Legal Business and Employment Outlook: Recruiter Views

[Editor's Note: The following remarks are excerpted from "The Outlook for 2004: A Recruiter Roundtable," published in The Recorder (03-22-2004). Lawyers, firms and corporate legal departments can all find reasons for optimism in over a dozen interrelated trends identified by this thoughtful panel.]

Chris Braun (publisher of The Recorder): Tell me what you think we're likely to see in the next year or so in terms of changes in the profession.

Avis Caravello (of Avis Caravello Attorney Search Consultants): I'm looking in my crystal ball and I see three trends that will definitely continue. There'll be further consolidation of the Am Law 30. The big firms are continuing their quest to be global players, coming into regional markets and acquiring smaller firms, and gaining more critical mass by continuing to expand overseas. In doing so, they are gaining more of a foothold in large institutional client bases and thereby continuing to raise their rates, which hopefully will result in more work for associates and more associate hiring.

The other result of that will be that as rates rise in certain practices that are more regionalized, we're going to see more opportunities for the smaller and the midsize firms to pick up those practice groups that are struggling to keep the rate structure in the larger global firms. That's really good news for the smaller and midsize firms.

The last thing I see, which also goes to long-term employment opportunities, is in 2 or 3 years there's going to be a massive shortage of mid-level to senior corporate associates, the likes we've yet to see. They have all been decimated from this market in the past 2 or 3 years. As things pick up, firms are going to be looking for those people. So three or four years from now, we will have that big shortage and we'll be running around trying to find those folks.

Stacy Miller (of Miller, Sabino & Lee): I'm seeing the continuation of trends. Law firms are reflecting their clients and their business models, whether that be having business people running and managing the firm, hiring a CEO or COO or what have you. I'm seeing a lot of firms streamline processes and making partners and people accountable for their practices and profitability. That's good news for us as recruiters. In the last couple years I've seen a great increase in retained searches, which goes hand-in-hand with very focused efforts on recruiting.

On the in-house side, a lot of my corporate clients are realizing that it is time to bring legal work in-house. It's much more cost-effective for them to hire somebody, pay the salary, and bring them on as an employee of the company, as opposed to paying outside law firm fees. So I'm seeing in-house legal departments grow. And that's in the very traditional sectors as well as in the new economy-type businesses. So I think it'll be an interesting couple of years.

Hopefully with the hiring of all the junior corporate associates that's going on right now, maybe all those people will grow up and become mid- to senior-level associates so that people aren't left in a glitch.

David Lacob (of Pacific Search International): I see five or six big trends. We will continue to see a dominance and further consolidation of the Am Law 100 and 200. The national firms that have the resources and scale are still in the sweet spot. At the same time, a couple caveats apply. I don't think, as has been written in some press articles, that the Magic Circle firms will necessarily dominate the U.S. landscape. They may make inroads, but I don't think they will dominate. They will still have a great role to play in world markets.

Another thing we're seeing is that the nature of how law firms get business from their in-house clients is changing. We've recently seen more fee-based bid work. I think that's a trend that's going to continue. Some people call it an auction model. I don't know if I'd go quite that far.

Conflicts for large law firms have become a massive problem. I don't want to say that there'll be a revenge of the boutique, but I do concur that we will see more boutiques; however they will be a different kind of boutique than we've seen in the past. One example of that is the midsize powerhouse litigation firm. There are a number of examples that I could cite in that area. I think that's a trend we're going to see, sort of a muscular, midsize litigation boutique. Another trend that's certainly going to continue is international work, particularly in Asia.

The demand for people who have engineering and hard science backgrounds will continue, and the demand for language ' Mandarin, Taiwanese, Cantonese, Japanese. There's massive competition for people with that kind of background and skill set, and that's going to continue. Some advice for very young lawyers or people planning to go to law school is think engineering, think science, think languages, and think China. Certainly I think these are areas where we're going to see a lot of excitement in the coming years.

Stephen Van Liere (of Cushing Bicksler Van Liere): I agree that this trend towards the largest firms focusing on premium billing will continue. It's almost reshaping the notion of what a full-service law firm is. Those are the firms that built broad practices to handle all the legal needs of their clients, but that sort of runs right in the face of trying to focus only on premium billing-rate practices. As Avis pointed out, it's going to create opportunities for firms that have a rate structure that's one notch below a premium billing rate structure. They will be able to pick up practices like employment, real estate, wealth management and other kinds of practices that still draw a nice rate, but maybe not the premium rate.

I see a continuation of this trend toward creating more levels of involvement and/or ownership in a law firm, which began as a way for some firms to de-equitize partners in order to increase their per-partner profit numbers to make them more attractive merger candidates.

A collateral effect (and I think a benefit) is that firms are starting to look a little more creatively at what a partner in a law firm is, what an associate is, what an of counsel might be. You see a plethora of titles now, whereas before it was simply either equity partner or associate. I hope that trend continues, because it allows for more flexibility in work arrangements for people who want to be lawyers but don't necessarily want to be an associate on an equity-partner track. That's important given the demographics of law students and lawyers who are trying to balance family and everything else.

The third element I'm curious about ' I don't know if it will actually develop into a trend ' is related to the in-house side. There was an excellent article in your publication about what was called the Dupont Method, this idea that corporations will start to outsource the more commoditized aspects of legal work. I'm very curious whether that will take hold, because it would have a significant effect on recruiting and hiring practices. It would have a significant effect on my business, because we also do contract attorneys and legal professionals. So it'll be interesting to see whether that is just sort of the latest “in vogue” management technique or whether it'll actually happen.

Chuck Fanning (of Major Hagen & Africa): On the staffing side, I think we're in a pretty interesting spot right now. We've gone through a period where associate hiring, particularly through recruiting firms, was almost zero for a period of time. Now it appears to be picking up quite dramatically. I predict that we will see the continuation and extension of a trend that has already started in the partner recruitment area: law firms being much more strategic about how they approach lateral hiring and the use of recruitment firms. When it comes to making important hires, whether it be in the partner or the associate realm, I just don't think the old model of tossing those needs out to a bunch of search firms on a contingent basis has worked very well. Corporations long ago discovered the benefits of partnering more closely with a recruitment firm to execute on important hires; in fact, contingent search is the exception rather than the rule with respect to our firm's in-house search practice. In the last couple of years, law firms have increasingly dipped their toe into the water of retained search at the partner level. I think we'll continue to see that, and also the extension of more exclusive or at least semi-exclusive relationships in the associate hiring realm.

[Editor's Note: The following remarks are excerpted from "The Outlook for 2004: A Recruiter Roundtable," published in The Recorder (03-22-2004). Lawyers, firms and corporate legal departments can all find reasons for optimism in over a dozen interrelated trends identified by this thoughtful panel.]

Chris Braun (publisher of The Recorder): Tell me what you think we're likely to see in the next year or so in terms of changes in the profession.

Avis Caravello (of Avis Caravello Attorney Search Consultants): I'm looking in my crystal ball and I see three trends that will definitely continue. There'll be further consolidation of the Am Law 30. The big firms are continuing their quest to be global players, coming into regional markets and acquiring smaller firms, and gaining more critical mass by continuing to expand overseas. In doing so, they are gaining more of a foothold in large institutional client bases and thereby continuing to raise their rates, which hopefully will result in more work for associates and more associate hiring.

The other result of that will be that as rates rise in certain practices that are more regionalized, we're going to see more opportunities for the smaller and the midsize firms to pick up those practice groups that are struggling to keep the rate structure in the larger global firms. That's really good news for the smaller and midsize firms.

The last thing I see, which also goes to long-term employment opportunities, is in 2 or 3 years there's going to be a massive shortage of mid-level to senior corporate associates, the likes we've yet to see. They have all been decimated from this market in the past 2 or 3 years. As things pick up, firms are going to be looking for those people. So three or four years from now, we will have that big shortage and we'll be running around trying to find those folks.

Stacy Miller (of Miller, Sabino & Lee): I'm seeing the continuation of trends. Law firms are reflecting their clients and their business models, whether that be having business people running and managing the firm, hiring a CEO or COO or what have you. I'm seeing a lot of firms streamline processes and making partners and people accountable for their practices and profitability. That's good news for us as recruiters. In the last couple years I've seen a great increase in retained searches, which goes hand-in-hand with very focused efforts on recruiting.

On the in-house side, a lot of my corporate clients are realizing that it is time to bring legal work in-house. It's much more cost-effective for them to hire somebody, pay the salary, and bring them on as an employee of the company, as opposed to paying outside law firm fees. So I'm seeing in-house legal departments grow. And that's in the very traditional sectors as well as in the new economy-type businesses. So I think it'll be an interesting couple of years.

Hopefully with the hiring of all the junior corporate associates that's going on right now, maybe all those people will grow up and become mid- to senior-level associates so that people aren't left in a glitch.

David Lacob (of Pacific Search International): I see five or six big trends. We will continue to see a dominance and further consolidation of the Am Law 100 and 200. The national firms that have the resources and scale are still in the sweet spot. At the same time, a couple caveats apply. I don't think, as has been written in some press articles, that the Magic Circle firms will necessarily dominate the U.S. landscape. They may make inroads, but I don't think they will dominate. They will still have a great role to play in world markets.

Another thing we're seeing is that the nature of how law firms get business from their in-house clients is changing. We've recently seen more fee-based bid work. I think that's a trend that's going to continue. Some people call it an auction model. I don't know if I'd go quite that far.

Conflicts for large law firms have become a massive problem. I don't want to say that there'll be a revenge of the boutique, but I do concur that we will see more boutiques; however they will be a different kind of boutique than we've seen in the past. One example of that is the midsize powerhouse litigation firm. There are a number of examples that I could cite in that area. I think that's a trend we're going to see, sort of a muscular, midsize litigation boutique. Another trend that's certainly going to continue is international work, particularly in Asia.

The demand for people who have engineering and hard science backgrounds will continue, and the demand for language ' Mandarin, Taiwanese, Cantonese, Japanese. There's massive competition for people with that kind of background and skill set, and that's going to continue. Some advice for very young lawyers or people planning to go to law school is think engineering, think science, think languages, and think China. Certainly I think these are areas where we're going to see a lot of excitement in the coming years.

Stephen Van Liere (of Cushing Bicksler Van Liere): I agree that this trend towards the largest firms focusing on premium billing will continue. It's almost reshaping the notion of what a full-service law firm is. Those are the firms that built broad practices to handle all the legal needs of their clients, but that sort of runs right in the face of trying to focus only on premium billing-rate practices. As Avis pointed out, it's going to create opportunities for firms that have a rate structure that's one notch below a premium billing rate structure. They will be able to pick up practices like employment, real estate, wealth management and other kinds of practices that still draw a nice rate, but maybe not the premium rate.

I see a continuation of this trend toward creating more levels of involvement and/or ownership in a law firm, which began as a way for some firms to de-equitize partners in order to increase their per-partner profit numbers to make them more attractive merger candidates.

A collateral effect (and I think a benefit) is that firms are starting to look a little more creatively at what a partner in a law firm is, what an associate is, what an of counsel might be. You see a plethora of titles now, whereas before it was simply either equity partner or associate. I hope that trend continues, because it allows for more flexibility in work arrangements for people who want to be lawyers but don't necessarily want to be an associate on an equity-partner track. That's important given the demographics of law students and lawyers who are trying to balance family and everything else.

The third element I'm curious about ' I don't know if it will actually develop into a trend ' is related to the in-house side. There was an excellent article in your publication about what was called the Dupont Method, this idea that corporations will start to outsource the more commoditized aspects of legal work. I'm very curious whether that will take hold, because it would have a significant effect on recruiting and hiring practices. It would have a significant effect on my business, because we also do contract attorneys and legal professionals. So it'll be interesting to see whether that is just sort of the latest “in vogue” management technique or whether it'll actually happen.

Chuck Fanning (of Major Hagen & Africa): On the staffing side, I think we're in a pretty interesting spot right now. We've gone through a period where associate hiring, particularly through recruiting firms, was almost zero for a period of time. Now it appears to be picking up quite dramatically. I predict that we will see the continuation and extension of a trend that has already started in the partner recruitment area: law firms being much more strategic about how they approach lateral hiring and the use of recruitment firms. When it comes to making important hires, whether it be in the partner or the associate realm, I just don't think the old model of tossing those needs out to a bunch of search firms on a contingent basis has worked very well. Corporations long ago discovered the benefits of partnering more closely with a recruitment firm to execute on important hires; in fact, contingent search is the exception rather than the rule with respect to our firm's in-house search practice. In the last couple of years, law firms have increasingly dipped their toe into the water of retained search at the partner level. I think we'll continue to see that, and also the extension of more exclusive or at least semi-exclusive relationships in the associate hiring realm.