The loss of key rainmakers to highly acquisitive firm HWL Ebsworth had an immediate back-pocket impact on their high fixed-cost business model.

Profits took a further hit due to a primary focus by some on commoditised banking, property and government work with a non-commodity low-scale service delivery model. Coping with all these pressures with consensus-based decision-making significantly hindered rather than helped.

Graduate intake set to increase

Many of the law firms interviewed for the AFR survey indicated they would significantly increase their graduate intake in 2019.

The data revealed a rough ratio of 0.6 new graduates for every existing partner. The total of partners listed in the survey, plus the no-show MinterEllison, is 3560. At the 0.6 ratio, we're talking roughly 2200 graduates to be apprenticed at the elite level in 2019. Add another 1000 for quality commercial and plaintiff firms and organisations not listed in the survey and we get a total of 3200.

Professional services consultant Joel Barolsky says there 'must be a better, fairer and more sustainable way to supply top talent to our top firms'. Arsineh Houspian

Australia's 39 law schools produce about 8000 graduates per annum. This means an immediate attrition rate of 60 per cent. And 2019 is a boom year for graduate hiring.

Graduates then join our top law firms expecting to be Harvey Specter (or your favourite TV law hero) on day 20 and find out it's not so glamorous.


In fact, if one takes indicative employee experience data from Glassdoor.com.au, we see many find it pretty average when rating the top five firms out of five. They are HWL Ebsworth (2.5), Clayton Utz (3.6), King & Wood Mallesons (3.1), Herbert Smith Freehills (3.7) and Norton Rose Fulbright (3.4).

Within three years of working in a major firm, a number of disillusioned trainees leave to seek employment elsewhere. This results in a shrinking talent pool of quality mid-level three-to-seven-year PQE lawyers.

Three strategic questions

Paradoxically, we have 60 per cent over-supply of legal graduates but a significant shortage of trained lawyers. Surely, there must be a better, fairer and more sustainable way to supply top talent to our top firms?

Three strategic questions have taken up thousands of partner decision-making hours across many of the firms listed in the AFR survey in recent years. Should we join up with a global firm? Should we change our partner remuneration model? How do we differentiate our firm?

Using partner numbers and growth as a proxy for success, the AFR survey reveals both global and domestic firms are thriving. In the top 20, we have seven globals and 13 locals (including Minters). It appears there is a compelling argument that both models work.

The data indicates there is no correlation with any particular partner remuneration model. Among the top 20 firms, there are strong individual performance-based models in firms like HWL Ebsworth and Mills Oakley, lock-step equal share models in firms Hall & Wilcox and Maddocks and hybrids like Allens and Baker McKenzie.

If market differentiation was a critical success factor, one would expect three or four standout brands, like a Qantas and Virgin in airlines or Coles, Woolworths and IGA in grocery retail. The AFR survey reveals 54 brands with no obvious differentiation within broad peer groups. Given many of the first listed are highly profitable it appears there are many more important factors that determine success than market differentiation.

In my view, firms would be far better off worrying less about globalisation, remuneration models and pursuing differentiation. The things that really matter are growing the pie through effective firm and practice leadership, nurturing a strong organisational culture, strategic focus and operational excellence.