Lawyer burnout is ‘a real problem’ as demand for legal work outstrips growth in the number of lawyers
Law firms will easily be able to absorb higher expenses driven by a war for talent due to strong revenue growth in 2021, according to the Customer advice 2022 Citi Hildebrandt released Thursday.
Average revenue growth for the first nine months of the year is expected to be 14.7% higher than the same period of 2020, according to the report, available here, from Citi Private Bank’s group of law firms and by Hildebrandt Consulting.
“2021 has undoubtedly been a year of strong growth for all segments of the industry,” the report says. “We expect to see some of the strongest net income and earnings per equity partner (PPEP) results ever.”
Demand increased by 6.6%, tariffs increased by 6.5% and the collection cycle was shortened by 2.1%. Growth in demand was driven in large part by M&A, finance and capital markets, and litigation activities.
“In this environment of strong growth in demand, there are not enough lawyers to handle the rising tide of work, with the total number of lawyers increasing by only 0.7%,” the report said. “Indeed, productivity increased 6.1% for the first nine months, making burnout a real problem for many companies where productivity was already high. “
Seeking to retain and attract talent, law firms announced spring bonuses, offered signing bonuses, and increased base salaries. Traditional year-end bonuses are expected to increase, and some law firms are also offering more special bonuses, according to the report.
So far, the war for talent has resulted in a 14% increase in compensation spending, which is the main driver of the 8% overall spending growth.
The report noted an almost even split between law firms that increased staffing (54%) and those that experienced declining staff (46%).
Ninety-three percent of law firms plan to increase the number of their associates next year, while 63% plan to increase the number of partners and counsel, according to a previous survey of executives of law firms cited in the report.
Law.com, Bloomberg Law and Reuters covered the report.