Benchmarking Compensation: Are You Doing it Right?
/How to create a plan that reflects the value of the lawyers you want to hire
It’s a simple reality of today’s hyper-competitive legal market: without an enticing compensation package, top talent won’t even glance at your job openings. The balance of power has shifted from employers to qualified candidates, and crafting the right mix of pay and perks is key to recruiting and retaining the skilled employees your organization needs for long-term success.
But many employers don’t understand the multitude of external and internal factors that go into benchmarking compensation – and wind up setting themselves up for failure. Get this wrong, and you’ll either struggle to attract the best candidates, or you will set the bar so out of whack with the rest of the market that you risk causing dissatisfaction among existing staff, thus needing to make adjustments down the road.
Labor costs mark the largest percentage of overall spend for a business – and law firms and corporations navigate a fine line between creating an Employer Value Proposition (EVP) that brands you as the employer of choice for good legal talent and staying within the boundaries of fiscal responsibility. Drilling down to determine the most effective compensation strategy requires taking a hard look at where you compete for candidates, against whom, and what the lawyers you want to recruit expect in pay and benefits.
It’s more important than ever to build a compensation plan that reflects the true value of the lawyers you want to hire. While knowing the market rate for salaried positions is essential, it’s rarely enough to reveal the shortfalls in your recruiting strategy that can stop you from achieving your hiring goals.
Competitive compensation isn’t just about pay
More than 60 percent of U.S. employers planned to hire more people in 2018 than they did the previous year, according to Indeed’s Employer Outlook. The historically low U.S. unemployment rate has made hiring a challenge across many sectors. But in the legal industry, declining law school enrollment combined with the alarming number of attorneys leaving the profession make it exceptionally difficult to find the right people to fill open roles.
A whopping 85 percent of lawyers say they struggle to hire skilled professionals for their firms or corporations, according to the Robert Half 2019 Legal Salary Guide. And the best candidates are fully aware they’re in the driver’s seat.
High-performing attorneys know their worth – and they are wise to the compensation your competition is offering. They know they can take the time to shop around for employers who will meet or exceed their expectations, and they’re quick to pass on those who won’t.
That doesn’t just mean a competitive salary. More than 70 percent of employees say they would quit their current job if another employer offered more flexible scheduling, and nearly 40 percent of Millennials say they have turned down job offers because they were unhappy with the perks.
Benchmarking compensation involves looking at the complete picture of what top talent demands. In the legal industry, that includes comprehensive benefits, flexible hours, an easy commute, the option to work remotely, and professional development opportunities. Superstar candidates also won’t settle for jobs that lack a defined career path with real growth and advancement opportunities.
6 tips for benchmarking compensation the right way
An Employee Value Proposition that sells candidates on the value your firm or corporation brings to the table in exchange for their excellent work is key to your recruiting strategy. Beyond that, how do you determine the details of competitive compensation for each position you need to fill?
Define your ideal candidate. Before you start the hiring process, define the traits of the person who would be perfect for the job, as well as for your firm or company. Individual characteristics of the lawyer you’re seeking will greatly influence compensation including education level, number of years in practice, performance metrics, and practice specialty. It’s also important to determine your goals for the position you’re trying to fill and align them with your compensation priorities. If you’re hoping to land a superstar, chances are you will have to offer more than your peers to create an EVP that lures them to your job.
Make sure you’re comparing apples to apples. Many other factors influence compensation as well, including geographic location, industry, the size of the company or law firm, its revenue, and whether it’s public or private. It’s also important to understand that every company doesn’t define roles with the same title in the same way – what may be considered a “senior attorney” at your organization, for instance, may not be at another. When you’re looking at what your competitors pay, make sure you dig deep enough to know that what you’re comparing is really the same.
Don’t ignore national numbers. Geography carries a lot of weight in benchmarking compensation – especially in areas where pay rates are significantly higher or lower than the national averages. For the most part, a lawyer who works in New York, San Francisco, or Washington D.C. earns significantly more than a lawyer based in El Paso, Texas or Boise, Idaho. But as the law profession becomes increasingly specialized and technology enables attorneys to work from anywhere, it can be a mistake to only consider regional information and ignore the national market when determining compensation.
Understand your competition. Law firms of similar size and revenue obviously compete for the same shrinking pool of talent. But an increasing number of coveted candidates are shunning the partnership track in favor of the more relaxed atmosphere that accompanies in-house counsel positions. In many cases, corporate jobs pay better as well – especially if the candidate achieves a general counsel position or receives stock options in a tech company poised for an IPO. Law firms that find themselves losing high-performing candidates to corporations may need a new compensation approach to stay competitive.
Know which skills are in the highest demand. If the role you’re looking to fill requires skills that are in high demand, you’re probably going to have to pay a premium to land a superstar. In today’s market, that means senior attorneys who specialize in litigation and commercial law, as well as such sectors as financial services and technology. Law firms and corporate legal departments are also paying for experience – whether that means in terms of years or exposure to vertical markets. While three to seven-plus years’ experience is a sweet spot for many firms because those lawyers can generally hit the ground running, attorneys with more than 10 years of experience and extensive client networks are heavily recruited to help expand practice groups.
Unique market conditions are also creating increased demand for certain types of lawyers. As Baby Boomers retire in mass, law firms are snapping up attorneys with experience in tax, trust, and estate law. Increased government investment in infrastructure has led to a need for lawyers familiar with serving the public sector, while a wave of new regulations that threaten hefty fines for non-compliant companies is heightening demand for lawyers with data privacy and compliance administration expertise. Catastrophic losses caused by natural disasters in the southern and western U.S. also have firms seeking lawyers who are skilled in construction, litigation, and insurance defense.
Know which roles are the hardest to staff. Law firms and legal departments should also be prepared to pay above-market rates for jobs where the supply of lawyers with the necessary skills falls far below the demand. Topping that list is niche roles, such as lawyers who specialize in insurance regulations. Filling those positions becomes even more challenging if the law firm or company is located in a less desirable geographic area where job seekers would have to relocate.
Benchmarking lawyer compensation can be a challenging process – especially as the gap between the supply and demand for skilled professionals widens. Following these six steps will help you create an EVP that makes your company a viable choice for superstar talent.
Carrington Legal Search is devoted to finding the ideal candidates for our clients’ recruitment needs. We have particular expertise in the Financial Services (banking, insurance, investment management, etc.) and Technology verticals. To make our nationwide network work for you, get in touch at 512-627-7467 or email carrie@carringtonlegal.com.