ThomsonReuters: “Having regained their footing after navigating the depths of the pandemic, law firms are facing a growing talent war that threatens to upend the legal industry’s newfound momentum. But the 2022 Report on the State of the Legal Market, issued today by the Center on Ethics and the Legal Profession at Georgetown Law and Thomson Reuters Institute, warns: “The traditional law firm response of just throwing more money at the problem is not likely to work as well going forward.” The report notes the law firm market has rebounded strongly and firms are performing well financially despite the ongoing pandemic. Demand soared in 2021 following a disappointing start, driven primarily by real estate and corporate practices. Litigation is one of the major practice areas that is still below pre-pandemic levels. Firms continue to raise rates aggressively, helping push profitability to record levels. However, the industry’s recovery has also sown the seeds for a rapidly growing series of cascading problems. The rising demand for legal services is colliding with lawyers’ evolving work preferences in a war for talent that is hitting unprecedented levels. Associate compensation is now surging at double-digit rates – some of the highest levels in more than a decade – driving up costs for firms. Yet at the same time, retention has plummeted. Attorney turnover has risen to record levels for firms, “edging dangerously close to losing almost one-quarter of their associates in 2021.” The report warns that relying on higher compensation to retain talent may not be sustainable nor particularly effective….The report analyzed turnover patterns and found that firms with the lowest turnover are not necessarily those with the highest compensation growth. In fact, they tend to have the lowest compensation growth among firms in the market. These initial results run counter to many previously held notions, as the report concludes that the “loyalty lawyers feel to their firms and their willingness to work hard is not simply, or even primarily, driven by compensation.”

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