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CultureFit-pokerWhenever you read about hiring trends in the trade press, the article usually focuses on growth industries and so called “hot” practice areas (i.e. compliance, intellectual property, data privacy, etc). But I am seeing a more interesting hiring trend that is not practice- or industry-specific.

In a nutshell, companies appear more focused than ever on building “best in class” law departments. Many departments are there already and it’s a matter of maintaining quality standards. I use Baxter Healthcare as an example here. Baxter has kindly partnered with us to make a couple of key hires related to the pending spinout of its BioSciences division into a new public company. If you are interested in one of these positions—VP, Information Policy and Management and Securities Counsel—or have a candidate referral to recommend, please contact me. You would be joining a team that is already A-tier in terms of pedigree, work ethic, mission orientation and community service.

But we also are working with a few companies that are going through an upgrade process, and this is the dynamic I choose to write about now. It starts with an evaluation of existing talent and the difficult process of managing out one or more good attorneys who don’t fit with a “best in class” vision. As examples, we are discreetly recruiting a securities attorney in Texas and a commercial generalist in Iowa. I can provide additional information confidentially by phone, but not in this format.

When engaged in a talent upgrade process, the general counsel’s office and HR leaders should prepare for some sticker shock. The days of bringing in A-tier mid to senior level associates for counsel and senior counsel roles at $150,000 base salaries are over.  In fact, $150K is the publicly stated starting salary at Hewlett Packard (Corporate Counsel magazine); that company’s A-tier law department is one of the few that recruits straight out of law school.

The price of poker has gone up. For only the second time since opening our doors in 1997, we recently turned down an order where I knew we could not possibly meet the client’s candidate pool expectation given the maximum compensation available.

There are macro trends at play here. The type of work sent to outside counsel, and the percentage of overall legal spend going to that resource, continues to evolve and in many ways narrow. The resulting expectation is that more so-called “high value” work is being handled directly by inside counsel. And since inside counsel are a fixed cost, companies want to hire folks who are willing to work at their full bandwith. I am talking law firm type hours here.

The disparity between top of market law firm pay and law department pay has traditionally come in waves. Law firms raise salaries on a cyclical basis, the disparity widens, but then it also narrows as law department compensation catches up a bit before the next round of “BigLaw” raises. Maybe we are simply in a gap-narrowing phase now and my macro observation is overblown. Either way, my point is that companies seeking A-tier talent (laterally from other companies or from law firms) need to step up their compensation packages to compete–because moving in-house for work/life balance as a “selling point” is dead. The motivators are: the opportunity to work for a great company, a better culture and interesting work. So, A-tier talent still wants to go in-house. No question. But when the rubber meets the road on compensation, your pay package better be attractive. Because if your company is playing the benchmarking game of paying at mid-points, you will struggle to attract lateral talent from other companies, and the best law firm candidates are no longer going to take massive pay cuts to move in-house.

If you are working hand-in-glove with your HR team to talk through this challenge, whisper one key word: Equity. Post Sarbanes-Oxley, we saw a trend away from equity grants. Specifically, companies began to narrow the grade levels at which employees were eligible for stock options. Restricted stock has since become the equity currency of choice. Adding equity eligibility may be easier versus lobbying for large base salary jumps, and it will help your department stand out. A meaningful equity grant achieves two goals. One, you become far more attractive to law firm candidates who are then willing to walk away from larger law firm salaries. Two, equity is of course a tremendous golden handcuff retention tool.

While we keep the compensation specifics of any specific client confidential, I can offer your company real time guidance on what the below, at, or above market numbers look like for just about any in-house position. So, please don’t hesitate to reach out and ask.

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