Polish up your retention policy – private practice lawyers are increasingly eyeing in-house roles
If the question was stark, the answer was starker. When The Lawyer ran its biggest-ever survey of the relationship between private practice and in-house, the final question to lawyers in private practice ran: would you consider taking an in-house role in the future?
We were not prepared for the response. No fewer than 68.5 per cent of the 1,317 participants said yes, they would.
If there is a single statistic that could at a stroke both obliterate any lingering perception of a qualitative divide between private practice law-yers and their in-house cousins and underline the growing sense of where the balance of power lies, this is it.
But that’s not all.
Of those who said yes, one third (32.6 per cent) were partners. Put another way, 53.9 per cent of all the partners surveyed said they would consider taking an in-house role.
When the more junior lawyers are asked, the numbers go stratospheric. No fewer than 80.1 per cent of the associates surveyed said they would consider an in-house role. That leaves only 19.9 per cent of associates set on a private practice career.
As one respondent put it: “The quality of many in-house lawyers is on a par with private practice – this divide between the two is an old-fashioned view.”
The battle for hearts and minds is on in terms of remaining in practice. So associates are not necessarily seeing partnership as the major aim. As Travers Smith managing partner Andrew Lilley comments: “It used to be the default assumption that partnership is what you would do, but this is changing. In-house roles offer a broader range of priorities in life and a more stimulating career than perhaps 15-20 years ago. Many of the top in-house lawyers come from the best firms in the City and they’re there by choice, not because a door has been slammed in their face or because they haven’t been progressing in their firms.”
Frances Murphy, head of corporate at Slaughter and May, agrees. “There has been a huge change in the role of in-house counsel in the past 20 to 30 years,” she says. “It used to be a rarity to have really senior lawyers working in an in-house role, but now it would be rare to find a major company without senior general counsel.
“This career path has developed a lot and this has changed perceptions. I’d be hard pushed now to think of a major company that didn’t have its own in-house team and many global companies have in-house teams that are larger than some law firms.”
The survey took place during the last two weeks of February this year. There were 2,549 participants in total, of whom 1,205 were in-house and 1,344 in private practice.
Of the in-house respondents 27.5 per cent, or 331, were general counsel or heads of legal, while of the private practice lawyers 51 per cent, or 690, were partners.
These were not serial movers, either. More than half – 51.9 per cent – of those who would look in-house have been in their post for four or more years, which suggests this is not a group of feckless lawyers riven with wanderlust.
“There’s less certainty in private practice, with firms going bust or entering into mergers, so many lawyers – even partners – don’t know what the future will hold and are looking for new challenges,” admits Laila Martin, manager at legal recruitment consultancy Shilton Sharpe Quarry. “There’s a clear appetite for in-house roles at all levels and across all sectors. Companies are also seeing the cost benefit of bringing lawyers in-house.”
“Work-life balance and flexibility are still attractive aspects of in-house roles,” says legal recruitment specialist Taylor Root partner Sarah Ingwersen. “But private practice is starting to understand that it’s not simply an easier option – you’re more exposed and vulnerable in an in-house role. You’re at the whim of the business, you can’t hide behind the office and the proximity is more demanding.”
That said, Ingwersen admits that there is no shortage of potential candidates for in-house roles as life on the other side of the fence looks increasingly attractive.
“We’re seeing a greater demand from private practice lawyers wanting to move in-house, but companies prefer to take on people with in-house experience, so there’s a bit of a disconnect between what the market’s doing and what it is wanting,”
Ingwersen says. “For lawyers wanting to move in-house, I’d recommend that you have at least done a secondment in-house as companies will want you to hit the ground running. In terms of filling the in-house roles available, it’s not difficult as there’s a massive surplus. Companies can more or less name their wishlist and they’ll get it as there are so many good candidates putting themselves forward.”
Secondments have been a key element in bringing together the two sides of the profession.
“All commercial lawyers should spend a period on secondment,” says Murphy. “It provides good lessons in understanding what drives clients and allows them to gain first-hand experience of the pressures and benefits of working in-house.”
Wragge & Co managing partner Ian Metcalfe echoes the sentiment. “As I always tell my associates, in-house roles are extremely challenging and arguably much harder than private practice, as general counsel are close to the absolute sharp end,” he argues. “We like our associates to do in-house secondments as it’s important for them to understand the pressures on in-house counsel to provide results immediately, and that you’re expected to have a broad-based knowledge of a wide range of practice areas. This is difficult to do as in private practice you tend to specialise quite early on, but in-house lawyers don’t have this luxury.”
Taylor Wessing managing partner Tim Eyles is another advocate of in-house secondments.
“We’ve taken on a number of people from in-house, both at senior associate and partner level,” he says. “Their skills are valuable and their commercial perspective is useful in private practice. This is a primary reason for our lawyers doing secondments – so they can get into the nitty gritty of clients’ operations.
It gives them more commercial grounding and makes lawyers better equipped to deliver advice in a user-friendly way.”
What comes across loud and clear from the survey results is that the interest in an in-house career does not tail off once a private practice lawyer gains partnership.
“We’re seeing more and more partners and even senior partners moving in-house – a prime example being Peter Rees, the general counsel at Royal Dutch Shell,” says Metcalfe. “He’s an example of a senior partner moving in-house and this reflects the importance of general counsel roles at global companies. I think we’ll see more senior-level appointments as in-house is now seen as a viable option [that] gives partners the opportunity to pursue a different course.”
However, the pressing problem for law firm managers is the fragility of their associate employee base.
The associates surveyed were from a broad spread of disciplines, with litigation (25.2 per cent) and M&A (17.1 per cent) accounting for the largest splits.
In total, 80.1 per cent of associates taking part in the survey would consider an in-house move. The finding that only a fifth of associates are wedded to private practice will pose an enormous retention challenge to partners and HR directors.
“General counsel are becoming more influential and this shift has made young lawyers more attracted to in-house roles,” muses Nabarro senior partner Simon Johnston. “They’ve seen that in-house roles are not just about providing legal advice, but also understanding the business context. At the senior level, general counsel now have a stronger role in organisations and handle more strategic aspects of the business.
“We’ve seen this with our young associates, who are definitely attracted to in-house roles, perhaps in a higher proportion than in the past. In 2010-11, 50 per cent of the lawyers who left our firm went in-house and in 2011-12, 34 per cent went in-house. It spiked in 2010-11 when the economy was in crisis and then went down again, so although there’s no other trend, there’s clearly a high proportion of associates looking to go in-house.”
Fast forward five years
Participants were asked to rank what they thought would be the biggest issues facing their firms over the next 12 months and five years.
These ranged from global economic challenges and the Legal Services Act (LSA) to fee pressure from clients and recruitment/retention issues. Respondents rated each issue on a scale of 1 to 5, where 5 was the most important.
Although responses from those mulling an in-house career and those wedded to their law firms largely mirrored each other, those considering a move outside of private practice were consistently more pessimistic about wider issues affecting the profession.
For example, global economic challenges were seen as of high importance (rated 4 or 5) by 57.2 per cent of those who wanted to stay in private practice, but the figure rose to 65.3 per cent when rated by those considering a move in-house.
One survey respondent commented: “The legal market has been in a prolonged period of defensiveness because of economic conditions. Over the next five years, as those conditions improve globally, those who have been playing ‘wait and see’ will make bigger, more strategic decisions. That, combined with new business models, will render the legal services sector unrecognisable in five to 10 years.”
Said another: “Economic conditions are driving market consolidation and downward pressure on fees. It could be survival of the fittest or a move to more niche practices.”
And there was outright pessimism from some. “We’re regularly working for free,” said one respondent. “Fee pressure is going to continue to be immense.”
Fee pressure from clients was consistently ranked as a dominant influence in shaping private practice, both in the next 12 months and longer term, over five years. When asked to rate the importance of a number of long-term challenges, 65.7 per cent of all respondents gave this a 4 or 5 weighting. Those open to an in-house career were more likely (68.5 per cent) to rate client fee pressure as highly important than those committed to staying in private practice (60.2 per cent).
The greater emphasis on client demand given by those considering a career in-house is surely not accidental, but one thing is certain: private practice perceptions of in-house power have shifted.
Those determined to stay in private practice were slightly more likely to rate the LSA as a significant challenge for the profession as a whole (the issue was rated 4 or 5 in importance by 50.5 per cent of respondents in this category), while those considering an in-house career were slightly more likely to rate recruitment and retention a challenge for their firm in the longer term (42.7 per cent).
One participant said the economic environment brings both challenges and opportunities.
“Because our firm is a boutique dispute resolution practice, a weak economy is a good thing as our practice is counter-cyclical,” they said. “We’re also less concerned about competitors as we operate a unique business model with a low cost base meaning that, unusually for a law firm, we compete on both quality and price.
“The only real issues we face are: (1) how we deal with the volume of work that is always coming in the door (we turn a lot away); and (2) how gradually we expand and how we attract quality applicants. The latter is becoming less of a concern as our name is increasingly becoming known.”
Another pointed out that globalisation is cutting both ways. “The largest long-term concern for lawyers in the UK is the emergence of new global economic centres and competition from well-trained local lawyers in these centres obtaining business from clients who previously looked to the UK for their legal expertise internationally,” they said.
Partners vs associates
It is in their comparative assessment of the long-term challenges to the legal sector that the sharpest divergence between partners and associates is found. Put simply, associates are more gloomy than their bosses.
Take the issue of fee pressure from clients, where you might expect partners to be more pessimistic. Again, the associates are the ones who see this as a bigger challenge; 60.2 per cent of partners surveyed rated the issue of high importance, compared with 70 per cent of associates.
In a similar vein, 57.1 per cent of partners gave global economic challenges a 4 or 5 in terms of a key issue, while 67.2 per cent of associates rated the same issue highly.
The global economic climate will have an indirect effect on all firms, but throughout the UK and abroad the key issue will be the recruitment and retention of new talent.
Associates were more likely to rate recruitment and retention as a long-term challenge for their firm (44.1 per cent giving a 4 or 5) than their management (38.9 per cent giving a
4 or 5).
One respondent commented: “With rapid changes in the international legal markets and constant lateral movement, the biggest developmental issue is retaining talent. However, the economic problems experienced by established markets and the growing importance of emerging markets also bear heavily on the type of talent that must be retained and developed to stay competitive.”
The LSA was the only long-term issue that partners weighted more highly than associates (40.1 per cent compared with 27.2 per cent prioritised this as a 4 or 5 in terms of importance). By definition, the LSA, which opens the door to third-party investment, is a subject on which the majority of associates are clearly not yet as engaged as the business-owning partners.
When split out by practice area there were startling differences in views on the long-term challenges for the legal profession.
Lawyers working in corporate and M&A were markedly more dismissive of the effect of the LSA; 56 per cent ranked this low (1 or 2) compared with litigators, 38.9 per cent of whom gave it a 4 or 5. By contrast, corporate lawyers were considerably more worried about long-term developments in the eurozone; 46.1 per cent of them gave this a high rating compared with 35.2 per cent of litigators.
Corporate lawyers were also much more sure that their firm would not see external investment in the next three years, with 50 per cent saying no. Litigators, though, were less definite; only 33.4 per cent of them said no. These findings suggest that lawyers from heavily transactional firms that are not the subject of external investment, as are the insurance volume players, are confident this will remain the status quo.
We asked lawyers to rate in-house clients on how well they understand the legal issues on transactions, how well they understand the commercial impact of the deal and how they communicate their requirements during the course of a transaction.
On the whole, private practice lawyers’ reaction to in-housers was positive. The respondents considering an in-house move tended to rate highly in-house lawyers’ capability on transactions (50.6 per cent giving them a 4 or 5) and their understanding of the commercial impact of the deal (64.3 per cent giving them 4 or 5), but they were more noticeably critical of their communication skills, with only 37.6 per cent giving them top marks in that category.
Those wedded to private practice were less likely to rate in-housers highly on legal issues (43.3 per cent) and the commercial side of deals (54.8 per cent), but their assessment of how well clients communicate their requirements pretty much matched those considering an in-house move, with 36.3 per cent rating them 4 or 5.
While private practice lawyers were on the whole positive about their clients’ performance on transactional work, they were less enthused by their experience on contentious matters. Again, those respondents who would not consider an in-house career were more likely to rate their in-house clients lower on litigation, except on communication. Only 30.3 per cent gave in-housers 4 or 5 when it came to a full understanding of legal issues involved in the case – a surprisingly low score.
Even those respondents considering an in-house move were lukewarm on in-housers’ understanding of the commercial impact of the result, with less than half (47.1 per cent) giving their clients 4 or 5 in this category.
How do private practice lawyers rate their in-house colleagues generally?
In the companion survey of 1,203 in-house counsel conducted by The Lawyer over the same period, respondents went into some detail – and it was not wholly complimentary. But private practice lawyers were strongly positive about their in-house counterparts – a trend highlighted in our overarching question about whether they would consider a move in-house. What came through were not criticisms about quality – far from it – but rather the management of external advisers.
One respondent complained about “being asked to pitch for work at a stage when its scope is too uncertain. This doesn’t benefit either the client or external counsel as it just turns the exercise into a test of how desperate the firms pitching are to get the work, rather than who is best-placed and who has correctly identified the likely issues involved”.
“Ultimately, most in-house counsel are decent enough lawyers who are paying for our expertise,” said another participant, “so it’s the way they handle the external service providers that will affect how well and efficiently (cost and otherwise) matters are dealt with.”
Another noted: “The best in-house counsel are those who know what their job is, know what my job is and appreciate that the little things take time too.”
Drilling down into the detail, corporate lawyers were more likely to praise in-house counsel for their grasp of technical elements; 60 per cent rated them 4 or 5 for their understanding of the legal issues of a deal, but less than half – 44 per cent – of litigators gave in-house lawyers a 4 or 5 for their understanding of legal issues in contentious work.
Litigators were also more likely than corporate lawyers to criticise in-housers for unrealistic expectations; only 35.4 per cent of corporate lawyers cited this, compared with 44.2 per cent of litigators. However, lawyers working in IP, technology and media were most critical of all; 50.7 per cent of them said their clients’ unrealistic expectations were the greatest source of frustration.
Let’s get together
It is, of course, tempting to read the perennial in-house versus private practice debate as a simple binary equation. But few lawyers on either side of the fence out there would really see it that way, and these results go a long way towards clarifying why.
What is being described on these pages – in its best moments – is a partnership in the truest sense. Both sides have a common goal – fee income is generally not it – and they work in tandem to achieve this.
The results of The Lawyer’s in-house survey suggest that, more often than not, a successful partnership is being achieved across most sections of the market. But it also highlights more clearly than ever where work still needs to be done.
Click below to read commentd from in-house lawyer:
Hilary Strong, general counsel, Chorion
Monica Risam, Europe general counsel, Aviva
Anke Sessler, chief counsel litigation, Siemens
Charmian Averty, general counsel, Resolution
Peter Rees QC, legal director, Royal Dutch Shell
Belinda Bradberry, head of legal and regulatory affairs, Cable & Wireless Communications
To download the survey in full click here.