It’s 2014 and We STILL Don’t Know Where Our Talent Is . . .
By Sue Manch –
Way, way back in 2008, Deloitte published a landmark white paper on the state of talent entitled, “It’s 2008 – Do You Know Where Your Talent Is?” [1] At the time, it caused a number of law firms to take a hard look at their talent pipeline. Many were not happy with what they found. Deloitte predicted a significant talent crisis likely to cripple firms dependent on knowledge workers, with shortages of top graduates and high attrition. With our “elevator assets” in large firms, most of us agreed that it was not only going to happen – it had already happened. Finding new lawyers with the intellectual firepower and willingness to make the sacrifices required to be successful was increasingly difficult. But that concern dropped off the radar screen as the legal industry saw a stunning financial meltdown that left revenues and profitability in tatters. Mass layoffs, summer and new associate deferments and firm failures that followed fostered a mindset that lawyers were lucky to have jobs.
After all that pain, law firms can relax about talent shortages because they are in a “buyers” market now when it comes to legal talent, right?
Well, maybe not . . .
The more I study the talent scenario in law firms today, the more I see the accuracy of the predictions Deloitte made in 2008. Yes, statistically there are two lawyers for every legal job and many law school graduates are unemployed. However, there are simply not as many highly talented lawyers who are also well-suited for private practice as we need to keep law firms thriving and to lay the foundation for our next generation of equity partners. The number of unemployable lawyers is a useless statistic, meaningful only if you believe that everyone who graduates from law school is likely to thrive and survive in meeting client demands in a large law firm practice. Those of us in law firm recruiting business for many years know that is not the case.
Relentless reporting of a legal talent glut confuses the issue for both students and firms. Law school applications are dropping, but the overall size of law firm graduating classes has not – alerting us to the fact that law schools must be accepting a higher percentage of applicants and likely lowering admission standards. A number of the highest ranked law schools have cut the size of their entering classes, but transfers of 2L’s and 3L’s to those same schools are on the rise. This keeps the overall law school graduation numbers high, but removes the reporting requirement to US News and World Reports for transfer grade point averages and LSAT scores. The Law School Admissions Council data shows years of steady decline in the number of applicants with the highest LSAT scores until 2014, when they finally showed a slight increase in that tier. The Constitutional Daily [2], a blog focused on trends in the legal profession, reports their analysis of Law School Application Council data showing that 78 of 144 ranked law schools and 18 of the schools ranked 1 – 48 experienced a drop in both average LSAT scores and average grade point averages among accepted students.
It’s not the whole picture, but it may be true that fewer of the best and brightest are pursuing law as a career. Add to that the smaller summer classes law firms have hosted since the financial meltdown and you have the perfect formula for a talent crisis today and in the years to come.
Let’s remember: there are a finite number of midlevel associates in large firms who have deep experience and can add value to client work – and every firm wants and needs them. We can’t go out and manufacture a fifth-year M&A associate who has seen steady Fortune 50 client deal flow and gradually built both skill and confidence. That person either exists or she does not. And that’s where it gets scary. In 2014, there are 629 1L students who fall into the top 20% of their class in the law schools ranked 1 – 10 on the US News and World Reports Best Law Firms list. That means almost every large firm in the country is competing for a share of those 629 students. If we posit that each AmLaw 100 firm wants a minimum class size of 15 to 20 (and we know many programs are much larger), that means we need at least 2000 1L’s to fill summer programs.
A recent Law 360 blog [3] entry about loss of jobs in the legal sector overall had buried in it an interesting comment from Dan DiPietro: “Many of our clients have told us their hiring plans haven’t changed significantly so we expect incoming classes to be essentially the same as last year,” said Dan DiPietro, chairman of the law firm group at Citi Private Bank. “We do understand, though, that midlevel associates are in short supply and great demand.”
It’s that last sentence that should make us cringe. Midlevel and senior associates, managed and leveraged properly, can be the most profitable talent tier in a large law firm, but midlevel associates are in short supply in most practice area specialties. Annual law firm associate attrition levels have remained largely stable at around 17 to 20%, meaning a first-year class of 20 associates will be cut almost in half by the time it reaches its fourth year if not augmented with laterals. It’s simple math. Talented law firm midlevels need three to four years of experience working on transactions, supporting trial teams or managing other types of client work. It is not possible to pull a third or fourth year lawyer out of a different type of employer and have a client-ready associate. Experiences in public service or in-house are useful, but do not prepare the lawyer to do the work of a highly effective law firm associate.
A lack of a strong midlevel tier in the developing lawyer pipeline also signals few partner candidates in line to become the next-generation owners of firms. In a May 2014 article, Aric Press of the American Lawyer magazine writes, “About 16 percent of the partners in the nation’s top 200–grossing law firms are 60 years old or older. And more than half of them are at least 65. Collectively they are at or nearing retirement. For Big Law, they are the leading edge of the baby boom generation that has transformed or at least swollen virtually every institution they’ve encountered since arriving on the scene in the heady years that followed the end of World War II.”[4] Because there were so many boomer partners, there are simply fewer Gen X partners behind them, leaving a gap that will have to be filled by the lawyers who are now associates and counsel. But will the talent firms need be there when their law firms need them?
The last time the legal talent market could not meet demand, salary wars ensued and partner and group movement was rampant. Given most firms’ inability to bill fully for junior lawyers, dealing with salary escalation could be disastrous and we know growth by laterals is a strategy filled with peril (see the excellent article detailing these perils by Bill Henderson and Christopher Zorn [5]).
Firms must begin a process of strategic workforce planning today, if they have not begun to do so. The talent pipeline in each practice and for every leadership roles must be analyzed and gaps identified.
It’s 2014 – Do you know where your talent will come from? If not, it’s probably a good time to begin strategizing.
Footnotes:
[3] http://www.law360.com/articles/487483/legal-sector-shrinks-amid-growth-for-most-professionals
[5] http://www.americanlawyer.com/id=1202639515457/Is-Reliance-on-Lateral-Hiring-Destabilizing-Firms
Blog Author
As Firmwide Director of Recruiting & Development at Bingham McCutchen, Sue collaborates with firm leaders to devise strategies to prepare lawyers and staff to provide the highest quality service to clients and to help them build successful and satisfying careers. The primary goals of the Recruiting & Development Groups are to support firm leadership in devising and executing talent strategy in alignment with firm business strategy and provide Bingham team members with developmental support that allows each to contribute at the highest levels as a part of our firm community.
Prior to joining Bingham, Sue was a founding Principal of Shannon & Manch, LLP, a leading consultancy advising law firms, law schools, and a range of legal employers on talent development and lawyer career management strategies. She has more than thirty years of experience as a consultant to the legal industry, university and law school administrator, and career coach. Sue has advised the majority of the Am Law 100 and Global 100 law firms, as well as top law schools. She held positions at Georgetown University, The Catholic University of America, Columbus School of Law, and Trinity College, among others. She has a MEd in Clinical Counseling from the University of Virginia and a BA in Psychology from Ohio University. Sue is also a Master Coach, certified by the Behavioral Coaching Institute.