The economic landscape is an ever-changing terrain marked by cycles of growth and recession. One of the defining features of this economic ebb and flow is the cyclical nature of recessions. These downturns, characterised by reduced economic activity, often come with little warning and can significantly impact various industries. Traditionally viewed as a stable profession, the legal industry is not immune to these economic fluctuations. While the legal industry's services are in constant demand, it too is vulnerable to the repercussions of recessions, particularly the 2023 recession.
The Significance of Retaining Legal Talent in a Recession
Before delving into strategies for retaining talent in law firms during a recession, it's crucial to understand why this is paramount.
Economic recessions bring a unique set of challenges to law firms. Client budgets shrink, competition intensifies, and the demand for certain legal services may decline. Moreover, losing talented employees comes with substantial financial and organisational costs. It's not just about recruiting and training replacements; it's about the disruption to existing projects, the potential loss of clients, and the impact on firm morale. This makes it imperative for law firms to not only retain their talented workforce but to do so efficiently.
In Thomson Reuters’s State of the Legal Market, 2023 report, it was noted that many lawyers were leaving their law firms, with 20.1% of them leaving by the end of the year in 2022, a higher rate than in the past decade. Silicon Valley and New York City have been particularly impacted by decreasing demand, although not to the extent seen during the 2008-2009 recession. History shows that retaining talent during recessions is always a wise investment.
Strategies for Retaining Talent
- Embrace Flexibility: One of the key factors in retaining talent during a recession is to recognise that employees have unique needs and circumstances. Law firms can manifest and embrace flexibility through remote work options, compressed workweeks, or even part-time schedules. A partner from a prominent global law firm pointed out, “In terms of the war on talent we’ve experienced unprecedented growth. The wider acceptance of remote working has enabled us to recruit from a wider talent pool.” By accommodating the diverse needs of their employees, law firms demonstrate a commitment to their well-being.
- Prioritise Professional Development: In challenging economic times, employees are more likely to stay with a firm that invests in their growth. As per Gartner's 2018 findings, firms with well-established internal hiring markets have a 33% higher employee intent to stay. Law firms can offer training and development programs to enhance the skills and knowledge of their staff. By providing these opportunities, they can ensure that their employees remain competitive in the legal industry.
- Foster a Supportive Work Environment: Recessions can be anxiety-inducing, and employees need a supportive work environment more than ever. Law firms should prioritise open communication, both for discussing economic challenges and offering emotional support.
- Recognise and Reward Performance: Recognition and rewards go a long way in retaining talent. Law firms can establish clear performance metrics and reward systems that acknowledge and appreciate outstanding work.
- Maintain Transparency: In times of economic uncertainty, law firms should be upfront about their financial health and the steps they are taking to weather the recession. When employees perceive their leaders as transparent, they express over six times greater satisfaction with their workplace and a fourfold stronger sense of belonging in their work environment.
- Consider Long-Term Benefits: When the economy takes a downturn, there's often a temptation to react quickly and impulsively to protect your law firm. However, this might not be the best course of action. According to Gary Mitchell, the Founder and CEO of OnTrac Coach, many law firms respond to a recession by making large and immediate layoffs, freezing spending, reducing salaries, and cutting partner compensation. Mitchell believes this short-term thinking can be detrimental to law firms. Instead, Mitchell advises law firms to adopt a more long-term perspective when dealing with a recession, such as retirement plans, health insurance, and job security for their employees.
The Way Forward: Nurturing Resilience and Loyalty
In the legal profession, talent is a firm's most valuable asset. By focusing on the well-being and growth of their employees, law firms can not only weather recessions but also thrive in the ever-evolving landscape of the legal industry. Nurturing a culture of resilience and loyalty will not only help law firms survive the economic storm but also position them for success when the skies clear. It's in these trying times that true leaders emerge, and law firms that prioritise their people stand the best chance of retaining their most valuable resource - their human capital. Retaining legal talent during a recession is not just a short-term necessity; it's an investment in the long-term success of law firms, ensuring they remain resilient and adaptable in the face of economic uncertainty.
Author: Varun Bhatia, Co-Founder of 3NServe.
Disclaimer: The views and opinions expressed in this article do not necessarily reflect the official policy or position of Novum Learning or Legal Practice Intelligence (LPI). While every attempt has been made to ensure that the information in this article has been obtained from reliable sources, neither Novum Learning or LPI nor the author is responsible for any errors or omissions, or for the results obtained from the use of this information, as the content published here is for information purposes only. The article does not constitute a comprehensive or complete statement of the matters discussed or the law relating thereto and does not constitute professional and/or financial advice.