This year is clearly going to be a very difficult one for law firms and their management teams. No-one knows for just how long Coronavirus will impact on activity levels and income generated. At the moment, the standard line from management teams is “let’s wait until the end of June and re-assess then”.
When there are so many decisions to be made that could have a long lasting impact on the short and long term financial health of their firm, it’s so easy for law firm management teams to immediately close their minds to recruiting partners during more difficult times. No-one will be criticised for saying “no” rather than “yes” to investing in laterals when activity levels aren’t what they have been.
Yet well run firms know that a downturn gives them the opportunity to hire talent that would never normally come on to the market. Let’s think about what is likely to happen over the next year. A combination of push and pull factors means that more partners than normal will come onto the market.
On the one hand, partners who thought that they had at least a mid-term future within their current firm might find that with an economic downturn, management has reached a different conclusion. And on the other, successful partners might look at their firms anew and now wonder how secure their firms are if the downturn lasts a few years and, even if those firms survive, what impact there might be on their earnings.
When I look at moves I facilitated in the last recession, the bravery of certain firms has paid off hugely. To give just two examples:
- A young real estate partner with a very small personal client base was made redundant. Most firms were not looking to hire a partner with his profile. However, the head of a top 50 firm’s real estate department who had previously retained me to (successfully) develop the practice, trusted my judgement, agreed to meet the candidate and liked him. He had to win an internal battle to push on and then to make an offer which was accepted. Ten years on, this partner is a successful equity partner whose client base brings in around £1.5m a year.
- A litigation led law firm invested heavily in recruiting a real estate team; the salaries came to £900k and the fee was approximately £200k. Over the last ten years, this team of two partners (and associates) has produced income of between £50-60m for their firm.
It will probably take a couple of years before we will learn which firms understood their long term strategy, continued to invest to ensure it was delivered and can point to those new laterals successfully integrated and delivering to their new firm. Will yours be one of them?