Recruitment “by far the biggest obstacle” to law firm growth

Hain: Marketing is important for multiple reasons

Recruitment is “by far the biggest obstacle” to the growth of law firms in 2023, with lawyers being “bombarded” with job offers, new research has found.

The report from accountancy group MHA also warned that ESG (environmental, social and governance) issues were accelerating up the agenda and law firms without some kind of recognition of their efforts to address it would start standing out.

MHA said almost two-thirds (63%) of the 100 law firms and contacts it polled believed it was the biggest obstacle, while only 13% identified the second biggest, pricing.

Karen Hain, partner and head of professional practices at MHA, said: “Many firms are struggling to recruit what they believe to be the right people.

“Some are flagging up the issue of staff retention since their fee-earners are being bombarded with employment offers from across the sector.

“As specific legal service lines have grown, firms have found it difficult to also grow their staffing capacity to be able to service that work to a standard they may have expected was normal a few years ago.”

In the UK section of the MHA Legal Sector Forecast 2023, Ms Hain said there had been “significant growth” in the salary demands made by lawyers.

They expected agile working, with “work-life balance almost outweighing a large salary increment” as a priority, while also expecting their new office environment to be “modern and environmentally friendly”.

MHA said the rules on firms having to publish their prices for certain services allowed potential clients to shop around for the lowest. “Unless there is some differential quality designated to the service, there is a risk of downward pressure on pricing for standardised services,” Ms Hain said.

Regulation, management, succession and internal issues were each cited as obstacles by only a handful of law firms.

A quarter (25%) believed that success in 2023 would be generated by marketing, with many firms having moved their marketing efforts online during lockdown; this included learning new skills, such as virtual networking and raising awareness through social media.”

Ms Hain said that, as well as attracting clients, marketing played “an important role in recruiting and retaining staff who are looking for a certain type of employer, providing the right working environment and a desired level of work-life balance, health, and wellbeing”

After marketing, three next drivers of success were said to be retaining staff, client relationship management and the state of the economy. Behind them were technology, third-party referrals and focusing on profitable service lines.

Emphasising the importance of recruitment, more law firms put staff retention top of their list of priorities for 2023 than growth, marketing and internal efficiencies.

Ms Hain commented: “Even with the threat of impending recession, 16% of firms are prioritising growth for 2023. In some cases, operating a larger practice gives more security against negative economic forces.

“Several of our survey respondents are looking for some consolidation of their position in their chosen marketplace. Expansion that has taken place since Covid lockdown is seen as a continued driver into 2023.

“Firms are also looking at new routes into the marketplace for legal service provision as well as considering new business partners who may add fresh ideas, new offerings, or referral sources.”

In an additional section on the importance of ESG for law firms, Simon Lewis, partner at north-west firm Brabners, one of the first UK law firms to become a B Corporation, said ‘greenwashing’ (making unsubstantiated claims that a business was environmentally friendly) was “undoubtedly a hot topic” for law firms.

Firms were likely to seek external accreditation for their ESG efforts, which could be through public accreditations such as B Corp certification and PlanetMark or assessment platforms like EcoVadis.

Mr Lewis added: “Each have their merits and firms without some form of accreditation are going to start to stand out.”

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