[Author: Ruby Srivastava]
The legal talent market has not been immune to the impact of the COVID pandemic on other industries. 2021 in particular saw unprecedented sideways movements as full-time attorney salaries skyrocketed as WFH models became ubiquitous.
But this year things have calmed down. The “wage wars” are over, or almost over, and wages are leveling out. The scramble to retain talent is over. The attitude is declining. Now that the frenzy has subsided, a critical question has come to the fore: will hiring attorneys as full-time employees (FTE) prove cost-effective?
Threats to RTD ROI
The issue is given new urgency by the threat of a “perfect storm” that combines economic turmoil – persistently high inflation, rising interest rates, stock market volatility and a possible global recession – with geopolitical uncertainty caused by the war in Ukraine and other tensions became. If history is any guide – for example the housing crisis of 2008 – should all or even some of these factors persist, the ensuing business downturn will inevitably result in a sharp drop in business revenues and demand for legal services. Recovering the ongoing fixed costs of new full-time lawyers is becoming significantly more difficult – and perhaps even impossible.
Another threat to the cost-effectiveness of hiring more full-time attorneys is the growing problem of burnout. Many attorneys feel the pandemic has made their workload overwhelming and unbearable. In a recent Gartner survey, 54% of corporate attorneys said 54% were “jaded,” with 20% saying they were “very jaded.” Flexible WFH opportunities are now more available and professionally acceptable than ever. Each full-time attorney who resigns impacts a law firm’s productivity and exacerbates the burnout problem for those who remain. In law firms, fewer attorneys mean fewer attorneys, who generate revenue to cover the sunk costs of recruiting, hiring, and training a full-time attorney who has switched.
Reasonable risk aversion
The outlook is bleak, and fear and uncertainty have prompted advocacy organizations to slow recruitment activity. As Bloomberg recently reported, “big firms don’t fire lawyers, but most have slowed down or stopped hiring. It’s a sharp turnaround after two years of many struggling to recruit and retain talent while the market was booming.” Demand is also slowing in legal departments, with hiring freezes becoming more frequent.
These developments come as no surprise. Memories of the 2008 downturn are still fresh. Nobody wants to repeat the mistake of getting caught hiring more full-time attorneys just when the economy was going sour. And with the lure of flexible employment opportunities for lawyers, no one wants to be the person who campaigned for a new hire, only to see that person leave before they’ve delivered the value needed to get them on board.
In this environment, full-time hiring is riskier than at any time in the last 15 years. These are key considerations when evaluating your staffing needs for Q4 2022 and beyond. The times have changed. So should your views on the wisdom of full-time employees.
