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Law Firms in Australia and the Talent Vacuum

Written by Marianna Tuccia and Nicholas Brown (Legal Professional, Sydney NSW)

A talent war has been waging over the last couple of years in private practice law firms in Australia. Particularly in that very sweet spot of 2 to 6 years post admission experience.  And especially in the sought after practice areas of real estate, finance, capital markets, projects and infrastructure. Law firms are pouncing on rising stars.

This skills shortage is a result of a number of factors. In the last 24 months, the international market has re-opened its appetite for Australian qualified lawyers i.e. Asia, the Middle East, the US and the UK have successfully recruited first class talent from the major law firms in Australia. Additionally, more and more lawyers are going in-house. According to an article by Matthew Hodgkinson from Eaton Capital Partners, ten years ago only 10% of corporate lawyers were practising in-house; a stark contrast to the 35% that are working in-house now. Another factor contributing to the skills shortage is that lawyers are leaving the profession altogether and going into other fields e.g. business development, journalism, legal editing, policy and government, teaching. A worrying trend is that many lawyers are questioning whether a career in law is for them. Long hours, demanding and unrealistic clients, timesheets, the workplace hierarchy in traditional law firms are contributing to the legal profession loosing talent. These factors are also contributing to the rise in the ‘NewLaw’ firm models. Recent examples of these firms are Hive Legal, Keypoint, Nexus, Marque, Salvos Legal.

Theoretically this skills shortage should be offset by the exponential growth in the number of law graduates vis a vis the number of legal practitioners. According to a November 2015 Australian Financial Review article by Emanuel Tardos, there were approximately 15,000 law graduates in 2015, compared to 11,000 in 2011. These graduates are entering into an industry with just over 66,000 practising solicitors in Australia. Although the number of graduates has increased, this has not converted to a higher rate of employment for law graduates. Additionally, the disruption in the legal profession (which has been extraordinary in the last few years) in terms of technology ie intelligent contracts, E-contracts and E-discovery technology is equating to less and less opportunities for law graduates and newly admitted lawyers. Tasks like discovery and other low level work are being outsourced off-shore and are no longer being undertaken by law graduates.

The question becomes how do law firms overcome this skills gap, particularly at the 2 to 6 years post admission experience level? What can they do to secure that rising star over their competitor? How does a law firm win the talent war?

Trite as it may sound, but retaining your existing talent is just as important as ‘acquiring’ new talent. Managing Partners of the top tier law firms rely on their brand reputation in order to recruit and retain talent.  In a October 2016 article in Lawyers Weekly, Ashurst’s head of HR Asia-Pacific, Richard Knox said that the firm’s key point of difference that allows it to attract and retain talent, is that the “firm is well positioned as one of only a couple of truly integrated global firms that brings to the Australian market a full service offering, with a premium client list that sets us apart from much of our competition … The firm provides them the opportunity to work on clients and matters at the very top end of the market in a supportive and flexible environment. We have found our staff really engage with that proposition.” The efforts of King & Wood Mallesons are different. Newly appointed Global Managing Partner Sue Kench said that, among other initiatives, they had “Design Week – a week with speaker forums, workshops, hackathons and events all focused around designing the firm for the future”.

It is interesting to see what other professional services firms are doing to win the war on talent. In KPMG’s report “Being the Best: Inside the intelligent finance function, Talent Management – Playing for keeps” the financial services industry are facing similar issues. With regards to retaining talent, under the heading ‘Engage and Retain’, their advice is to manage performance through 360 degree feedback, and reward innovative strategy. Moreover, KPMG prides open and honest communication in order to make sure that their talent feels valued.

It is, therefore, of vital importance that law firms put talent management at the top of their strategic agenda. Law firms need to work hard to improve their recruitment and retention strategies if that gap in skills is to ever be overcome. The question “Why would a talented lawyer want to work here?” must always be at the forefront of every Partner’s mind. If the answer is not compelling, then more thought needs to given to the improvement of the firm’s workplace culture and practices.

Extensive training strategies, internal learning and development programmes as well as more on the job training by Partners will also assist in overcoming the skills gap. In some instances, the answer to overcoming the skills shortage may be right on your doorstep – retrain the underutilised and under-challenged lawyers already in your law firm. Additionally, law firms need to think creatively and outside the box when undergoing the recruitment process. If that wish list cannot be entirely fulfilled then time and resources need to be spent to upskill candidates.  On the job training by Partners and more Senior Lawyers ought to come into play more often than is presently occurring. You just never know how much a candidate will develop and grow into the role within 6 to 12 months’ time.

The war on talent will only intensify. Quality lawyers only want to work at quality law firms – law firms that are emulate agility, cultural cohesion, diversity, open communication and true collaboration. Law firms that do not emulate such qualities will eventually fold.

What is the best way to prepare for an interview?

Written by Libby Mizrahi– Recruitment Consultant (Legal Professional) Melbourne VIC

Let’s face it, job interviews can be daunting. Usually however, we find that the anxiety we create in our minds around an upcoming interview, is a lot worse than the interview itself.   In fact, amongst most of the lawyers that I work with, those that are most apprehensive pre- interview, are equally as surprised post interview, with how well the interview proceeded. Conversely, some of the most confident lawyers are actually underprepared for interview and perform badly.

Interviews, like a lot of other things in life, are as scary as we make them. The more prepared you are going in, the better the result. For most of us, we need to look at the interview process in a new way. We need to reframe the way we perceive the interview as a chance to demonstrate or sell our unique and high level skills and experience. That’s where it can get exciting.  It’s a chance to paint of a picture of the type of person we are, discus what motivates and drives us, what we enjoy in our work, what we are passionate about and where we want to take our careers. Once we reconsider the process within this paradigm, most of that tension and anxiety dissipates and we can concentrate on the positive aspects of the process.

The number one, hands down best advice I can give as a recruiter is to BE PREPARED for the interview.  Hell, be over prepared, it will be a lot of easier pick and choose what you want to share in interview,  than to have to struggle and stammer through what may feel like an interrogation.

This includes:

  • Research the firm, partners and team

I encourage the lawyers I work with to use me as a resource. My job is to provide as much relevant info as I can on my client. This info has been gained over some 15 years and is invaluable. Lawyers should do their own research as well, scour the internet / LinkedIn and know your audience well ahead of time. You will need to know exactly why you want to work with this firm/ team.

  • Know your CV inside out and be able to sell your skills, abilities and experiences.

You need to know very convincingly how you could contribute to the firm. You need to be armed with examples of matters you have worked on and highlight of your career to date.

  • Be armed and ready to ask relevant questions.

It’s just as important to remember that the interview is also an opportunity for you to find out about the firm.

  • Don’t stress if it doesn’t work out.

If things don’t go to plan, learn from the experience and move on. Focus on doing better next time round.

Business Development Is Your Responsibility

The legal profession has a long history and some members of the profession can remember the days (somewhat fondly) before advertising, marketing and business development were words associated with a professional service. Work came from existing clients and people they told.Business-Development

Today, the challenges facing the profession, and individual lawyers – including globalisation, specialisation, the number of practising lawyers competing for work – mean that marketing and business development are skills that must be learnt.

Marketing and Business Development for lawyers and law firms is increasingly important in what can only be described as a very competitive market – for the service you give your clients needs to be coupled with a strategic approach to building your own and your firm’s profile, and what you can do for clients, and actually develop existing clients and bring in new clients as well.

What’s the difference?

Business development and marketing are not interchangeable terms and they have quite distinct responsibilities in a legal environment.

Marketing is about the promotion of the services you offer and establishing within your target market what your point of differentiation will be. Marketing involves things like advertising, website content, blogs, brochures, and public relations activities.

Business Development on the other hand is a strategic activity that focuses, on particular clients or industries. It is about networking, building connections and referral networks, strengthening existing relationships and cross referrals.

More and more, lawyers need to be very strategic about obtaining and retaining clients. Work doesn’t just come in the door, or over the phone. Even if you are currently very busy, you will need a ‘pipeline’ of work down the track to keep being busy and to maintain profitability.

Your clients are not buying a transaction from you, or your expertise. They are paying you to solve a problem or make something happen for them. Thinking about what you do to solve your clients’ problems will be integral to how you market yourself and develop business – because it is actually not about you, but your clients.

Most lawyers, unless they have done so as part of another degree, will not have studied anything to do with marketing or business development, and may be tempted to think that this is the responsibility of someone else. The truth however is that regardless of the size of the firm for whom you work, or your level of expertise, you have a responsibility for business development. It is a skill that can and should be learned.

Slow recovery but steady improvement

Thankfully, with an improved outlook, business confidence has increased over the last 4 consecutive quarters.    M&A work has more than doubled, and employment for junior lawyers is also forecast to improve.

Here are the figures to give you renewed faith in the legal market.

Quarterly legal confidence

The quarterly legal confidence survey compiled by the Commonwealth Bank and Beaton Research & Consulting shows that business confidence among law firm leaders is still in negative territory but is now at its highest point since July of last year and has been improving for 4 consecutive quarters.    Those surveyed included the leaders of 30 law firms – 8 top-tier practices and 22 mid-tier practices.

% of firms who believe that business conditions are negative is as follows:-

  • 17% October 2014;
  • 23% in July 2014;
  • 28% in April 2014;
  • 43% in November 2013;
  • 70% in July of 2013.

While it is a slow recovery, there is a steady improvement.

Corporate/M&A

Australia has become the second biggest/most active market for Corporate/M&A deals in the Asia-Pacific region, after China.  The Australian market accounted for almost a quarter of the M&A deals completed in the Asia-Pacific.  The recovery in M&A work has contributed to a big improvement in business confidence at the most senior levels of the nation’s lead law firms.  The M&A work has more than doubled in value compared to last year, and the value of completed mergers and acquisitions within Australia in the 9 months to October more than doubled to the same period last year.

Many of the recent transactions have a cross-border element and another noteable aspect was the return of private equity.

A Partner from HerbertSmith Freehills has said it is the strongest start to the year since records began in the Asia-Pacific – a return of the “bold/strategic type M&A” rather than deals that were triggered by corporate distress.

Many positive deals are now part of people’s forward-thinking and strategic planning.     For the first time, activity is being seen in M&A across a range of sectors and from different buyers.

The top-tier firms are the main beneficiaries from the increase in M&A.

Other areas of law/improvement

Despite the boom in M&A, revenue is expected to only improve over the next 6 months in just 6 of the 15 surveyed practice areas.   The biggest decline in revenue is expected in insolvency and restructuring.

The improved outlook for law firms was in line with what was happening in Canada and the US.    Corporates are cashed up again and there are opportunities to gain market share and rationalise industries at that phase in the cycle.  Most firms expect Partner and Senior Associate numbers to grow at a slower rate over the next 6 months (primarily due to a more cautious approach to hiring at top-tier practices).    Top-tier firms expect no change in equity partner numbers in the next 6 months and believe they will continue to reduce the number of salaried partners and Senior Associates.

Junior Lawyers

There is strong improvement in the employment outlook for junior lawyers – 50% of firms expect to increase the number of lawyers with up to 3 years of experience (up from 39% in July of 2014).  Of those 50% of law firms, 55% of mid-tiers and 38% of top-tiers expect to be hiring.