The return to a “normal” pace of lateral lawyer moves isn’t happening, and isn’t likely to happen in 2024 (or maybe ever). This is becoming clear as Decipher Investigative Intelligence has started to track and compare moves not only against the previous 6-year average, but also against the pre-pandemic average, the 3-year average from 2017-2019.
| Title | Q3 2023 | Q3 2023 vs Q3 2022 | Q2 2023 | Q2 2023 vs Q2 2022 | Q1 2023 | Q1 2023 vs Q1 2022 |
|---|---|---|---|---|---|---|
| Partner | 1,318 | -29% | 1,265 | -4% | 1,402 | -15% |
| Associate | 2,967 | -32% | 2,797 | -43% | 1,551 | -66% |
| Other | 1,391 | -19% | 1,129 | -28% | 1,289 | -39% |
| TOTAL | 5,676 | -28% | 5,191 | -33% | 4,242 | -49% |
| Title | Q3 2023 | Q3 2023-Q2 2022 | 2017-2022 Avg (6 Yr) | Q3 2023 vs 6-Yr Avg | 2017-2019 Avg (3 Yr) | 2023 vs 3-Yr Avg |
|---|---|---|---|---|---|---|
| Partner | 1,318 | -29% | 1,146.50 | 15% | 892.3 | 32% |
| Associate | 2,967 | -32% | 3,117.70 | -5% | 2,263.30 | 24% |
| Other | 1,391 | -19% | 1,199.70 | 16% | 998.7 | 28% |
| TOTAL | 5,676 | -28% | 5,463.80 | 4% | 4,154.30 | 27% |
The 6-year snapshot and 3-year pre-pandemic comparisons provide us with the bigger picture: We’re likely settling into a “new normal” for lateral partner movement that’s 20 to 30 percent higher than pre-pandemic levels, mostly because law firms realize that hiring partners is the easiest and fastest way to increase revenue. And even though associate hiring has slowed as law firms readjust their budgets and evaluate demand, there’s been more lateral associate movement through the first three quarters of this year than in all but one full year between 2017 and 2020.
It’s easier to see these numbers when you step back from the recent quarterly decreases: Q3 partner moves are up 15 percent compared to the previous 6-year average and up 32 percent vs. the pre-pandemic average.
A similar picture emerges for associate moves. Q3 hiring was down 32 percent from 2022 (after being down 43 percent in Q2 and 66 percent in Q1) and down 5 percent compared to the previous 6-year average. But compared to the pre-pandemic average, associate moves were up 24 percent in Q3.
Year-to-date data also paints a more complete picture of the lateral hiring environment. With only three quarters of the year in the books, partner moves are already up almost 20 percent over the previous 6-year average and only down 17 percent from 2022’s historic numbers. Year-to-date lateral partner hires are already 35 percent greater than the pre-pandemic average.
Associate moves year-to-date are down almost half from 2022’s total and 20 percent compared to the previous 6-year average. But lateral associate hiring in 2023 so far is still faring better than in 2017, 2018 and 2020, and is up 13 percent compared to the pre-pandemic average.
Takeaways for law firm leaders
- Partner compensation: In Q3, average partner-level candidates continued to claim larger books of business, an average of $1,739,019, up 88 percent from a year ago. The average compensation-to-book ratio dropped to 60 percent from 67 percent in Q2 as billable hours continue on an upward trajectory, 21 percent more than Q1, and 6 percent higher than Q2 candidates. As competition for talent decreases from the hectic hiring environment of 2021 and 2022, firms can expect to pay less for each dollar of anticipated revenue that a candidate brings in. The comp-to-book ratio has steadily decreased (almost by half from 2022) from quarter to quarter, starting in late 2021.
| Category | Q3 2023 | Q3 2023 vs Q3 2022 |
|---|---|---|
| Avg. Years of Experience | 18.2 | -11% |
| Avg. Previous Employers | 4.6 | 112% |
| Avg. Billable Hours | 1,681 | -7% |
| Avg. Compensation | $1,036,000 | 5% |
| Avg. Book of Business | $1,739,019 | 88% |
- Associate rebalancing: While both partner and associate moves continue to outpace the pre-pandemic average, firms are rebalancing their associate headcounts, which explains why there is more partner than associate hiring when compared to the pre-pandemic average. Many firms hired associates during the “gold rush” of 2021 and 2022 by offering increased compensation packages up to 50 percent higher than similar associates due to intense competition. Firms are realizing today that it’s common sense to move on or let these associates walk, then hire a replacement level candidate for 40-50 percent less – or even get by without filling the role.
- 2024 outlook: While firms look to tighten their belts on associate compensation, it’s likely that 2024 will continue to be an active environment for lateral partners, and the number of moves will hover somewhere in between pre-pandemic and post-pandemic averages.
