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Law Firms Adapt to Economic Climate with Strategic Hiring and Firing

published February 22, 2023

By Author - LawCrossing
Published By
( 3 votes, average: 3.3 out of 5)
What do you think about this article? Rate it using the stars above and let us know what you think in the comments below.
Law Firms Adapt to Economic Climate with Strategic Hiring and Firing

How Law Firms Are Responding to Economic Uncertainty through Hiring and Firing Practices
 
In spite of the current economic climate, law firms are engaging in both hiring and firing practices. Some firms are cutting costs by laying off employees who are not generating revenue, while others are strategically hiring lawyers to upgrade their talent pool. These hires are not aimed at meeting a surge in demand, but rather at strengthening the foundation of the firm's profitability. The trend of layoffs has been continuous, with several firms letting go of their staff in recent months. On the other hand, many firms are hiring as well, with the nation's top 200 law firms have brought on 372 lateral partner hires so far in 2023. Some firms are also using this time to "clean up" their workforce by counseling out underperformers while actively recruiting higher-performing groups.
 
Hiring and Firing Practices in the Legal Industry amidst Economic Uncertainty
 
According to a report by Wells Fargo Legal Specialty Group, law firms have been hiring and firing in response to a nearly 4% decrease in profits per equity partner last year. While firms hired aggressively in 2021 to manage an influx of work, they are now taking a more thoughtful approach to shedding talent that does not align with critical goals. Rather than making deep cuts as they did during the Great Recession, firms are protecting profits by reallocating resources to areas of strategic growth such as technology, professional development, and client development. This approach is necessary for the current uncertain economic climate, where interest rate hikes could potentially lead to a recession. With economic indicators that are harder to interpret than in the past, it is crucial for law firms to navigate these uncharted waters with a more measured approach.
 
Consolidation in the Legal Industry: Mergers and Acquisitions as a Response to Economic Pressures
 
Some law firms are adapting to the current economic climate by seeking mergers with other firms. This year has seen several deals, such as Orrick, Herrington & Sutcliffe's merger with Buckley, Morrison & Foerster's acquisition of Durie Tangri, and Holland & Knight's combination with Waller Lansden Dortch & Davis.
 
Shearman is reportedly in the early stages of merger talks with Hogan Lovells, while Stroock & Stroock & Lavan is said to be searching for a merger partner. Consolidation is becoming more attractive to firms, as larger and more profitable firms have a competitive advantage in recruiting talent.
 
The rise in consolidation could bring about long-awaited changes in the legal industry, with larger law firms becoming even bigger and smaller ones specializing in niche industries. For example, Clark Hill, a Michigan-based boutique law firm, acquired Philadelphia's Conrad O'Brien and Larsson & Scheuritzel, citing rising costs of running a law firm, including labor and technology costs, as well as cybersecurity compliance requirements, as some of the factors driving expenses. Some smaller firms are also seeking merger partners to address succession planning as their founders retire.

published February 22, 2023

By Author - LawCrossing
( 3 votes, average: 3.3 out of 5)
What do you think about this article? Rate it using the stars above and let us know what you think in the comments below.