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The Real Threat To Biglaw’s Business Model

By Kathryn Rubino for Abovethelaw.com

Biglaw has a talent problem. It’s not that more recent law school graduates aren’t capable of doing the work that the industry demands of them, it’s that they are unwilling — or at least, less willing — to put themselves through the ringer of Biglaw for the benefits that Biglaw is currently willing to give them (namely, prestige and money). That’s a big problem for Biglaw.

Earlier this year, Major, Lindsey & Africa and Above the Law reported on a survey that detailed what priorities are most important for millennial lawyers, and money is only top for ~17 percent of respondents. And ~29 percent said they would trade compensation for more time off, plus ~ 25 percent said a they’d swap money for a more flexible work schedule. Neither time off nor flexibility are traditional strengths for Biglaw, and that’s feeding the talent crunch.

The scarcity of associate talent means the lateral market is fire right now. And, in an effort to keep home grown talent right where they are, Biglaw is throwing money (see, e.g., the raises and bonuses that swept through the upper echelons of the industry earlier this year) at the problem, with super hot/busy practice areas getting some extra love. But what is a boon for associates’ pocketbooks actually threatens the Biglaw business model.

Randy Kiser of DecisionSet told Law.com the problem is twofold, with firms struggling to recruit and retain folks to log the needed billables and potential stagnation in the leadership ranks if these younger attorneys aren’t folded into leadership roles.

“And at this point, it looks like that is a growing threat to the law firm business model,” said Kiser, who published a book in 2019 on law firm trends, strategies and threats. “As long as you’re selling time, you have to be very careful about retaining the people who are delivering that profitability.”

And the strain caused by 18 months of pandemic life — and the blurring of work/home boundaries that has come with it — has caused burnout, leading to folks exiting:

“Are people actually leaving because of burnout? The truth is that yeah, they are,” said Michelle Fivel, an MLA recruiter who specializes in placing associates. “What’s going on right now is sort of unprecedented. The hours associates are pulling are just really mind-boggling, and some of them just don’t see another way out.”

So how are Biglaw leaders dealing with this talent crunch? Some see it as part of the natural cycle:

“At some point it will subside,” said Joe Krasovec, managing partner for Schiff Hardin, about the competition for young lawyers and corresponding pay increases. “I’ve been through a couple of these cycles, where salaries and compensation goes up, and the market or demand turns, and you see—compensation never comes down, but it flattens for a while. So, I think we’ll hit that at some point. But I think the competition for talent is still very robust.”

But Tom Fitzgerald, managing partner for Winston & Strawn, says the problem keeps him up at night:

“It’s serious, it’s significant and at some level—and this is not unique to Winston & Strawn, it’s any firm with great fortune and great clients—it’s going to affect us long-term,” Fitzgerald said.

“Every great law firm is built on a cadre, a cohort of home-grown people that you get out of law school. We want them to stay and be partners. And those are our building blocks. And so it’s the combination of homegrowns and laterals that build the best law firms. And I don’t care what firm you’re talking about—the Wall Street firms, Kirkland & Ellis, or other great law firms—they hire both. They train them and bring them up, and they have that glue. They’re part of the fabric of the firm. They help attract the right laterals. And if we start losing an undo amount of those associates, we lose that glue, that firm culture. It worries me every single day.”

It wasn’t that long ago that work/life balance was an actual joke in Biglaw, and now they’re reaping the consequences of that attitude. The truth is firms have to get serious about making Biglaw a long term career for more folks. Hopefully the tide has turned. More and more we’re seeing firm recognize they have to do more than just throw money at the problem — with perks like Peleton, a curated selection of high-end items and experiences, and $15k towards vacation on the table. But my guess is it’ll take some time before Biglaw culture truly starts to change.