaraderie within an organization. Pro bono work can also connect lawyers from different organizations, expanding one’s professional network, which can prove invaluable for career development down the road.

Enhancing Brand Recognition, Law Firm Culture and Recruitment
Many lawyers today tell me they are looking for employers that prioritize corporate responsibility – which is the notion that a firm makes a concerted effort to operate in ways that enhance rather than degrade society and the environment. Pro bono work is one of the prime ways firms can achieve this. In fact, when evaluating law firms and attorneys to hire as outside counsel, many clients look favorably at those who have actionable social responsibility initiatives in place.

Leadership and Pro Bono
Strong pro bono involvement often leads to leadership opportunities. This is evident in the growing number of dedicated pro bono partner roles in law firms globally. As reported by the International Bar Association, there are now 66 examples of dedicated pro bono partner roles across 55 law firms worldwide​​.

The nature of pro bono work has evolved significantly over the last decade, with pro bono practices expanding in size and complexity, often operating across multiple jurisdictions and connected to humanitarian emergencies. This growth in pro bono partner roles reflects these trends and provides another avenue for leadership opportunities within firms​​.

Elevate Your Legal Career with Pro Bono Insights
In sum, providing pro bono services is not just the right thing to do, but it’s also the smart thing to do – for your career, your community, and your happiness. To truly excel in this profession, strategic choices are crucial. For personalized guidance on leveraging pro bono work to enhance your legal career, reach out to Lateral Link. Our team of experienced legal recruiters specializes in aligning lawyers’ career trajectories with their professional aspirations and personal values. Engaging with our experts offers a unique opportunity to explore how you can improve your professional development. Please reach out to us anytime for seasoned insights on how you can define and achieve your ideal career path.

What Law Firm Associates Want: Attracting Top Talent Through Relevant Policies and Procedures

To secure top-tier talent, law firms must understand and respond to the shifting preferences and expectations of associates. The purpose of this article is to help law firms better understand what associates are looking for when considering a lateral move. Equipped with this information, firms will be better positioned to critically analyze policies and procedures that may be inhibiting recruitment and growth efforts. 

Today’s associates want two things. No, it’s not better snacks in the break room. It’s transparency and fairness – a prominent theme throughout this article. Considering these trends and expectations will ensure that your law firm is an attractive option for lateral attorneys.

The Pursuit of Transparent Compensation

At the heart of candidate expectations is an unequivocal demand for transparent compensation. Transparency starts at the beginning of the job search and sets the stage for a positive or negative candidate experience.

There is a high demand for transparent salaries. Lateral associates want to know the salary for each job they are considering before applying. In fact, compensation expectations are often included in the first conversation legal recruiters have with their candidates. Thus, the first step in attracting the best candidates is to be clear on compensation. Firms can create clarity by providing a salary range in the job description and sharing this range with their recruitment partners. Salary transparency ensures that both parties are aligned before investing time and energy into the interview process. 

Transparency also extends to the offer process. If a candidate discloses a target salary and the firm agrees to interview that candidate, the firm’s offer should reflect the candidate’s target number. In a real-life example, a candidate was transparent and ensured salary alignment by disclosing her target salary, but the offer she received was $25,000 less than previously discussed. This discrepancy left the candidate with a negative impression of the firm, which ultimately resulted in an offer that was not accepted. To ensure that your offers are accepted, discuss realistic salary ranges as an initial matter and ensure that the candidate’s salary request fits within your compensation plan and structure. 

Valuing Contributions Beyond Billable Hours

Transparency drives candidates to the firm, but equitable compensation helps them stay. Associates and partners alike are expressing a desire for recognition and compensation for their contributions outside of billable hours, including activities such as recruitment, training, diversity programs, and business development. Oftentimes, these important yet non-billable activities are not taken into consideration when determining overall compensation. In a real-life example, a partner’s expertise, ethnicity, and gender were leveraged to obtain new business but the partner received no credit or other form of compensation for helping to bring in that new business to the firm. To maintain equitable compensation, develop a system to appropriately value non-billable contributions. 

Redefining Bonus Structures

The legal industry is experiencing a significant shift in how bonuses are perceived and valued by candidates. Disenchantment with discretionary bonuses is growing. More and more candidates favor transparent, formulaic bonus structures. Associates want to know what goals they are required to meet and what they will receive in return. They crave clear guidelines and expect to be presented with a written bonus structure. 

Associates are also conducting cost-benefit analyses to evaluate the best way to spend their time. Bonus structures that provide an hourly rate for hours billed in excess of the firm’s requirement are being strictly scrutinized. Accordingly, the law firm’s formula must be motivating and competitive. In two real-life examples, one associate earns a $1,500 bonus for every 100 hours billed over 1,900 hours while the other earns $75 per hour billed over 1,900. The first associate calculated that this bonus amounts to $15 per hour and felt that they could be paid more working a second job or forgoing the bonus altogether while the second associate billed 2,300 hours and earned a $30,000 bonus. The first associate felt demotivated and undervalued while the other felt motivated and excited to succeed. 

In another notable trend, many candidates (associates and partners alike) are willing to exchange the promise of a large bonus for a slightly higher base salary even if it means a reduction in overall compensation. In another real-life example, an associate expressed more interest in a compensation structure with a base salary of $200,000 and a $10,000 bonus than a base salary of $150,000 with a $100,000 bonus. These trends highlight a preference for predictability, stability, and transparency.

Let’s not forget bonuses based on collections. Associates are turned off by bonuses that are only paid when and if the client pays. While associates understand that there is a business reason for linking bonuses to collections, associates feel that they have no control over when and if a client pays their bill. This issue is also compounded when the associate exclusively works for one client who has a reputation for payment delays or a client has strict billing rules. Unlinking associate bonuses to client-dependent activities will create a more equitable environment and culture. 

Bonus structures – if designed properly – have the potential to attract, motivate, and retain candidates. Firms should review their bonus plan and evaluate it with a critical eye. It may also be an opportunity to save money and enhance culture while also better reflecting associate compensation trends and desires.  

The Desire for Upward Progression

Associates crave firms that offer an upward trajectory. After all, no one wants to be at a dead-end job. Associates are seeking firms with reputations for offering annual raises and a clear path to partnership. In a real-life example, an associate with a four-year tenure at her firm made a lateral move because she had not received a raise in over two years. If your firm struggles to provide annual raises and has no defined path to partnership, your firm is likely a less attractive option to laterals. To combat these issues, carry out intentional salary adjustments, calendar time each year to review salaries, and document the path to partnership. 

The Imperative for Determined  Leave

Similar to salary, candidates are demanding transparency around time off and leave of absence. Vacation days and parental leave are of high interest. Candidates are now less content with open-ended leave policies and desire specific and numerical leave policies. They do not want to guess how much time off is too much or too little. They want to know the firm’s expectations upfront (usually in the form of a formal written policy) and adhere to those requirements. In particular, associates want to know the firm’s policy on leave before accepting an offer. This is understandable as policies often vary from firm to firm. To attract top candidates, law firms should consider memorializing their policies in written documents and actively promote their policies during the interview process. Doing so will ensure that candidates are well-informed and eliminate the need for candidates to initiate this taboo yet crucial conversation.

Embracing Flexibility: The Hybrid Work Model

The demand for flexibility is stronger than ever, with many candidates seeking firms that have adopted the hybrid work model. In particular, candidates seek an established, written policy clearly identifying the number of days expected to be worked in office. In a real-life example, a firm offering hybrid work (1 day in the office per week) is able to attract talent at salaries well below market. Offering this work model has saved the firm thousands of dollars per attorney in base salaries. This approach also helps to retain attorneys because employees highly value this level of flexibility and it is less likely to be found at competitor firms. If your firm is considering adopting a hybrid work model, make sure you have the necessary technological infrastructure, are able to maintain a level of mentorship and support, and clearly communicate expectations. 

A Call for Transparency and Fairness

Transparency and fairness stand out as the prevailing themes in the current landscape of candidate preferences. Law firms that align their policies and procedures with these principles will position themselves as attractive employers for today’s legal talent. Embracing these trends will not only enhance the firm’s reputation but will also contribute to the long-term success and stability of the firm.

Lateral Link is a vital ally for law firms navigating these changing tides. Connecting with Christine Berger and Lateral Link ensures that your firm is attuned to the latest trends, fostering a culture that attracts, nurtures, and retains the best legal talent. The journey towards building a resilient, future-ready legal practice starts here.

Lateral Attorney Hiring Trends in 2023: Adapting to a Shifting Economy

Trends in the Lateral Attorney Hiring Market in 2023

Certain practice areas have maintained consistent hiring or experienced a modest increase as the economy hints at recovery entering the latter half of 2023.

General State of the Economy and Law Firm Financial Stability

Though foundational components of the U.S. economy, like steady GDP growth and historically low unemployment rates, show strength, depressed corporate activity levels are affecting the demand for legal services. The situation worsened due to law firms over-hiring in 2021, leading to decreased productivity, especially among junior associates. However, certain practice areas remain in demand, signifying an increase in deal activities in some corporate sectors, which, in turn, is boosting law firm requirements and attorney recruitment.

Law firms have seen a rise in demand over the past quarter, aligning with the broader economic recovery. A recent Q2 2023 report by the Thomson Reuters Law Firm Financial Index (LFFI) revealed a 1.5% demand increase for legal services. This was a significant jump from the 0.1% rise in Q1. The study also highlighted an impressive 5.9% surge in client-agreed rates, the most substantial in over a decade. Demand mostly catered to countercyclical areas like bankruptcy and employment and less economically sensitive fields like litigation and antitrust.

However, the path to economic recovery isn’t devoid of challenges. Law firms grapple with overcapacity and efficiency issues. A survey by Wells Fargo’s Legal Specialty Group indicated a 4.4% revenue growth for law firms in the first half of 2023 but pointed out struggles related to an oversupply of attorneys hired during 2021-2022. Additionally, according to a Decipher Investigative Intelligence report, lateral hiring in Q2 2023 dropped by 33% year-over-year. Interestingly, partner hiring dipped by just 4%, while associate hiring plummeted by 43%.

Busy Associate Hiring Practice Areas

Even with many law firms overstaffed, certain areas continue to recruit. These sectors range from those traditionally countercyclical to ones less influenced by economic shifts or aligned with recent economic enhancements.

Labor & Employment

This sector has remained active over the last two years, particularly in employment litigation and counseling. Companies, still navigating a backlog of L&E investigations from the pandemic era, coupled with a rise in class action suits against employers, means L&E associates are highly sought after.

Data Privacy and Cybersecurity

The increasing number of corporate data breaches and evolving regulations have created a demand spike for experts in data privacy and cybersecurity.

Restructuring

Aligning with the rise in U.S. corporate bankruptcies, restructuring has seen predictable growth. Yet, it hasn’t reached the spikes typically associated with significant economic downturns.

IP

With courts clearing the backlog of patent litigations from the pandemic period, there’s a surge in hiring patent litigation associates.

Litigation

Litigation, typically less affected by corporate activity slowdowns, has seen consistent demand, especially in areas like consumer protection and public nuisance state attorney general actions.

Corporate and Transactional Practice Areas Experiencing a Rebound

Despite the setbacks in the past year, corporate transactional sectors are witnessing a revival in hiring. Recent data on M&A activity showcases this trend. As more economists predict an upbeat trajectory for the upcoming quarters and with recent firm hiring patterns, optimism surrounds the prospective increase in associate recruitment as we move through 2023 and into 2024.

If you’re seeking insights into the lateral attorney hiring market or considering a move in this dynamic environment, don’t navigate these waters alone. Contact our Managing Director in the Chicago office, Jesse Hyde, for expert guidance and dedicated support. The Lateral Link team is here to assist you every step of the way, ensuring you have the resources and opportunities tailored to your professional aspirations.

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.

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.