At least one law firm has now bumped starting salaries for first year lawyers to $200,000 per year, as noted in a January posting at Above the Law. Good news for young lawyers, but perhaps not such a great omen for things to come.
Based on interviews I have conducted with various Chief Legal Officers for large companies over the years, I have concluded that sizeable first year salary bumps are the prime catalyst for the growth of in-house law department staff. Simply put, CLOs and CFOs are making an economic decision that it is much cheaper to bring work in-house than to farm it out, and that translates to a shrinking outside counsel hiring budget in the future.
Furthermore, every time salary structures and hourly rates push higher, CLOs look harder at alternative providers, many of whom are now selling all-in-one turn key solutions to corporate problems, featuring not just legal advice, but advice on how to restructure corporate org charts, utilize developing technologies, train and develop people better and get maximum bang for the buck in attacking any given problem. Such comprehensive, integrated, multi-disciplinary solutions are being offered by Big Four providers, such as Deloitte Legal Services, and by new entrants into the competitive landscape, such as United Lex.
Law firms can compete with this broader, more integrated approach by partnering with technology providers, financial experts and human resource experts to offer their own broad-based solutions, but as of now, that does not appear to be happening on a large scale.
This is one more competitive puzzle that law firms need to solve while pitching to their clients how they are the best, most economical and prudent choice for legal problem solving, despite rising first year salaries.