One of the purposes of these blogs has been to highlight changes in the legal market and as we are currently in one of the most changeable and evolving periods in the industry there has been more to write about than ever before! As well as the already-blogged-about reduction in partners seeking equity (http://vgcharles.blogspot.com/2010/07/pep-talk.html) and the increasing number of mergers (http://vgcharles.blogspot.com/2010/06/to-merge-or-not-to-merge.html), another noticeable factor has been the small but not insignificant number of firms which actually stand to come out of the recession in a better state than they entered it.
This is not to say that these practices have increased profits during a period of economic turmoil; firms which may have achieved this are very few and far between. Instead it is the firms which have chosen to ‘speculate to accumulate’, perhaps at a reduction in profits, and have brought in high calibre and disillusioned partners and fee-earners from so-called ‘better’ firms.
For example; let’s say you are a mid-sized practice based on the outskirts of a city in the north of England. You know that whilst you enjoy a reasonable quality of work and have some long-standing and loyal clients, those firms based in the city like Pinsent Masons, Hammonds and DLA can utilise huge resources and an international reputation to attract the best work around.
However what if the job security of the partners at the big firms is at risk? What if senior associates who both service the clients and have a following of their own now find that any route to partnership is blocked, as the firm cannot support further partners without risk of a team being top-heavy?
You on the other hand have a steady and well-run practice; profits may be down but due to some financial frugalness during the boom times you have a resource of cash at the bank with limited or no borrowings. Could you offer these individuals or teams a new challenge where they can bring this established and high calibre client base?
There are a number of firms who have utilised this period of uncertainty to draw talented lawyers out from the cities and main legal hubs which exist around the country. Through employing prudence when profits were high they now hold the additional capital required to invest, with the result that they can now offer a competitive and attractive option to those lawyers who are on the market.
Coupled with this the ‘speculate to accumulate’ model, the old ‘three times salary’ adage is being relaxed with a view to a long-term gain. If your new hire can bring a client which has always generated £x per annum but is now only producing 2/3rd of x, does it not still make a certain amount of sense to offer them the £1/3rd of x salary they are after on the basis that there is still a huge chunk of profit there, plus the potential to earn more when the market recovers? These ‘zero cost’ hires are becoming more and more common, and when coupled with a commission-based bonus there is a sharing of risk on both sides.
These are options which these firms are considering and which will lead to them coming out of the recession in a far stronger position; this can be in levels of turnover, calibre of client base, the calibre of lawyer servicing those clients and even moving up a tier or two in the Legal 500.
Not every firm is in a position to do this at present, but for those who can this is where the benefit of professional legal recruiters comes to the fore; representing a client which is on a sound financial footing is far more attractive and important than simply the highest bidder mentality which was previously so prevalent. Those firms which CAN invest are only too willing to tell us that they WILL invest and then it is for the recruiter to make sure that the opportunities are relayed to the candidates in a confidential manner, as this level of financial information is obviously not something firms seek to shout about from the rooftops.
As stated at the start of this blog the market is changing rapidly and by the time the dust settles your local legal market may well be dominated by some very different firms to those at the forefront five years ago.
To discuss opportunities with firms who are in a position to invest in you, or if you are a practice looking to find out where you can strategically strengthen and how, call one of our specialist consultants at VG Charles & Co on 0121 233 5000 / 020 7649 9094.