City firms are set to take a tougher line on associate performance as they try to counteract falling staff turnover brought about by the uncertain economic climate.
Partners are predicting falls in staff churn over the coming year with many typical destinations for associates — such as investment banks — freezing recruitment and associates more wary about moving.
Figures compiled by Legal Week show that staff turnover across many of the top 20 law firms has remained broadly steady over the last three years, with the average annual rate of lawyer departures across those firms disclosing figures standing at 14% for the last two years.
However, this is set to change and Legal Week’s Big Question survey this week reveals that more than 90% of partners predict firms will use tougher performance reviews to try to raise staff turnover.
Olswang managing partner David Stewart told Legal Week: “There is a natural tendency not to move if your practice area is depressed.”
Simmons & Simmons managing partner Mark Dawkins (pictured) commented: “If firms have had more work than they can handle you could see a situation where some might have dropped their standards.
“Then, when the tide goes out, quality issues become more apparent so you would expect those firms to be looking more closely at the weakest elements in a downturn.”
Legal Week’s figures show Herbert Smith has seen one of the most marked improvements in retaining staff over the last three years, with its attrition rate for 2007-08 standing at 13.2% — down from 18.1% the previous year and 21.7% in 2005-06.
Clifford Chance (CC), the only magic circle firm to disclose its figures, has also seen a slight drop in departures, with attrition standing at between 15% and 17% for the last financial year, compared to between 15% and 18% in 2006-07.
CC people partner Laura King commented: “The rates have fallen for the first three months and this is doubtless related to the credit crunch. People are more clever and strategic now. There is no doubt there are fewer jobs as people think about their direction.”
Eversheds holds the lowest disclosed attrition rate across the top 20 at just 7%, down from 8% in 2006-07, while national rival Hammonds has also noted a fall in the number of leavers, with attrition standing at 12%, falling five percentage points from 2006-07.
However, with banks and rivals recruiting heavily when markets were busy, several firms have seen increases in the number of associates leaving over the last few years, including DLA Piper, Addleshaw Goddard and Berwin Leighton Paisner.
Almost half of the top 20 refused to disclose their attrition rates, with Linklaters, Freshfields Bruckhaus Deringer, Allen & Overy, Lovells, Slaughter and May, Simmons & Simmons, Norton Rose, SJ Berwin and Clyde & Co all declining to take part.
Outside the top 20, attrition at Olswang has risen from 15% in 2005-06 to 18% over the last two years, while the rate at Nabarro dipped marginally from 12% in 2006-07 to 11% this year.
One recruiter told Legal Week: “Historically, if you are keeping your attrition below 15% you are doing well… in many ways people are more nervous about moving now because there is always the sense of being last in, first out.”