2012 In-House Report: Salaries & Hiring Trends
InsideCounsel has released its hugely popular “2012 in-house compensation report,” discussing compensation, the hiring forecast, hot trends, and what it takes to land an in-house position, and how to succeed as in-house attorney.
Companies Are Hiring, But Selectively
The good news is that companies are hiring, the bad news is that they are only doing so very selectively. With the economy finally on the upswing, law departments are looking to hire new help. But experts caution that companies aren’t necessarily hiring attorneys.
The bulk of the hiring seems to be dedicated to paralegals and contract managers. When it comes to hiring attorneys, the numbers are still very low, and the competition very stiff.
Who’s Getting Hired: Standout Experienced Business Lawyers
Companies are most interested in mid-level and senior lawyers with four to nine years of experience. Additionally, they’re seeking jack-of-all-trades attorneys who can work independently.
Being a lawyer that delivers high quality services is no longer enough to land an in-house job. Today, lawyers hoping to get hired by a company need to show that they understand the company’s business and can contribute to its bottom line.
A law degree might no longer be enough. Today’s, in-house lawyers have to understand financials, business strategies, and need to be able to wisely manage projects and budgets. Many are now armed with M.B.A.’s to deliver just that.
One thing is clear: As companies emerge from the recession and slowly increase their legal hiring, attorneys searching for new careers must stand out among the competition. That often means being armed with more than legal excellence to do so.
Advice to Young Law Grads: Start with a Firm and Network.
The vast majority of corporate legal departments are still steering clear of recent law graduated. What can a recent law graduate do to improve his or her chances at landing in-house? The solution: try your hand at a law firm position first, focus on transactional work, stay there for at least five years, and network aggressively.
Base Salaries Slightly Up by 3.3%
2011 has brought moderate increase in in-house base salaries. According to the 2011 HBR Law Department Survey, the average base salary increase among all legal department staff levels in 2011 was 3.3 percent, up from an average increase of 2.6 percent in 2010.
The Bonus Is the New Gravy
The 2011 HBR Law Department Survey found that the average bonus increase among attorneys was an astounding 25.7 percent. The average cash bonus for all attorney levels was $67,000? What does it take to earn those bonuses? Today’s in-house lawyers are held accountable for the level of performance and their contribution to the bottom line. By the same token, they’re asked to share the risk of their companies’ performance. So, in-house lawyers have to meet their objectives, and contribute to the company’s bottom line to expect to get some gravy on top of base.
What’s Hot: Management Skills, IP, M&A and Compliance
The most in-demand practice areas: transactional (M&A), IP, labor and employment, and compliance. In terms of industries, health care and pharmaceutical are generally offering higher salaries.
The hottest skills required from in-house lawyers aside for outstanding legal and business skills, are management skills. Knowing how to manage projects, people, and budgets is key to increasing one’s value in-house.
Trends of the Future: International Expansion and E-Discovery
As companies are pushing for international expansion as a competitive strategy to expand their core business and increase their market share, so are corporate legal departments. Today, many clients are looking to hire in-house attorneys for their international operations, with a focus on Asia, South America, and India.
E-discovery is also very much in-demand. Companies are looking for lawyers who can effectively manage e-discovery and document review with a smart process that saves money.
What can we take away from this report? Lawyers with any hopes to succeed in-house need to be able to bring value beyond outstanding legal skills and experience. Contribution to the bottom line is what it’s all about.
Could the In-House Legal Market Be Improving?
The legal job market has never picked back up since the recession, and talks of market improvements have been rather more wishful thinking than reality. In short, the legal job market has been grim. Yet, there might be a glimmer of light on the horizon coming from in-house legal department: hiring may be on the rise.
A recent survey from HBR Consulting, a consultant to law firms and law departments, shows that in-house hiring may be on the rise. This is a trend that we have been noticing at ESQ Recruiting as well.
What’s prompting a rise in hiring at corporate legal departments? A concerted effort by companies to reduce their legal expenditures and reliance on outside law firms. Legal work has not lessened, if anything, it has increased as a result of recent regulatory changes. As a result, companies are seeking to bring more of the work in-house, which could mean more in-house jobs.
Companies also seem to be on the rebound. According to the annual Association of Corporate Counsel survey, only 54 percent said that their department has been affected this year by the economic downturn—a significant drop from the 74 percent reported in 2009. In addition, the survey also indicate that CLOs were planning to add staff in the coming year, 37% more than reported in 2009, 2008, or 2007.
It also looks like corporate legal departments are willing to spend a little, to save a lot more. The Altman Weil and LexisNexis Martindale-Hubbell survey found an overall increase in law department spending of 7.9 percent to an average spending of $914,000 per lawyer for fiscal year 2005. Outside legal costs rose by 5.5 percent to an average of about $602,000 per lawyer. The survey also found a 19 percent increase in internal hiring with lawyers per billion of revenue rising from 2.93 lawyers per billion in revenue to 3.49 lawyers per billion in revenue."
The results of the 2011 HBR Law Department Survey compiled information from 219 companies in 20 industries. Seventy percent of the participating companies had revenues at or above the Fortune 500 level. Key findings from the survey include the following:
- More than 50 percent of companies reported an increase in worldwide legal staff between 2009 and 2010.
- More than 80 percent of companies said their legal needs are increasing.
- More than 40 percent of companies plan to increase the number of internal lawyers by an average of 10 percent in the next year.
- About 60 percent of survey participants cut outside legal spend by an average of 3 percent between 2009 and 2010.
What does this mean? Corporate legal departments are opening their doors, which is a good sign, but that does not mean that the market is necessarily looking very rosy. Those positions are still few, very competitive, and companies are setting the bar very high for new hires. The good news is that the trend is looking to continue, which may lead to more opportunities for lawyers seeking in-house positions.
GC Compensation in 2011
Cash is King
While 2011 has been far cry from an economic recovery; chief legal officers have done pretty well for themselves, even making some modest gains according to the annual compensation survey conducted by Corporate Counsel. What is remaining steady is cold hard cash, in the form of base, and nonequity incentive compensation, which is tied to corporate performance goals. Gone are the bonuses GC’s got for just being there and performing well. What is out? Stock options continue to fall out of favor.
Women On Top
Who has gotten the biggest paycheck this year? The top prize goes to a woman for the first time since Corporate Counsel started this survey, in 1994. Denise Keane, the top legal officer since 2007 at tobacco giant Altria Group, Inc., took home $6.5 million in total cash compensation. She is a not alone, in-house woman counsels are for the most part continuing to make steady progress in terms of compensation.
Company Performance Dictates
GC compensation is based on 2 sets of requirements: individual performance and company performance. The success of in-house counsels is directly tied to that of the company they serve. Therefore, they really have to contribute to the bottom line if they want to improve their own take home pay. Choice of company and industry has never been more crucial for on-house counsels looking to make a transition. The top performers in this year’s list tend to be clustered in the tobacco, oil, and entertainment industries.
The Top 10 Money Makers
1. Denise Keane – Altria Group, Inc. (Total cash: $6.4M)
2. Donald De Brier – Occidental Petroleum Corporation (Total cash: $5.9M)
3. Russel Deyo – Johnson & Johnson (Total cash: $4.9M)
4. Thomas McCoy – Advances Microdevices, Inc. (Total cash: $4.6M)
5. Louis Briskman – CBS Corporation (Total cash: $4.2M)
6. Paul Capuccio – Time Warner (Total cash: $4.2M)
7. Alan Braveman – Walt Disney Company (Total cash: $4.1M)
8. David Bernick – Philip Morris International, Inc. (Total cash: $3.6M)
9. Michael Fricklas – Viacom Inc. (Total cash: $3.0M)
10. Alan Schnitzer – The Traveler’s Companies, Inc. (Total cash: $2.8M)
To see a complete list of the Top 100 Best Paid GC’s, click here.
Who’s in Demand for In-House Counsel Positions?
A new survey shows senior level lawyers are in particularly high demand for in-house counsel positions. The survey, by New York legal consulting firm Eoilis International Group, found an increase in attorney interviews at big corporations last year and, among them, were interviews of senior level lawyers and law firm partners.
Why Are Senior-Level Attorneys in Demand?
This is not surprising considering the state of the legal market. There is a plethora of highly skilled attorneys looking for work, and companies are taking full advantage of this market. They are seeking to hire experienced counsel, sometimes at junior-level prices, simply because they can. Also, law firms have not delivered the type of cost-savings companies were expecting during the downturn, and as a result companies have decided to take the legal work in-house and enjoy the savings.
Historically, in-house legal departments have not been good training grounds for attorneys, which is still the case today. Company lawyers are part of the “overhead,” and therefore they must quickly add value to an organization to justify their existence. They do this by being able to work independently, with few resources, on a wide variety of matters. These are typically the traits of senior level attorneys who have been practicing for ten years or more. These attorneys have extensive practice area, management, and business experience all rolled into one. They not only know how to practice law, but they know how to manage people and budgets.
What Else Are Companies Looking For?
According to the survey, in-house positions weren’t the only jobs up for grabs at big corporations. 38% of companies surveyed reported considering experienced attorneys for a wide range of positions, including quasi-legal and business roles. This study signifies two things: Corporations are hiring, BUT their in-house legal departments are looking for experienced lawyers who understand private practice.
"In-house departments are in the process of trying to revamp their images," says Nicky Mukerji, director of business intelligence at LegalBill. "Presenting hires with both legal and business experience sends a strong message to corporate executives and financial departments that law departments will be capable of handling all aspects of their caseloads."
What’s a Recent Graduate or Junior-Level Attorney To Do?
Do not set yourself up for failure by applying to in-house positions for which you are not ready. Get experience with a law firm first. In-house legal departments do not hire attorneys without substantive experience, which is usually translates to at least five years of experience. Moreover, all types of legal experience is not viewed the same by in-house legal departments. Companies tend to favor law firm-trained attorneys over those with government or private practice experience. Companies almost never hire solo practitioners. Companies also do not favor hiring government attorneys either, unless they have the type of regulatory experience that matches their industry. Finally, the great majority of in-house positions are in transactional practice areas, not litigation. Litigation positions are very rare and often reserved for partner-level candidates. If you want to improve your chances of landing an in-house job, focus on transactional practice areas with a law firm.
What’s a Mid-Level Attorney To Do In Today's Job Market?
They need to wait for the market to improve and bulk up on their skills in the meantime. Being a very good attorney is no longer good enough to land an in-house position. You have to be versatile, adaptable, and efficient and know the business and industry of the companies you are targeting. Forget the general counsel position or golden job at a Fortune 500, at least for now. Instead, go for in-house counsel positions that allow for upward mobility, and refocus on small-to-medium-sized corporations in industries in which you have experience. In other words bid your time, try to get your foot in the door at a smaller organization and in a more junior-level role, and stand out by virtue of your work and business skills.
What About Senior-Level Attorneys and Partners?
It’s not a panacea for them either. While experienced partners and attorneys are always more attractive to executives and general counsels, chances are unless you’ve already been a general counsel, not many companies will give you a shot at the top job unless you’ve already proven yourself. It’s a chicken and egg dilemma. This can be overcome by a strong show of the skills and experiences we discussed above. That said, it’s still a very competitive market, so be ready for a long process ahead.
There are still very few positions available and the requirements are increasingly demanding. You need to be able to do it all, be an expert in your field, knowledgeable in a variety of other practice areas, know how to manage, train and hire people, manage outside counsels, balance budgets effectively, and understand the business of the company. Oh, and be ready for a steep pay cut.
While Fortune 500 companies may still pay their general counsel handsomely, the odds of landing that kind of position is akin to winning the lottery. The vast majority of in-house positions are not with Fortune 500 companies, and do not come with a high compensation package. That’s right, companies do not pay law firm salaries, and the compensation cuts from a law firm partner to an in-house legal position, even at the general counsel level, are on average about 50%, no matter how talented the candidate. While you may be ready for a pay cut, the real question is, how low can you go? If you are lucky enough to be selected for a position, be ready to make significant concessions to go to the in-house side.
In-House Legal Departments & Salary Reports for 2011
Now that the dust has settled from the economic tumble of 2008, where are in-house legal departments today? InsideCounsel explores the state of in-house legal departments, including in-house compensation.
With most economic experts declaring the recession over—the aftereffects of the crash are evident across all corporate sectors, including in-house legal departments. Staffs are smaller, workloads are heavier, budgets are tighter and salaries are somewhat stagnant.
Having to adjust quickly to the changes—whether they liked them or not—was essential for survival, notes Vanessa Vidal, president of ESQ Recruiting. "There is a sense of resignation and acceptance when it comes to low base salaries and freezes," she says. "Counsel have no choice in the matter, because no one else is offering anything different, and jobs remain hard to come by."
What Are Salaries Like?
In 2010, according to Hildebrandt’s annual law department salary survey, the average base salary for all attorney levels in-house was approximately $174,000. The median was even lower at about $167,000. While such six-figure salaries are nothing to sneeze at, it can be difficult for in-house counsel to suppress the sniffles when comparing those figures to law firm salaries. According to the 2011 Robert Half Legal Salary Guide, first-year associates at large law firms will earn, on average, between $107,250 and $132,000 this year. When a first-year associate can make nearly the same salary as an experienced in-house attorney, it’s easy to wonder why anyone would go in-house.
Robert Major, founding partner at Major, Lindsey & Africa, says it’s actually the overwhelming demand among lawyers to go in-house, though, that keeps the salary gap so wide. Since this is a “supply and demand” issue, with many lawyers going after few in-house positions, the gap is likely to remain.
The most highly compensated practice area in Hildebrandt’s survey was mergers and acquisitions. Intellectual property lawyers specializing in licensing earned the second largest amount of money. They also had the highest median base salary, $193,738. Lawyers specializing in securities litigation saw the largest median base salary increase (3.3 percent), as well as the largest median cash bonuses, which amounted to $71,000.
What Are the “Hot” Practice Areas?
Accordign to Robert Half Legal, companies continue to look for lawyers with business-development skills and strong interpersonal. Litigation, bankruptcy and foreclosure continue to drive the need for bringing on new talent.
Vanessa Vidal, president of ESQ Recruiting, says that companies looking for new growth will likely consider small acquisitions as opposed to multibillion-dollar deals, which will mean an overall uptick in M&A activity over the next couple years. "Some of the bigger deals will most likely occur in consolidating industries, such as energy and health care," she says. Vidal also predicts that "emerging markets will lead the M&A surge in 2011, with Asia in the lead."
What Does It Take to “Shine” In-House?
Michael Melbinger, a partner at Winston & Strawn and chair of the firm’s employee benefits and executive compensation practice, says that "The No. 1 skill that we see [being rewarded] is the ability to minimize the use of outside counsel," says Melbinger. "Companies are rewarding legal departments that are able to do the work themselves and build their skills. Sometimes this means spending more hours and taking on more work with fewer people. But what it comes down to is that if he or she can save money, then that should be rewarded."
Vanessa Vidal, president of ESQ Recruiting, says companies are frequently recognizing counsel who demonstrate flexibility and adaptability. "They are what I call the ‘MacGyvers’ of the legal world—counsel who can come up with creative strategies to accomplish their goals with few resources available," she says.
Can We Talk Bonus?
Scanning through Hildebrandt’s annual law department salary survey, one data set practically pops off the page. Bonuses, the survey results indicate, have jumped an average of 73.5 percent between 2009 and 2010. Even the significantly lower median increase of 10.2 percent is enough to make jaws drop in envy. But it looks like these figures are just a return to standard levels after a recession-motivated low in 2009, cautions Lauren Chung, director in the law department consulting practice at Hildebrandt. Today, bonuses tend to be set and non-negotiable, just like base salaries.
What About Long-Term Incentives?
They’re baack! Long-term incentives—deferred compensation such as stock and equity—may not have returned to pre-recession levels, but they’re likely to become increasingly important components of compensation packages in years to come.
InsideCounsel, "In-House Salary Report," by Kayleigh Roberts and Ashley Trent, February 2011 Issue.
What Are The Hot In-House Practice Areas for 2011?
Hot In-House Legal Practices
Corporate Governance – What has increased the demand in this practice area is the result of the recent legislative and regulatory proposals generated by Washington as a response to the financial crisis of 2007–2010. This led to widespread calls for changes in the regulatory system that plunged the country and the rest of the world into an unprecedented recession. The result was the adoption of the 2010 Dodd-Frank Act, which contains new governance obligations for all public companies. Companies are trying to respond to what has been termed to be “the most sweeping change to financial regulation in the United States since the Great Depression.” As a result, this has increased their reliance on legal counsels, who in turn have had to further focus their attention on new provisions and requirements guiding corporate governance matters.
Regulatory – This era of heightened scrutiny has made regulatory demands and requirements increasingly more intrusive, and the practice more defensive. Companies are gearing up accordingly, which has resulted in a demand boost in this practice area.
Labor and Employment – The combination of an ailing economy, business downsizing, a declining job market, and increased government enforcement is dramatically increasing employment lawsuits. Companies are on the defensive as they are sorting out differences with employees in a continuing downsizing marketplace. The EEOC has announced several regulatory initiatives from President Obama, which we are also now starting to see come into play. If there is a rise in litigation, labor and employment disputes will account for a significant number of those lawsuits.
Healthcare – With health care reform a reality, health care law is hotter than ever. As part of the newly enacted health care reform package, Congress tightened rules and statutes relating to the prosecution of health care fraud offenses. There were also modifications to the Anti-Kickback Statute under the Patient Protection and Affordable Care Act, the new requirements for compliance under Physician Payments Sunshine Act. In preparation for addressing these legislative changes and reporting requirements, healthcare organizations are turning to healthcare lawyers to help them comply with these reforms, making the practice a very hot one. If the new Obama healthcare plan has boosted the need for healthcare lawyers, the aging of America’s population, has also increased the market for healthcare organizations. With a booming business on the horizon, healthcare organizations are likely to be growing in areas with high popularity densities such as Arizona, Florida and parts of the Midwest, which in turn are expected to enjoy a rise in the healthcare practice area.
Intellectual Property – Intellectual property is an organization’s most valuable asset, and securing that asset has made intellectual property a recession-proof practice. When the economy declines, it usually forces companies to think “outside the box” and look for new products, inventions, or ideas. This usually translates into an increase in services to help protect the intellectual capital of these companies. Invention and innovation is what keeps companies competitive, and intellectual property lawyers, paralegals, and other professionals very busy. High tech companies are in the business of invention and innovation, and they are the main consumers of intellectual property services. Primarily, concentrated in California, Silicon Valley and Lost Angeles County have become intellectual property litigation and patent prosecution hotbeds. Other states with a strong high tech industry presence that are enjoying a surge of intellectual property activity include Texas, New York, Florida, and Virginia.
In-House Practices that Will Heat Up in 2011
Mergers and Acquisitions – M&A activity has been on a “wait and see” path for some time as the system remains vulnerable and fear lingers. However, the good news is that the fundamentals are in place for M&A to start picking-up again. In 2010, the U.S. economy has found some stability and returned to growth, and consumer confidence strengthened. Companies who have weathered the worst of the storm will be looking for a new growth engine, and may be returning to the M&A market. Companies will most likely go in “toe first” and will likely stay away from very large, multi-billion dollar deals, in favor of “smaller acquisitions” to complement and strengthen their existing business, rather than enduring the burden and risk after a large M&A deal. As a result, we will most likely see an uptick in M&A activity over the next year or two. Some of the bigger deals will most likely occur in consolidating industries, such as energy and healthcare. As usual, technology companies also are expected to be on the prowl. We may also see some increase M&A activity with the real estate market and the financial industry, which is finally recovering. In terms of geography, emerging markets will lead the M&A surge in 2011, with Asia in the lead.
International – As companies look to focus on expanding their core businesses and increase their market share, they are likely to look outside of the U.S. as part of their competitive strategy. This will drive the international law practice. U.S. companies will continue to look opportunities in the three most popular emerging markets—Brazil, India and China. Some other markets that may generate some new and renewed interest may include Mexico, Vietnam, Korea and the Middle East, with Turkey, Saudi Arabia, and the United Arab Emirates as attracting most of the attention. This boost in international transactions will come primarily from companies in the consumer and infrastructure sector seeking to expand into new markets.
Good New for In-House Job Seekers: Law Departments Plan on Hiring
As companies continue to slowly emerge from the recession, many are looking for ways to save money on their expensive legal bills. Corporate legal department, according to a recent Altman Weil's Chief Legal Officer Survey, are increasingly telling firms to just forget it, and taking more work in-house.
Altman Weil's Chief Legal Officer Survey, released Wednesday, showed that sixty-three percent of the officers surveyed reported that they had increased their internal budgets from 2009 to 2010, and 29% claimed that they would decrease their use of outside firms in the coming year.
That’s great news for attorneys and paralegals looking to go in-house. The survey showed that 41% of chief legal officers indicated that they plan to hire new in-house lawyers in the next 12 months, and 32% said they would increase the number of paralegals on staff over the same period.
The survey, conducted in September and October, is based on responses from 174 officers from law departments. 28% of respondents run law departments in corporations with over $10 billion in revenues.
Of course, the great majority of companies taking on more work in-house will do so with its existing legal staff, placing increasing pressure on an already overworked staff. However, this mark s a shift from companies simply trying to negotiate law firm fees, to looking at alternatives, including bolstering their own internal capabilities. That’s great news for attorneys who are already in-house, in terms of increased job security, and for those looking to break into the in-house world in terms of opportunity.
2010 Best Legal Department…And the Winner Is?
Corporate Counsel's fifth annual competition for "2010 Best Legal Department" identified Microsoft as its winner. The winning legal department was one that prevailed in a prolonged and very expensive antitrust legal battle. As Ian Forrester, a partner at White & Case who represented Microsoft in Brussels put it, the case is "a really extraordinary piece of legal history." Some have called the settlement one of Microsoft's general counsel, Brad Smith's crowning achievements. He and his legal team ended more than a decade of close scrutiny by European regulators. The software colossus can keep doing business across the Atlantic, and the stage is now set for better relations with Brussels.
The litigation successes were among several reasons Microsoft was named Best Legal Department of 2010. The department achieved success after having its budget and staff cut for the first time, due to the economic meltdown. The department improved its diversity, it's helped laid-off workers get free computer training, and has represented immigrant children in court. In other words, it has reached out to the community and given back in tough times.
All three legal departments that were selected this year (the other three finalists) had one thing in common: they retooled and achieved great success doing "more with less."
- Finalist: Discover Financial Services
- Finalist: Hewlett-Packard Company
- Finalist: The Williams Companies, Inc.
2009 Net Income: $1.3 billion
General Counsel: Kelly McNamara Corley
Number of In-House Lawyers: 34
Pro's: Doing a lot with very little.
Con's: No formal pro bono program.
Hewlett-Packard Company (HP)
2009 Revenue/Net income: $114.55/$7.66 billion
General Counsel: Robert Holston
Number of In-House Lawyers: 190/425 (worldwide)
Pro's: Good litigation management, excellent pro bono and diversity programs.
Con's: Ad hoc flextime and fixed-fee arrangements.
Why Was It Picked as a Finalist: Retooling of the legal department, reorganization of litigation, and commitment to pro bono and diversity. "This isn't a place lawyers go to retire," said deputy GC Ashley Watson. Today, HP lawyers describe the department as "energized." In the past two years especially, there have been higher work expectations, a boatload of new hires, and ambitious new projects like revamping the company's worldwide system for complying with local laws that have meant more work for newcomers and veterans alike. Changes were not easily made, but today HP's Legal Department stands as one of the best in the country.
2009 Revenue/Net Income: $8.3 billion/$285M
General Counsel: Jim Bender
Number of In-House Lawyers: 39
Pro's: Outside counsel management, discovery, and pro bono efforts.
Con's: Diversity.
Why Was It Picked as a Finalist: Williams' legal department was able to do what most talk about, but never get to achieve: to cut its outside legal expenses by about 15 percent. The effort started six years ago, when General Counsel Jim Bender decided to reduce the number of law firms the natural gas company used, and implemented blended-rates (that came as close to fixed rates as can be). Williams's ability to use its data to effectively manage outside counsel is one reason it was chosen as a finalist for Best Legal Department. They've also done a god job implementing a new compliance program and developing a comprehensive approach to discovery. Kudos for a legal department that's done what most hope to achieve , but never quite get to do - make real cuts into outside legal fees.
Happy CLOs Are Poised to Hire More in 2010
According to the results of the Association of Corporate Counsel's 10th Annual Chief Legal Officer Survey, CLOs are not only happy with their job, but want to share that happiness by hiring more in-house counsels in 2010. More than 90 percent of CLOs that responded to the Survey indicated that they were happy with their jobs (up 2% from last year’s Survey). Even with the recession and a heavier workload, chief legal officers said they still like their jobs. It’s still good to be in-house. And, it looks like that happiness is going to spread.While these are positive news in an otherwise still gloomy market, this does not mean that the in-house legal market has turned the corner.
In-house legal are still operating under tough budget constraints, and while a 5% increase over last year is good news, it will not serve to make much of a dent in this saturated market
Who Will They Be Hiring?
In particular, over one-fourth (28%) of respondents plan to hire lawyers to do commoditized work, and 21% of these respondents plan to hire specialists.
In addition to the increase in hiring plans, the survey found that the number of law department attorneys based outside the U.S grew this year. This increase can be seen in Western Europe and Canada, where the number of in-house attorneys rose from 1% in 2008 to 7% in 2009; and also in Asia/Pacific, where there was an increase from 1% in 2008 to 2% in 2009.
Why Are CLOs Looking to Hire More?
The recession has forced companies to take a critical view of how they operate. While CLOs will be increasing in-house hiring, they will also be decreasing spending on outside counsel. More than a third (34 percent) said they've cut spending on outside counsel. At the end of the day, they have figured out that they can operate more efficiently by bringing more work in-house, spending less on outside counsel, and boosting spending on alternative fee arrangements, the survey shows.
Could This Be a Long-Term Trend?
That remains to be seen. While this is not a significant increase in hiring, this may be a sign of more positive news to come. Moreover, the recession has forced companies to try on a new model, and they may like what they see.
Who Will Be Getting Squeezed in 2010?
As we are nearing the end of 2009, one of the toughest economic times of our generation, one would hope to see lessons learned on the eve of a new year. One thing remains clear: greed is far from dead. It is alive and kicking. So who will be squeezed as we enter 2010?That said, no need to worry, law firms have a heart after all, and most of them won't seek an across-the-board rate increase. That’s a relief, except for those poor clients who’ll fall in the increase pool. One has to wonder who they are to be deserving of such treatment?
Will legal services be any better in 2010? Will law firm associates be better compensated in 2010? Will fixed costs increase for law firms next year? There are no reports of anything that would indicate changes in the quality of legal services to be provided in 2010. If you’ve read recent reports regarding outsourcing, law firms have been looking at creative ways to offshore legal work at a fraction of the cost. Law firm training has remained relatively stagnant over the years, and there are no changes being proposed by law schools to improve the practical skills of its graduates. The answer here seems rather clear.
As for compensation, if you’re a law firm associate, chances are you will receive a smaller paycheck in 2010. An American Lawyer survey of law firm leaders found that 40 percent of the firms had reduced starting pay for their associates, and 44 percent are considering cuts next year. If you are counting on bonuses, these are disappearing almost as fast as our polar ice caps. They are unlikely to increase overall compensation figures for 2010.
What about fixed fees? Due to intensifying focus on expense control, total overhead expenses decreased 0.6 percent from the previous year in the first three quarters of 2009 according to www.constantcontentblog.com. Law firms cut expenses and saw decreases in the areas of non-lawyer compensation, including occupancy, technology, library, marketing etc. That trend is likely to continue into the New Year. One has to wonder where the impetus for a 3.2 percent increase came from.
Could law firms try to freeze their rates for two consecutive years in a row? Yes, but are they ready to continue to deal with decreased profitability? The answer is evidently no. Partner-per-profit concerns continue to gnaw away at law firm leaders who are scrambling to find solutions to keep these profits from decreasing any further. A 5% partner-per-profit decrease seemed to take law firms into a tailspin of unprecedented layoffs, salary cuts, delayed starts dates, and other cost cutting measures. When Clifford Chance reported a record 30% decrease in partner profits; the news reports were full of dread. Of course, partners still took home a hefty $900,000 a year. That made for fewer sympathetic readers.
When the Am Law 100 showed yet-another-across-the-board 5 percent bump in profitability, you would have expected compensation figures to hit rock bottom. Profits per partner fell by 4.3 percent, to an average of $1.26 million, and revenue per lawyer dropped 1.2 percent, to $818,000. One might argue that if you were already overweight, losing 5% of your body weight is not such a big deal. I guess it's all relative.
If law firms are relying on client goodwill to support this proposed rate increase, they may have to re-think their strategy. According to a recent Reuters press release, for the first time in nine years in-house counsel predict they’ll pay no increase in outside law firm hourly rates. 64 percent said they have implemented or will implement rate freezes. 46 percent of law departments surveyed said they have cut their hourly rates paid to outside counsel, or will reduce their rates. That still leaves a rather significant 36 percent who may go along with rate increases, and 56% who will be requiring as much if not more legal services for 2010, which is probably what law firms are banking on.
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