Originally published in The Legal Intelligencer/law.com
Smart Strategy
The post-pandemic era has been plagued with a new and ever-changing talent landscape, as law firms grapple with power shifting squarely into the hands of candidates, employees and partners. A confluence of macroeconomic forces—including generative AI adoption, political shifts and evolving generational expectations—are intersecting with industry-specific dynamics like changing leverage models, consolidation, and record-high compensation levels. These combined trends are reshaping the legal workplace and redefining the types of opportunities and demands firms will face in 2025 and beyond. Below, we explore five of these critical talent trends and how they will impact the future of the law firm workplace.
The Competition—and Cost—for Top Talent Will Continue to Rise
What’s Driving Growth:
Lateral Hires as a Growth Strategy: Law firms continue to prioritize lateral hiring of associates and partners to fuel expansion. This strategy, combined with rising compensation levels—6.7% in the first 9 months of 2024 according to the Citi Hildebrandt client advisory—makes top talent harder than ever to hold onto—and afford.
Demand for Professional Skills: It’s not only the lawyers who are in demand. Professionals with expertise in business development, marketing, technology, pricing, data science, and billing are hot commodities – and those with experience in the legal sector will secure top dollar and continue to drive salaries (and expenses).
Constrained Talent Pipeline: While law school application rates have increased, they remain significantly below the 2004 peak, limiting the availability of new talent entering the legal workforce. While a downtick in associate demand helps to mask this shift, it does not fully eliminate the competition, especially for the cream of the crop.
Macro-Economic Factors: A low unemployment rate of 4.2% indicates an already tight labor market. Add to that the potential deportation of up to 8.3 million immigrant workers and it could further strain the talent pool, driving up compensation costs across industries. Although law firms may feel less impact than other sectors, the ripple effects on hiring costs are unavoidable, particularly for support staff.
What Law Firms Can Do About It:
Embrace Flexibility: Smaller and mid-sized firms—and others who prefer not to compete on dollars alone – can lean into flexible work schedules, reduced billable hour expectations, and remote work options. Research by Major Lindsey Africa indicates that over 50% of associates would trade compensation for fewer billable hours, and more than 25% prize flexibility or additional time off.
Enhance Employer Branding: Position the firm as an employer of choice by highlighting unique benefits, a supportive work environment, and opportunities for professional growth. Just be certain that the brand promise is exhibited once talent arrives – a poor experience can leave an enduring mark.
Invest in Talent Pipelines: Develop long-term relationships with law schools and create internship programs to attract top students early in their careers. Consider alternative programs or less traditional sources of talent such as Legal OnRamp to augment recruitment efforts.
Pivotal Moments—Recruitment, Onboarding and Exit—Gain Power
What’s Happening:
First Impressions Matter: A candidate’s experience during recruitment and onboarding significantly influences their perception of the firm and their likelihood to stay long-term.
Exits Shape Reputation: The way a firm handles employee departures can have lasting impacts on its reputation, affecting both client relationships and future hiring efforts.
Gen Z Vulnerability: This cohort, particularly incoming associate hires, consider experience a driving factor in winning their loyalty, making these milestone markers—interviews, start days and exits—even more significant. It may not be surprising then that although year-to-year associate attrition is down from 26% in 2021 to 18% in 2024, a remarkable 82% of associates leave within five years, according to NALP Foundation research, with the fourth year being the most critical.
What Law Firms Can Do About It:
Streamline Recruitment Processes: Evaluate current processes to ensure clear, transparent communication and timely updates throughout the hiring process. Consider limiting which lawyers and professionals are involved in recruiting and make sure each individual is equipped with a clear understanding of the firm’s value proposition, ideally tailored to the cohort or individual being courted. Plus, dividing each interviewer’s role and responsibilities can lead to a more comprehensive and effective process all around.
Prioritize Onboarding: Create structured onboarding programs that integrate new hires into the firm’s culture and provide resources for success. Schedule check-in points throughout the course of the first year (or beyond) to hear what’s working well and identify ways to improve an individual’s experience and chances of success.
Develop Alumni Networks: Former employees, like clients, have long memories and the way a firm handles departures often shapes how a person remembers their entire experience. Conduct exit interviews to gather actionable feedback. Foster relationships with former employees to maintain goodwill and potentially benefit from referrals or rehires. Consider celebrating departures as a way to provide a proper send-off and express gratitude to those who delivered special value to the firm.
Upskilling and Reskilling Investments Will Pay Off
What’s Driving It:
Technological Advancements: Necessary updates plus new adoption of AI, cybersecurity, and pricing tools will require technical competencies and training for all professionals, including lawyers. For firms “playing catch up,” to avoid a technological debt—shoring up old platforms now to avoid heartache and cost drain in the future—this will likely mean a lot of change in a short period of time. Not necessarily a strong suit for the legal sector.
Evolving Leverage Models: The proportion of equity partners and associates in law firms has declined by 3.4% and 4.3%, respectively, over the past five years, while non-equity partners and other lawyers have increased by 4.8% and 3.0%, according to the Georgetown/Thomson Reuters State of the Legal Industry 2025 report. This reshaping of the law firm model, alongside differences in generational learning styles and preferences and hybrid work is increasing demand for business development, project management, leadership skills and other human skills.
Establish Tech Competencies: Many firms have clear sets of expectations for how paralegals, associates and professionals develop legal skills or competencies linked to their roles. Few, however, have associated technology competencies—minimum thresholds for the type of knowledge needed to effectively use and apply technology tools and keep the firm safe from cybersecurity risks. This dynamic is especially notable for partners who, at many firms, are allowed to “outsource” technological understanding to others. There is a limit to efficacy of this approach and it presents potential risks to firms. Having a clear set of technological competencies can help to alleviate this exposure.
Address the Gender Gap in AI: According to research from the Bank for International Settlements, only 37% of women report using generative AI compared to 50% of men. Be mindful of this gap and explore ways to advance the comfort level and AI-savvy of professionals across the firm.
Double Down on Human Skills: Engagement of professionals and lawyers at virtually every level is tied inextricably to whether they feel valued by their “manager,” or the person providing them day-to-day assignments and feedback. Within law firms this could mean a considerable proportion of the firm. Offer formal leadership programs to provide people firmwide with the skills and resources needed to motivate
Institute Reverse Mentorship: Encourage those most experienced and adept at technology, who may be from younger generations, to mentor colleagues and superiors, facilitating knowledge transfer and strengthening team dynamics. Bonus—this approach provides an opportunity for more junior folks to shine, giving them increased confidence and making them feel more valued and engaged.
Culture and Trust Will Displace DEI as Means to Enhance Inclusivity
What’s Driving It:
Changing Social and Political Climate: Amid mounting social and political scrutiny, many firms are reassessing their public commitments to DEI initiatives. This reevaluation stems from the need to balance authentic inclusivity efforts with divergent viewpoints.
The Need for Inclusivity: A genuinely inclusive workplace remains vital for retaining top talent and meeting client expectations. Inclusive cultures foster collaboration, innovation, and loyalty, which are critical for long-term success.
What Firms Can Do About It:
Focus on Internal Culture: Shift the emphasis from outward DEI statements to fostering a culture built on trust, collaboration, and mutual respect. Encourage leaders to lead by example in promoting inclusivity through their actions and decisions. Tout the benefits of collaboration in terms that resonate, including the notable impact on expanding client relationships (see Heidi Gardner’s Smart Collaboration for more insights) and improving retention—both of which positively impact the bottom line.
Train on Giving (and Receiving) Feedback: Feedback is the cornerstone of a growth mindset and the ability to flourish and improve performance, including relational capabilities. Creating forums and systems for upwards, downwards and peer feedback can help to foster cooperative environments, improve team dynamics and create space for people to grow. Though not yet a common practice in law firms, 360 reviews for partners are gaining traction. Pro tip: start at the top, measure progress and celebrate personal successes.
Measure Progress: Regularly assess inclusivity efforts using employee surveys, focus groups, and diversity metrics. Use this data to adapt strategies, ensuring continuous improvement and alignment with organizational goals. Consider instituting stay interviews—discussions to highlight what is working and why people choose to remain at the firm—to identify core cultural strengths and inform future investments (including recruitment and onboarding, highlighted above).
Law Firms Will Harness the Power of AI and Analytics to Make Better Decisions
What’s Driving It:
Inefficient Processes: Despite technological advancements, many law firms continue to rely on outdated, manual processes, leading to inefficiencies and missed opportunities for growth. These can also be sources of frustration, especially for younger workers.
Untapped Potential in Talent Analytics: Law firms have been slow to embrace data-driven decision-making in areas like HR, recruiting, and talent management. Part of the onus lies in effectively capturing and integrating the data itself in ways to allow for analytics.
What Firms Can Do About It:
Integrate Data Systems: Start by consolidating and cleaning data across platforms to ensure accuracy and usability. A unified data system allows for consistent and reliable analytics across the organization. Historically, law firm data is traditionally siloed—this has been the single most prevalent finding in virtually every assessment of competitive intelligence capabilities performed in the past decade and, unfortunately, still holds true today. Accurate and integrated talent data will allow law firms to level up, make better decisions around recruitment, hiring and firing, and establish stronger performance management systems to drive engagement and accelerate growth.
Adopt Advanced Tools: The new demands from talent are spurring expansion of HR, recruitment and talent functions. They are also weighing those professionals down with routine tasks and often antiquated, inefficient systems. Enhance productivity and efficacy by investing in sophisticated HR platforms. For example, Workday recently announced RecruiterAgent, an AI-optimized tool to streamline recruitment and talent management, including succession—a driving trend within law firms. These tools not only reduce administrative burdens, but also improve decision-making and the rarely appreciated (and soaring) costs of attrition.
Reevaluate Compensation Models: Align compensation structures with the firm’s strategic goals. Between 2019 and 2023, nearly 50% of firms modified partner compensation models to reflect evolving priorities. How many of those revisions included new ways to reward and incentivize desired behaviors related to talent management and leadership, however, is questionable. Forward-looking firms will adjust compensation to include subjective components in conjunction with development and implementation of comprehensive performance management and feedback systems (including for partners).
Conclusion
Transforming the traditional law firm model, leadership approaches and professional development framework to adapt to the changing needs of talent is a strategic imperative. The firms that invest in navigating these trends will demonstrate their commitment to putting the needs of their people above profit, at least some of the time. This benevolence—a core factor in trust and engagement—will yield rewards and create a lasting strategic advantage for years to come.
Reprinted with permission from the [January 17th edition of the Legal Intelligencer] © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.