Smaller Firms Score Talent As BigLaw Downsizes

Law360, April 25, 2023

By Aebra Coe

As the nation's largest law firms conduct layoffs and scale back hiring, small and midsize firms are taking advantage of the moment to add big firm lawyers in increasing numbers, according to statistics provided by legal data company Firm Prospects LLC.

The portion of associates leaving large law firms for those outside BigLaw has shifted over the last two years, from 31% of lateral departures from large law firms in 2021, to 34% last year, and 42% during the first quarter of 2023, according to data collected by Firm Prospects, which tracks lateral movement among 3,500 law firms.

Of the associates who left the 100 largest law firms in the U.S. by revenue for another firm during the first three months of the year, 29.1% landed at midsize or small law firms and 13% headed to the second 100 largest law firms in the U.S. by revenue, the data shows.

The movement is likely the result of a glut of hiring on the part of large firms in 2021 and a subsequent drop-off in the volume of work at those firms this year, leading to layoffs and a reduction in new hires, according to Firm Prospects co-founder Adam Oliver.

That shift leaves a number of job seekers looking for a home, and many small and midsize firms have been more than happy to snap them up, Oliver said.

"There are a lot of candidates looking for somewhere to land. They can't go from an AmLaw 10 firm to an AmLaw 10 firm right now because they're not hiring at the moment, so many end up going to a midsize shop," he said.

Many of those associates looking for a job have worked on large deals, have excellent credentials, and could even bring novel capabilities to their new firms, Oliver said.

"The midsize firms are being opportunistic and being really smart about this," he said.

Another factor at play, according to Gary McGinnis, a recruiter and managing director at Garrison & Sisson, is that large law firms were poaching talent from the midsize firms in 2020 and 2021 during a boom in business, leaving many of those smaller firms in need of more hands on deck.

"Many of those firms had trouble recruiting or retaining associates during that BigLaw hiring boom because of the differential in salaries," McGinnis said, pointing to the increased salaries, bonuses and signing bonuses offered by the largest firms during the hiring boom. "I now wonder if some of the need among those [smaller] firms could be residual."

However, other recruiters said the data on attorney movement during the first quarter can be attributed to the growing appeal of midsize and smaller firms.

The unsteady economy and swirling news of layoffs in the industry have led many associates to yearn for a sense of security, and many are finding that at midsize and smaller law firms, according to Jenny Swan Meyer, chief operating officer at Swan Legal Search.

"It's a prime time for small and midsize firms to be recruiting associates from BigLaw — they offer an appealing alternative. For junior and midlevel associates, job security is top of mind," Meyer said. "As part of the recruitment process, many firms have shared that they did not conduct any layoffs during the Great Recession or the pandemic, and do not intend to do so in the future."

Path to partnership is another priority among associates today, something that's often a little more achievable at smaller law firms, according to Raj Nichani, founder and president of the RMN Agency recruiting firm.

A recent survey of millennial lawyers by Major Lindsey & Africa found that the percentage of that generation who hope to make partner is on the rise, reaching 45% this year, up from 24% in 2021.

"Some younger people are gravitating toward the mentorship at smaller firms and the opportunities for partnership being quicker, for being thrown into the deep end in terms of work sooner," Nichani said. "They're able to say, 'I'd rather trade in however many dollars and get those extra attributes.'"

It's an open question whether the attorneys now heading for Mid-Law will stay put or return to BigLaw when the economy turns around and deal flow picks back up.

According to Oliver, the industry has often moved like a pendulum, with lawyers swinging back and forth based on the current economic headwinds.

"Some would make the argument that you don't want to make a move to a midsize firm because then you can't get back into a big firm, but I think it's better to continue working and maybe they'll like life at a smaller shop," he said. "And a year from now when [BigLaw] hiring picks up, they'll be employed and the opportunities will probably be there."

--Editing by Marygrace Anderson.

https://www.law360.com/pulse/articles/1600833/smaller-firms-score-talent-as-biglaw-downsizes