The legal sector’s talent market was not immune to the impact of the COVID pandemic on other industries. Most notably, 2021 saw unprecedented lateral moves as salaries for full-time attorneys skyrocketed as WFH models became ubiquitous.

But this year, things have settled. The ‘salary wars’ are over, or at least nearly so, with pay levelling off. The scramble to retain talent has passed. Hiring is down. Now that the frenzy has subsided, a critical question has come to the fore: Will hiring attorneys as full-time employees (FTEs) prove cost-effective?

Threats to the ROI of FTEs

The question takes on new urgency with the threat of a “perfect storm” combining economic turbulence – persistent high inflation, rising interest rates, stock market volatility, and a possible global recession – with geopolitical uncertainty generated by the war in Ukraine and other tensions. If history is any guide – for example, the 2008 housing crash – should all or even some of these factors persist, the ensuing business downturn will inevitably mean a sharp drop in business revenue and the demand for legal services. Recovering the fixed ongoing costs of new full-time legal talent will become markedly more difficult – and perhaps impossible.

Another threat to the cost-effectiveness of adding more full-time lawyers is the growing problem of burnout. Many lawyers find the pandemic has made their workloads overwhelming and unsustainable. In a recent Gartner survey, 54% of corporate lawyers scored themselves as 54% “exhausted,” with 20% specifying they were “highly exhausted.” Meanwhile, flexible WFH opportunities are more available and professionally acceptable than ever. Every full-time attorney who departs hits a law organisation’s productivity and exacerbates the problem of burnout of those who remain. At law firms, fewer lawyers means fewer lawyers generating revenue to cover the sunk costs of recruiting, hiring, and training a full-time lawyer who has moved on.

Justifiable Risk Aversion

The outlook is murky, and fear and uncertainty have led law organisations to slow down recruiting activity. As Bloomberg recently reported, big firms “aren’t laying off lawyers, but most have slowed or stopped hiring. That’s a sharp turn after a two-year stretch in which many scrambled to recruit and retain talent as the market boomed.” In law departments, demand is also down, with hiring freezes increasingly common.

These developments are no surprise. Memories of the 2008 downturn are still fresh. No one wants to repeat the mistake of getting caught hiring more full-time attorneys just as the economy soured. And with the lure of flexible employment opportunities for lawyers, no one wants to be the person who championed a new hire, only to see that person leave before they have delivered the value necessary to justify bringing them onboard.

In this environment, full-time hires are riskier than any time in the past 15 years. These are critical considerations when assessing your staffing needs for Q4 of 2022 and beyond. Times have changed. Your views on the wisdom of FTEs should, too.