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Is Australia on the verge of a legal recruitment storm?

Is Australia on the verge of a legal recruitment storm?

CHANGED UTTERLY: Opinion is divided as to whether the recruitment levels in the legal industry will ever recover to those seen b

CHANGED UTTERLY: Opinion is divided as to whether the recruitment levels in the legal industry will ever recover to those seen before the GFC
After lying dormant for the past year, the legal recruitment market is once again showing signs of life. However opinion is divided as to whether it will ever reach the lofty heights that lawyers grew accustomed to before the GFC.

After grinding to a standstill last year, and remaining practically comatose for at least the first half of 2009, there is general agreement among legal recruiters and HR professionals that the legal recruitment market is now starting to show signs of life. However, views diverge markedly on how quickly this resurrection is occurring, and whether the market will ever again reach the dizzying heights of three or four years ago, when firms were fighting tooth and nail to secure top talent.

There was general consensus among those Lawyers Weeklyspoke to that the legal recruitment market has started to pick up over the second half of this year. Mahlab Recruitment's managing director (NSW), Lisa Gazis, says that the market has picked up progressively throughout that period, but particularly over the last month.

"Firms have been much more optimistic about what will happen in the year to come, and so hiring intentions have increased, so that's been very positive," she says.

She adds that there are now signs of life even in the practice areas hardest hit by the downturn, such as banking and finance, property and corporate.

Matt Harris, a consultant at Taylor Root, agrees that the improvement in the market has been particularly marked over the last six weeks. "It started quite slowly - there were a couple of early indications that some of the firms that had been very quiet ever since the global financial crisis began had started to come back to the market ... and then, probably about six weeks ago, things started to dramatically develop and increase and improve," he says.

He adds that the primary drivers of activity are the upper mid-tier firms (he says that the top-tier is still very quiet), and he agrees with Gazis that the hot spots have been corporate and banking and finance.

A recruitment storm?

However, where opinions diverge is over how quickly, and if at all, the market will fully recover. Mallesons Stephen Jaques executive director, people and development, Kate Rimer, is cautious about the recruitment market's likely rate of recovery, particularly given prevailing conditions in former recruitment hot spots overseas.

"I think overall we will see a gradual pick-up in recruitment activity, but nothing significant until at least the middle of next year," she says.

"Historically we have lagged much of the economy going into and coming out of downturns. We are seeing a similar pattern with the GFC, where law firms are lagging many of the economic indicators by six-plus months.

"As the economy picks up there is likely to be some lift in recruitment activity, but markets such as London - which have historically been the destination for many lawyers - are not likely to provide many opportunities for at least the next 12 months, given the severity of the GFC in the UK."

“I think we’ve already started entering a recruitment storm. I think everyone was expecting it to take place over the next six to 12 months but I think it’s happening already”

Gazis, too, predicts a more gradual improvement over the next year. "I think over the next 12 months there will be increased recruitment. I think demand for high-calibre lawyers with good training and good experience will continue to grow ... and we will start to see the return of a very competitive market," she says.

Harris, by contrast, predicts a much faster recovery, saying he believes the market is already starting to feel the first winds of a "recruitment storm".

"I think we've already started entering a recruitment storm. I think everyone was expecting it to take place over the next six to 12 months but I think it's happening already," he says.

"It's not that there are hundreds of vacancies in all firms ... but you've got a number of firms now very confidently and very actively trying to recruit into their corporate groups, their private equity groups and their banking groups ... and that's a clear indication that the market has improved dramatically and it's going to snowball."

Harris believes, in fact, that the balance of power in the market has already shifted, and that candidates are now back in the driving seat. "There are already not enough candidates to fill the jobs. I think there's going to be a better balance for a time than there was ... but the flow is definitely in favour of the candidate rather than the [firm]."

A return to former glory?

There are also differences in opinion over whether the market will ever fully return to its former glory days. Harris believes there is no question that it will.

"It's already a very competitive [market] for candidates and for talent, and I think, as more firms get back into recruitment, and more and more vacancies are released, that problem is going to get worse, and it's going to very quickly return to exactly the same state as it was two years ago when there were lots of jobs and very few candidates."

While saying it's hard to predict exactly when, Middletons human resources director Tracey McDonald says she also believes the market will bounce back to what it once was.

"We tend to go through cycles. So we've been through that high demand period in the past .... then that started to scale back about 18 months to two years ago, but I think we'll see that again. Not yet, but the cycle tends to be every three to four years ... so I imagine we will get back to that," she says.

Gazis agrees, saying firms should be prepared for a return of the battle for talent. "It's a competitive market and I think that firms will find they are competing for talent a lot more, and they will also be having to - again - deal with all the issues of retention that they had in the past," she says.

Rimer, however, is less convinced, and believes that - at least for the top tier - the changes in market dynamics will mean that while the market will be competitive again, it will be less so than in the past.

Quoting Anne Sherry, the CEO of cruise ship operator Carnival Australia, Rimer says she believes the legal industry is facing a "new normal".

"We know that large law firms are very maxed out in terms of their size in Australia, and each of us - Allens, Freehills and ourselves - have had pretty static market share for a number of years. So I think we have got as big as we can get over the last decade," she says.

"There will still be significant competition for talent - there always will be and we all want the same good lawyers, particularly at the top end of the market - but I'm not sure it will be the same degree of intensity that we have seen."

Retention on the agenda

Though the timing and degree of the reinvigoration of the market might be open to debate, as more vacancies open up the issue of staff retention is likely to become of increasing importance to law firms.

Harris believes that there is a lot of pent-up desire among many lawyers to change jobs, and that law firms should prepare for a burst of movement.

"There's always a body of candidates out there wanting to move jobs at any one time, but they haven't been able to move jobs for the last year, so there's a blockage of people that have been stopped and that blockage is about to be removed. So I think there's going to be quite a burst of people moving around all over the place," he says.

He believes that another contributing factor is the degree of frustration that exists among lawyers, at least in some firms, about how the financial crisis was handled - particularly over initiatives such as salary freezes.

"There is, from some sectors of the candidate market, a general sense of dissatisfaction over how things have been handled over the last 12 months," he says.

"People are pretty tired of still seeing no salary reviews on the horizon. They know they're busy, they know their firm is making money, yet it's not being reflected in salary rises or bonuses. It's understandable, but I think some lawyers have got to the end of their tether ... and they're ready to go."

While she doesn't agree that the market is in for a recruitment frenzy, Rimer does believe that managing lawyers' salary expectations will be important in the future.

She says that the financial crisis has led to a fundamental shift in client expectations surrounding the cost of legal services, and the growing demand for cheaper legal services will inevitably be reflected in future salary levels.

"I don't think there's a wide enough appreciation among many lawyers as to the significance or the magnitude of the change we're seeing in the economy and in client expectations," she says.

"One reason is that this is the first major economic upheaval that many lawyers have worked through and lived through, and if they haven't worked in a corporate that has downsized, resized or demerged, then they haven't experienced a tumultuous internal change either. So I think there's a resetting of expectations to come, and that will be because our clients will largely demand it."

Managing staff engagement during this transition period, she says, will involve firms putting greater emphasis and effort into non-remuneration influences that are also important to job satisfaction - influences that she believes have been under-appreciated by firms in the past.

"Having worked outside in other industries, I find the focus on remuneration very intense in professional services. And, to be honest, I think that comes down to the fact that perhaps we are not as good as we could be around the basics of people management - all the other things that make a place [somewhere] where you would want to stay," she says.

"Salary and remuneration are always amongst the top five reasons why people leave [a job], but why people stay is much more focused around the environment and who they work for - that's why I think the smart firms will be focussing on the total piece."

Middletons' McDonald agrees that promoting the non-remuneration elements of the workplace has been particularly important during a period in which salary increases have been fewer and further between. "I think with some lawyers - if they're not really clued into the economic circumstances - it might have caused some frustration. People always like to be rewarded for their efforts, so that's a challenge for retention and engagement of staff," she says.

"But salaries are not the only way to attract and retain and develop people, so it's been a matter of firms being creative about those engagement opportunities - looking at good work opportunities, development on the job and a variety of other reward mechanisms too."

Overall, Gazis believes firms have practised what they have been preaching, and have succeeded in doing what Rimer and McDonald suggest - finding creative ways of cutting costs, while keeping up staff engagement levels, despite initiatives such as salary freezes.

"All the firms made a great effort to try and ensure they retained the staff they needed to retain, and deal with those people they couldn't keep in a very human and responsible way," she says.

She points in particular to the voluntary redundancy schemes that firms such as Mallesons and Allens Arthur Robinson put in place.

"There was a lot of collaboration and consultation with employees, and employees taking up those packages left feeling very positive. So, overall, I think they did a very good job."

- Zoe Lyon

Related article >> Mid-tiers lead the silver lining in legal recruitment

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