The Foster Group Interviewed by Law.com on How the Middle Market Can Be a Life-Changing Opportunity
/How the Middle Market Can Be a Life-Changing Opportunity for Legal Professionals.
Big Law has been on a tear, with new firms breaking the $1 billion revenue threshold for the first time in fiscal 2021, as Jessie Yount recently reported, and others eschewing geographic barriers by planting their flag in former legal industry whistle-stops like Nashville, Austin and Salt Lake City, as Andrew Maloney recently reported.
But the one area that has members of the legal set craning their necks are the salaries and bonuses being paid at many Big Law firms, as Dan Packel recently reports. It’s enough to make a mid-market firm manager pull their hair, gnash their teeth and say, “How on earth can we compete with the big boys?”
Michelle Foster, founder and managing partner of the legal recruiting firm The Foster Group, says if you are a managing partner of a mid-market firm, fear not, the cards you have in your hand are better than you think!
Texas Lawyer spoke with Foster and some of her colleagues at The Foster Group recently about how the middle market can be more appealing to potential hires who might otherwise be considering a job with a Big Law firm; how the mid-market is changing lawyers’ lives; how the pandemic changed that segment; and how it can be stronger in 2022.
What effect has the pandemic had on the middle market?
Michelle Foster, Managing Partner: We have seen more flexible work arrangements designed to address work/life issues and retain talent. Including creative compensation structures and tracks that adjust for hours in conjunction with compensation, to allow attorneys to select the appropriate ‘hours track’ for their personal and professional sustainability.
Drew Foster, Managing Director: The pandemic created many legal issues and questions that businesses turned to the law firms to navigate and address. We’ve seen strong demand for legal services across numerous practice areas. Middle-market firms tend to offer a full-service platform and blend a cost-value approach that clients are seeking. Unlike some smaller firms that tend to have more limited bench strength or expertise in certain practice areas, and unlike some of the big law firms that have the expertise, but charge premium rates, middle-market firms provide a strong value proposition to clients and also tend to have the expertise and geographic footprint that clients are seeking.
Elaine Oh, Managing Director: We are finding that middle-market firms tend to be filled with sophisticated attorneys, who work with marquee clients and handle complex legal matters, similar to Big Law, but with less “red tape” and structural roadblocks internally. There tends to be more flexibility as well, whether it be with remote work, billable hours requirement, billing arrangements, partnership track, etc. We are finding that many mid-market firms are able to capitalize on this and attract top talent.
Drew Foster, Managing Director: We have seen retention issues across the board at the associate level, coupled with a larger compensation gap between the firms and so we have seen middle-market firms revamping their compensation structures accordingly. Even for those who cannot match the increasing market compensation, their efforts to craft a stronger compensation package than they had a few years ago is important in attracting and retaining talent.
Why are these characteristics important to attorneys?
Elaine Oh, Managing Director: Middle-market firms tend to be able to act more “nimbly” than Big Law, allowing them to better support their attorneys. There also tends to be more of a focus on business development, and so these types of firms are better able to support these attorneys’ practices, especially for those who are in a transition phase and may need more support whether that be BD, associate support, etc.
How can the middle market make itself more appealing to lawyers compared to Big Law firms?
Geoff Scollard, Director of Recruiting: By consistently offering lateral partners compensation on par with that of upper-market firms and developing a reputation of doing so. Oftentimes partners at firms that are higher up on the Am Law [200] are hesitant to consider moving downstream under the assumption that their compensation cannot be matched. This is not always the case and in this market we are seeing more and more mid-market firms beating offers from upper-market counterparts.
In what ways is the middle market capable of changing lives?
Elaine Oh, Managing Director: By providing these attorneys with remote work flexibility, bill rate flexibility, and valuing their work and clients more so than Big Law might, these attorneys have more control over their practices, client base, and ultimately their careers.
Geoff Scollard, Director of Recruiting: From a career progression perspective, middle-market firms can offer rate relief allowing partners to grow their practices and retain and expand their client base which ultimately leads to higher profits.
How can the middle market be stronger in 2022?
Geoff Scollard, Director of Recruiting: Middle-market firms should focus on growing their smaller offices and expanding their footprint to territories outside of the major legal hubs where overhead is lower and firms can provide greater value to mid-market clients. It is also important that firms keep their rates competitive in such given regions. Clients in markets like Phoenix, Denver, Nashville and Vegas expect vastly different rates than in New York, Chicago and Los Angeles. More and more firms seem to be adopting national rates and this can make it challenging for partners in emerging markets to retain clients who are used to regional rates.
Do you have any other observations you can share about the middle market?
Geoff Scollard, Director of Recruiting: The discrepancy between upper- and lower-market firms seems to be widening. Many middle markets are merging with strategic goals to rebrand as upper-market firms. When firms complete mergers and raise their ranks on the Am Law [200 list] they tend to downsize their less-profitable practices, and partners with clients who expect lower billing rates are often forced out.