ALM Managing Partner Breakfast: the Worries of Headcount, Succession & Salary

Topics: Billing & Pricing, Efficiency, Government, Lateral Hiring, Law Firm Profitability, Legal Executive Events, Midsize Law Firms Blog Posts, Peer Monitor, Staffing & Headcount, Succession, Talent Development

Breakfast

WASHINGTON, D.C. — Attorney headcount, productivity, salaries and talent, along with succession planning were key topics that managing partners were eager to discuss and confessed they were worried about at during a Managing Partner Breakfast event sponsored by Thomson Reuters and ALM.

Legal Executive Institute‘s William Josten set the stage for the discussion with a presentation of law performance results from Thomson Reuters’ Peer Monitor benchmarking data. As Josten noted, the first half of 2016 did not present too many surprises on the national level — continuing the trends of the past few quarters, demand briefly had an uptick in the first quarter of the year but actually contracted to negative territory in the second quarter. Josten noted that the extent of the contraction, nearly a full point, was larger than he had expected, and he anticipates we will see little growth in the third quarter, if not a negative rate again.

Interestingly, midsize law firms saw the most demand, work rates, and attorney productivity on the national level compared to AmLaw 100 and AmLaw 200 ranked law firms, the data showed. However, almost the direct inverse was true in the D.C. legal market, with midsize markets lagging both groups. D.C. AmLaw 200 firms were ahead in almost every category, even achieving almost 5% growth in these first half of this year.

Anthony Pierce, Partner at Akin Gump

Anthony Pierce, Partner at Akin Gump

Josten and panelists Anthony Pierce, Partner in charge of the D.C. office of Akin Gump Strauss Hauer & Feld; and Dwight Bostwick, Chair of the executive committee and partnership board at Zuckerman Spaeder, expressed concern that lawyer growth in midsize firms was up an astonishing 11%.

Panelist Katelyn Polantz, a reporter for the National Law Journal, noted that could be due to the sometimes slow speed at which former federal government attorneys ramp up when moving into practice. The panel also wondered if midsize firms were grabbing talent to take advantage of the increased legal opportunities afforded by growing and often-conflicting regulations. Still, several panelists wondered if the “tail could really wag the dog” in this case.

“If that were my business, I’m going to be out of business soon if I’m facing that much drop in productivity and that much lawyer growth at the same time,” said Pierce.

One audience member from a 50-attorney firm suggested that headcount may be up because smaller firms are struggling with succession planning. As baby boomers ramp down practices for retirement, law firms sometimes retain these less productive older partners for other reasons, even while still needing to invest in lateral or newer associates just to sustain the practices.

Zuckerman Spaeder’s Bostwick agreed, saying that while some firms are de-equitizing partners, they’re not really pushing non-productive partners out of the firm as likely needed or reducing their salaries to truly effect both profitability and change. Indeed, Bostwick warned that if firms continue to retain unproductive partners, maintain the same profits per partner each year and not plan for the future, more firms could go the way of historical Washington D.C. law firms of old that seemed as long-standing as the Washington Monument but disappeared in the past few years due to dissolution or merger.

headcount

Panelists at the ALM Managing Partner Breakfast

He suggested that firms need to sacrifice some short-term profits to ensure long-term stability. Bostwick also noted that the worst thing firms could do right now is to push out or eliminate young equity partners who haven’t hit their stride yet, noting that many partners in their 60s didn’t really ramp up their practices and productivity until just 10 to 15 years ago.

“Some U.S. law firms may be the least innovative businesses to ever populate our shores,” Bostwick said, adding that it is time to respond with more innovation.

Issues surrounding succession planning and transition of practices, clients and firm leadership was what Akin Gump’s Pierce admitted keep him up at night. Pierce took a sunnier approach than Bostwick on the stability of today’s law firms, noting that just after he became partner in charge of the D.C. office in 2008, the legal industry suffered the worst two quarters of business ever, but those firms that were creative had survived those “dark days.”

However, Pierce did express concern on the impact on the industry of the massive wave of baby boomer partners that are retiring or moving in-house versus the ones that want to stay on and work in some capacity, while also expressing frustration with the lack of talented lawyers coming into firms. In fact, the number of incoming law students and quality of those had dropped in this economy as jobs had become less plentiful, leaving the AmLaw 50 law firms fighting for the same smaller pool of talent, he noted.

“But if you want intellectual stimulation and want to make money, the law is the place for you,” Pierce said.