A SENIOR LEVEL LEGAL RECRUITER'S VIEW OF THE MARKET; IDENTIFYING TRENDS AND AREAS OF GROWTH WITH INSIGHT INTO THOSE ISSUES WHICH AFFECT THE LEGAL ARENA
Reading the legal press at the moment you are inundated with articles about firms releasing a summary of their performance for the last financial year. There are not too many who are reporting increases in turnover, yet a number are stating that their profitability has improved and for most PEP has increased markedly.
It doesn’t take a genius to work out the basics of how a firm can increase profits where turnover is down; overheads have obviously decreased whether this be through economies of scale, savings in office costs, and/or a reduction in headcount.
Similarly the increase in PEP in most cases is likely to reflect a decrease in the number of EPs at the firms, either through retirement, redundancy or de-equitising. Considering that equity at Top 100 practices last year was as low as £35k such a move is unlikely to have met as much resistance as previously!
But how does the increase in PEP reflect on the attractiveness of a firm as an option? As discussed in our last blog “Sale La Vie” (http://vgcharles.blogspot.com/2010/07/sale-la-vie.html) one of the key aspects of the legal recruiter is not just to introduce candidates to clients but also to sell the firm to potential employees as an option which can realistically meet their requirements, expectations and ambitions. Along with turnover and equity spread, PEP has always been a key number for partners viewing the succession to equity as the ‘promised land’ they hope to reach in the short-to-mid term when making a move.
In previous years a move to a firm which offers a healthy PEP level has always held the promise of excellent financial recompense for those achieving equity. Now with firms cutting back on equity partners it is important that candidates looking for a move understand whether the opportunity for equity is both realistic, attainable and worthwhile. Otherwise they can end up in a queue for equity for years, with firms able to take advantage of additional layers in the hierarchy which are not always to the partners’ benefit; recent history has shown practices calling on fixed-share or prior-share partners for recapitalisation of the practice yet these individuals retain less of the ‘clout’ enjoyed by the full EPs.
Firms also need to consider how they are viewed in the market if profits/PEP are up yet the practice is still known to be cutting jobs or trainee intakes. It’s a fine line between being seen to be a caring yet profitable concern and giving off the impression of a practice which only cares for the top of the partnership tree, at the expense of the rest of the employees. Firms which find themselves on the wrong side of this line can expect a backlash of negative publicity, an inability to retain their top staff and also find it difficult to attract high calibre individuals who can enhance and improve their offering.
The job of the legal recruiter is not one of practice management but of career management; it is not our place to criticise or comment on individual firms for the manner in which they have gone about the disclosure of their financial performance or the inference which can be drawn. It goes without saying that certain firms enjoy a better relationship with the press than others and hence any articles which are portraying certain practices as financial ogres should be treated with the same pinch of salt as those which highlight others as a beacon of light in a dark economic jungle.
However our role is to make sure that the firms we work with closely are able to attract the right kind of talent, which requires the firms themselves to be honest with us and transparent with their potential employees as to how and where they are profitable, the potential for achieving equity and the overall performance of the practice as a business concern.
The recent economic downturn has shown that the legal profession is not as bulletproof as perhaps we all believed; it has also shown that the status of equity partner is far from the best position in a practice which is struggling for profitability. We are speaking to more partners than ever who are rejecting the opportunity to become an EP in favour of retaining a healthy salary and the guarantee of dependable income without the liabilities EPs incur.
Whether this will change hugely in the near future is open to debate; as the market improves the prospects for EPs will once again appear bright, but those who have been bitten by poor drawings for the last few years the offer of equity may no longer hold the same appeal as before.
Are you at a firm where the recent financial figures have given you cause for concern? Are you currently deciding whether to take equity at your firm and seeking guidance as to your options? To discuss your options call one of our specialist professional consultants at VG Charles & Co for an impartial conversation about your situation in complete confidence on 0121 233 5000 / 020 7649 9094