Brain drain is real: NZ lawyers head offshore, time to prospectively build your talent pipeline

More lawyers left Top 7 NZ law firms than entered during Q3 of 2022

The third quarter of 2022 (July to September) saw a collective net loss of lawyers from New Zealand’s Top Seven firms [1] – a big jump from smaller net losses in the first two quarters.  The total number of hires was down compared to the second quarter, but the number of leavers markedly increased.[2]     

Media predictions about an expected mass exodus of young professionals upon our borders reopening have come to fruition:[3] 50% of lawyers leaving these top firms during the third quarter headed overseas, while only 15% of new hires were from offshore.  In contrast to the 97% of lawyers heading overseas during Q3 who had less than 7 years PAE (and the majority at the 3–4-year PAE mark), all hires from offshore were senior lawyers (7 years+ PAE).   With many NZ law firms already very thinly resourced in the ‘middle’ (3-7 year PAE bracket), these departures are likely to amplify this problem.

The next largest group of leavers (22%) headed for in-house or governmental roles.

Alumni featured strongly in the hires during this period (24% of new hires).  The next most common talent source was other Top 7 firms (20%), followed closely by hires from boutique firms (17%).

It’s no surprise that firms are turning to alumni to fill vacancies as previous employees with a history of strong performance are usually great hires. However, as those candidates currently returning are much more senior than is required, and with many young NZ lawyers having only recently departed for their OEs, it may be some time before the right people return to the local talent market.  The number of lawyers departing our shores is normally counterbalanced by those people returning from a stint overseas.  The pandemic has disrupted this balance (as evidenced by only 15% of new hires during this period coming from offshore and those people being more senior than those departing).  Many lawyers currently overseas who would historically have been looking to return home after a few years away will be considering extending their OEs to maximize travel opportunities thwarted by the pandemic. 

Economic situation unlikely to loosen hard-to-find talent and may have opposite effect

We are still experiencing very low levels of unemployment in Aotearoa. 

Recent reactive hiring shows some firms now have an oversupply of lawyers but not necessarily the right ones due to reactive hiring from a small pool of available talent that in some cases are being paid well above their experience level.  In the words of Alex Giannopoulos from the Leo Cussen Centre for Law (interviewed on the Lawyers Weekly podcast recently): ‘… a lot of firms are hiring staff even if they don’t feel they fully suit the brief because they are afraid they won’t get anyone else.  And of course, we know that that sometimes can make things worse because it is harder to unscramble that egg if you end up with a bad fit and you have to go back to the recruitment drawing board.’ [4]  

While talk of economic recession may give the local legal industry hope about an upcoming ‘loosening’ of talent, HR teams will be receiving many unsolicited CVs, spending considerable firm time and energy ascertaining the suitability of these candidates and it is unlikely that any candidates coming onto the active market are going to meet firms’ ongoing hiring needs – firms are still struggling to find specialists and these highly skilled lawyers with in-demand expertise are in short supply.[5] These roles are always competitive – even in a recession. 

Highly skilled specialist lawyers are not likely to be actively seeking new roles any time soon, nor are they going to move on demand (without exorbitant salary offers).  The days of top talent moving on demand are over.  Placing an active candidate may result in the poor fit problem outlined by Giannopoulos above and will mean large agency placement fees. 

Exacerbating the problem of being able to find the right talent, concern about job security in uncertain economic times tends to make employees more ‘sticky’ and less likely to consider new job opportunities.  As experts in identifying risk, we know lawyers are much more reluctant to move to a new opportunity for fear of becoming ‘last in first out’ in difficult economic times.   

Practical solutions to these issues: Why you should build your talent pipelines now

Adding to gaps caused by the exodus of NZ lawyers post pandemic is the looming recession.  However, a rather unique feature about the legal industry as that there is always work at any point in the economic cycle.  Again, quoting Giannopoulos from the same podcast: “Anyone who works in the legal recruitment space knows that when the market is up some parts of the law firm might actually do well, other parts might not and then when the economy shifts in the other direction it goes the other way.”

Even during the global financial crisis, firms continued to need lawyers with specialist experience like restructuring and insolvency lawyers, employment lawyers, family lawyers and these areas are in short supply so firms need to start prospecting and building relationships early.  The pandemic also showed that firms kept recruiting.  Finding staff, more than any looming economic slowdown, will continue to be law firms’ major challenge over the coming year.

Even in a recession, one thing that is consistent is that no matter what the economy looks like, good talent in the legal space will continue to be incredibly hard to find and retain.  With these issues in mind, now is the time to build your talent pipeline.  Firms need to invest now in building relationships with the sorts of people they want to hire when the economy picks up.  Talk to talent earlier, identify those who are moveable and ascertain their timeframes and drivers for a move.  By proactively collating this information, firms will create pipelines of talent for their future hiring needs.    It might be hard to predict which jobs will need filling when the economy starts to recover, but odds are that those highly sought-after specialists will still be in demand as well as in short supply. 

Taking this proactive approach allows your firm to save cost (by avoiding costly recruitment agent placement fees) and improve the quality of your hires (by taking a slower approach firms can be much more selective about who they consider and eventually employ).  It will also ensure your firm is front of mind when the economy improves and well placed to resource up again as required. 

For most law firms, this is a new approach to talent sourcing and at Insource we want to help firms make this transition so they remain competitive as the war for quality talent continues.  The first step is having a comprehensive market map.  Did you know that of NZ lawyers in the ‘moveable talent’ bracket of 0-10 PAE, over half do not have an individual profile page on their employer firm website (55%) and a fifth do not have a LinkedIn profile (20%).  If firms are relying on LinkedIn to map the market, they are missing a considerable number of potential candidates. 

Using Insource will help you to identify the right talent in seconds, leaving you with valuable time to connect with those people and build relationships for your future hiring needs.  We’ll also help you learn how to build your pipelines if this is a new approach for you.  If you’d like to find out more, please contact Insource here https://insourcerecruit.com/contact/ for a demo.

[1] Net loss of -45 lawyers in Q3, compared with net loss of 3 in Q1 and net loss of -11 in Q2

[2] Total hires in Q3 was 29 compared with 40 in Q2, total leavers in Q3 was 74 compared with 51 in Q2

[3] Covid-19: The exodus after the borders open – MBIE estimates 50,000 Kiwis will leave – NZ Herald

[4]  www.lawyersweekly.com.au/podcast/36209-the-nexus-between-recruitment-and-legal-education  

[5] Discussions with an Australian law firm partner recently indicated Australian firms were ‘overlawyered’ with the wrong sorts of lawyers, yet specialist staff were still hard to source.  The same is likely to be true of large NZ firms.

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