What will the legal market be like in 2019?

As conduits between the demand and supply side of the legal talent search, recruitment professionals have a unique vantage point on the sector in China.

We invite Janet Chan, Michael Page Eastern China associate director for legal recruitment, to examine several key questions facing the industry – What are three major talents trends driving change in the Legal market? In what specific sectors and niche areas is demand for legal talent concentrated right now? And what can law firms do to attract the talent they need?  Here below are her insights.

MP: If there were three major talents trends driving change in the Legal discipline in your market next year, what would they be and why? Please explain.

Janet: In China, three major talents trends may be the increasing demand for lawyer talents in 3 fields: FCPA (Foreign Corrupt Practices Act), M&A/PE/VC, Real Estate including real estate investment and real estate fund. There’s a huge demand in the past year and the new year.

1. The high demand of lawyers for FCPA is because many international businesses, especially American enterprises should make sure their operations in China comply with Chinese laws and regulations, or they’ll be investigated by America’s Department of Justice. Therefore, these companies need to hire law firms for consulting. Most of those international businesses are from highly-regulated industries such as pharmacy and TMT (telecom, media and technology).

2. M&A/PE/VC have been the hot fields for several years, because a lot of capitals invest China’s industries by buying or merging Chinese companies, and a lot of international funds invest Chinese projects. So the talent demand is a hot trend these years. M&A/PE/VC mostly focus on education, pharmacy and TMT industries.

3. In recent 2 years, investment on commercial real estate and industrial real estate is frequent, which may involves engineering construction for logistics or chemical companies, investment on warehouse construction and so on. In 2018, this will be one the hottest trends in China, therefore a lot of law firms want to hire lawyer talents focusing on real estate.

MP: With regards to your answers to the above questions, what would be the major action that legal partners should take in order to prepare for these changes?

Janet: 1. In order to hire the best candidates, legal partners should change their hiring methods. They should know how to draw a clear picture on career path for candidates. Legal partners in global law firms are very old-fashioned, and they seldom promise candidates clear pictures on their career path.

Instead, Chinese law firms are good at drawing pictures. The legal partners in Chinese law firms can promise candidates if they work for 6-7 years in the firm, they can be partners, which is very attractive and makes the career path clear and transparent.

Chinese law firms are result-oriented, which makes them flexible and transparent. All the bosses are in China so it is easy to make a decision on promotion. However, global law firms are much more complicated as the promotion assessment involves so many factors, such as checking if the candidates for partner have global background etc. The rigid system of global law firms restricts their development.

2.  Law firms should be flexible on talent transfer. When a law firm grows to a certain scale, its traditional business on corporate, commercial and FDI will decline. It is better for partners to ask the lawyers in these fields if they are willing to transfer to practical business such as real estate, instead of hiring new talents focusing on the practical business. It is a good way to retain talents and making full use of resources. But the premise is those lawyers should be excellent enough and have fast learning skills.

MP: Every discipline has one or two niche areas with the potential to be “stars” for talent movement. For Legal in your market, what are these “star” niche areas, and why?

Janet: I think the niche area is Chinese law firms. These years I’ve witnessed so many cases that many top lawyers even in senior associate or partner level move from global law firms to Chinese law firms. There are several reasons:

1. The after-tax salary is much higher in Chinese law firms than in global ones. For example, the commission scheme is more attractive in Chinese law firms. If a partner earns 10 million RMB for firm, he can get 40%-50% in Chinese law firms, while only 20% in global law firms because global firms’ overall cost is much higher and they have to meet the standard to global rules.

2. The charging standard is different between Chinese law firms and the global ones. Global law firms charge the high minimum legal fee, but it is inappropriate and strange to Chinese clients. Most Chinese clients won’t accept it for first cooperation. Then we can see a lot of such cases: One partner from global law firm makes much effort to nearly win a client, but finally the cooperation stops because the high legal fee, which makes the partner disappointed. Instead in Chinese law firms, the charging standard is flexible because their strategy is gaming market share. No matter how much revenue it is, the priority is to grab market share. After one or two times of cooperation, maybe the fee will rise.

3. Chinese government supports and provides a lot of help to Chinese law firms, which makes the Chinese law firms develop quickly. And relatively, global law firms are more difficult to grow.

MP: Lastly, in terms of talent retention, what’s the one training or development priority that you would advise law partners or HR managers in legal to prioritise, in order to retain top talent?

Janet: I meet lawyers every day. The following tips are what they raised most frequently.

1.  Training of business development skills. Global law firms have training programs but mostly those programs focus on basic and junior level, such as wiring and modifying contract, drafting memo, which are centred on paperwork. And after 3-4 years, most of the senior lawyers are required to do business development, but they are unfamiliar with it because they got no training on that. So I would suggest the law firms developing some training programs on client facing, business development, and some other social skills. If not, many lawyers will feel challenged and decide to change jobs to another law firm or to enterprises as legal consul.

2. Reducing the requirement on lawyers of assimilating into western culture. Although some Chinese lawyers have international education background or worked abroad before, they are not native speakers and it is difficult for them to assimilate into the western culture. When a lawyer reaches the high level such as senior associate or partner, playing well together is same important as their performance. If the lawyer feel bad at it, he may hop to a domestic law firm. So if global law firms want to retain talents, maybe they have to reduce the requirement of assimilating into different culture.