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  • Writer's pictureHHF Team

The American Lawyer: Why Is Big Law Growing When Demand Is Dropping?

Updated: Jul 20, 2023

May 30, 2023 at 01:57 PM | Andrew Maloney

Many firms are "relying on some natural attrition, and it’s not coming along as fast as they’d like," Wells Fargo's Owen Burman said.

Law firms up and down the Am Law 200, from the elite crowd to more regional shops, have grown their attorney head count, despite slower demand and productivity declines since 2021.

Some of that head count growth is likely inadvertent, as the attrition rate slows, while some law firms are also planning longer-term investments to build scale, with specific practice area and geographic growth needs, say firm leaders and analysts.

While attorney layoffs have multiplied in Big Law over the last year, overall, Am Law 200 firms are still getting bigger, from top-ranked Kirkland & Ellis’ 13% growth in 2022 to No. 191 Fennemore Craig growing by more than 40%.

Am Law 100 firms grew head count by an average of 4.3% in 2022, with the median standing at about 923 lawyers. In 2021, the median in the top 100 was about 880. Firms in the Second Hundred grew head count by roughly 2.7%, with the median standing at 283 attorneys. Previously, it was 272, according to ALM data.

And head count has continued growing in 2023, according to the latest dispatch from Citi’s Global Wealth at Work Law Firm Group. The survey of more than 190 firms found lawyer count rose about 3.7% across segments in Q1, with analysts noting the “strong” growth coupled with slow demand resulted in a productivity decline of about 5.2%.

Like growth in the equity tier, some of the overall head count growth is more incidental, a product, perhaps, of firms investing in particular areas while taking a wait-and-see approach in others.

“I think it’s that they see their strength and they’re recruiting for areas that do have growth, and they just haven’t reduced in areas they haven’t seen growth. It’s not a decision overall to say, ‘We wanna continue to grow head count,’” said Owen Burman, managing director for Wells Fargo Legal Group, on the overall growth in head count recently.

He said many firms are “relying on some natural attrition, and it’s not coming along as fast as they’d like. The transactional associates are staying on when they might have otherwise chosen to leave voluntarily. At the same time, they do have to hire in other areas. So it’s kind of a mismatch in skill sets, and they’re not interchangeable.”

Additionally, law firms have made a conscious decision to increase their associate classes since 2021, when demand was white hot, said Michelle Fivel, co-founder of the recruiting firm Hatch Henderson Fivel. On the partner side, she said, while firms are mostly avoiding “investment hires” at the moment, firms are still trying to snatch up folks with a proven, mobile client portfolio.

“There’s always, always, always demand for partners with clients and a history of business generation, and a portable book that clients will absolutely follow—on the corporate side and the litigation side—regardless of the market,” Fivel said, adding that unless a partner has a very unique or specialized skill set, “you won’t see firms hiring equity or nonequity partners that are not immediately accretive, for the most part.”

No firm leaders say they want to grow just for the sake of growth, but scale is a priority for some. In the Am Law 100 last year, for instance, the firm with the largest percentage increase was Taft Stettinius & Hollister, which added 100 lawyers via a merger with Detroit-based Jaffe Raitt Heuer & Weiss, helping grow its ranks by more than 25%.

Taft Stettinius managing partner Robert Hicks specifically told The American Lawyer that he wants the roughly 750-lawyer firm to get to 1,200 lawyers before his tenure is up in four years, saying among other things that he thinks Taft Stettinius stands to benefit from growth in legal tech, which could cause more consolidation.

“Taft is pretty clearly an acquirer. It’s a survivor. I think that gives us a leg up in the middle market. It will be interesting to see where it consolidates to,” he said.

Among the Second Hundred, Fennemore Craig led with 40.4% growth in head count, combining with midsize California firm Rynn & Janowsky and increasing to 240 lawyers from 171.

Firm CEO James Goodenow said he also appreciates the value of scale as advances in technology such as artificial intelligence have the capability to undermine smaller firms.

“It’s clear that firms need to make investments for the future in cybersecurity to protect client data, and AI or other types of technological advancements will make us more efficient at what we do,” Goodnow said earlier this month. “Smaller firms aren’t able to make those investments in the way larger firms can.”

Goodwin Procter (24.2% lawyer growth), Fragomen, Del Rey, Bernsen & Loewy (20.2%) and Willkie Farr & Gallagher (19.5%) had the next-highest growth rates in the Am Law 100 last year.

Spencer Fane (19%), Buchalter (12.6%) and Foley Hoag (11.2%) rounded out the top-four lawyer growth rate increases in the Second Hundred.

Even as many predict a recession later this year, law firms are also thinking years beyond 2022, analysts have said, whether it’s through their billing rates or their stake in specific practice areas, such as capital markets.

Indeed, the decisions that ultimately lead to overall head count growth or decline are usually made at a more particular level. Allison Murdock, managing partner of Stinson, where head count fell by about 2.5%, to roughly 403 total lawyers last year, said her firm’s primary consideration is “where do we have a practice need?The firm just opened a Tampa office, adding a handful of lawyers, including two partners, plus of counsel and associates.

“There’s geographic growth, which in essence is a practice and client-service need, but also, where do we have a need for some areas of expertise, whether it’s a particular office or division?” she said in an interview. “So we focus very heavily on that as opposed to, ‘Let’s just have more lawyers.’ We try to be strategic at a more granular level as to where we need growth to serve clients, and that’s with regard to associates and partners.”


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