This article provides an in-depth analysis of law firm hiring trends, attrition, AI's impact on legal services, compensation structures, lateral moves, mergers, and diversity initiatives. It incorporates authoritative insights from Georgetown Law (discusses how AI adoption is driving changes in law firm hiring, compensation, and service delivery), ABA Journal (examines how an increasing number of managing partners are stepping down), The National Law Review (analyzes how firms are restructuring DEI efforts due to legal and social pressures), JD Supra (explores best practices for lateral partner success), and the Thomson Reuters 2025 State of the US Legal Market Report (examines industry trends, law firm performance, and economic shifts), as well as BCG Attorney Search’s observation and conclusions about the market trends heading into 2025.
Read Our Previous Legal Market Reports Here
Sustainability of Rising Compensation
Associate Compensation
The competitive legal hiring market has driven record-breaking associate salaries, with first-year associates at top firms earning between $215,000 and $225,000, not including bonuses (Vault discusses salary trends and market competitiveness). However, the sustainability of these pay scales is being questioned as firms seek to balance profitability with rising costs.
Partner Compensation
At the top of the legal hierarchy, partner compensation has reached unprecedented levels. According to Major, Lindsey & Africa, the average law firm partner compensation has risen to $1.4 million, marking a 26% increase since 2022 (MLA Global).
Escalating Billing Rates
Partners at elite firms now command billing rates exceeding $1,680 per hour, particularly in corporate litigation and M&A. The demand for high-stakes legal services has fueled these rate increases, with corporate clients pushing back and negotiating alternative fee arrangements (AFAs) to manage legal costs (Brightflag analyzes how rising billing rates impact client retention).
Persistence of the Billable Hour Model
Despite ongoing discussions about alternative billing methods, the billable hour remains the dominant model in the legal industry. While generative AI has the potential to reduce time spent on routine tasks, it has yet to significantly disrupt traditional billing practices. Fixed-fee models and technological innovations are being explored, but the billable hour persists due to its entrenched role in performance measurement and client billing (Financial Times).
Growth of Alternative Legal Service Providers (ALSPs)
The market for Alternative Legal Service Providers (ALSPs) has reached a record $28.5 billion, driven by demand for cost-effective, high-volume legal work and specialized expertise. Independent providers dominate this sector, and advancements in generative AI are expected to further enhance their appeal. Some law firms anticipate that their own AI developments may eventually reduce reliance on these services (Reuters).
Diversity, Equity, and Inclusion (DEI): A Year of Setbacks
Despite previous gains, 2024 was a challenging year for DEI initiatives in law firms. The American Lawyer's 2024 Diversity Scorecard reports that minority attorneys comprised 22.4% of lawyers in 2023, reflecting a slight increase from 21.6% in 2022. Minority partners now make up 13.6% of all partners, up from 13% the previous year. However, these gains are modest, and significant disparities persist across firms.
Source: Law.com
Bias remains a significant concern, with many attorneys reporting experiences of bias, particularly among Black lawyers. Despite these challenges, a majority of underrepresented attorneys still believe partnership is attainable, although firms continue to struggle with measuring work allocation in a meaningful way.
Lateral Hiring and Market Movement
1. Growth in Lateral Hiring
Lateral hiring surged in 2024, with many firms actively seeking experienced attorneys to bolster their ranks. This trend reflects firms' desires to expand their practice areas and client bases.
Source: Law.com
2. Law Firm Mergers on the Rise
2024 was an active year for law firm mergers, with large firms continuing to acquire smaller boutique firms and UK firms expanding into the U.S. Notably, however, many mergers resulted in significant attrition, with retention rates often hovering around 50% four years after a merger.
Source: Law.com
A major driver for mergers remains talent and client retention. Firms seek to expand their geographic reach and practice offerings while securing talent pipelines in an increasingly competitive market. However, firms without a clear post-merger integration plan often suffer significant attorney losses.
Source: Bloomberglaw.com
See Also:
- Law Firms and Their Future in the Changing Legal Industry
- 5 Strategies Lifestyle Law Firms Use to Compete in the Legal Market
- How Law Firms Can Survive a Tough Economic Legal Market
The Role of AI in Law Firms
AI adoption remains a hot topic in the legal industry. While law firms have been slow to adopt AI, the corporate sector has moved forward aggressively, increasing pressure on firms to incorporate AI tools for efficiency and cost savings.
According to the 2024 Legal Trends Report by Clio, firms are billing 34% more of their cases on a flat fee basis compared to 2016, and firms using AI are more likely to bill exclusively with flat fees. This suggests that AI is expected to increase legal productivity, allowing attorneys to focus on high-value, high-billable work.
Source: Clio.com
Some law firms have invested in AI-driven search and hiring platforms to improve efficiency in recruitment and cross-marketing initiatives. However, AI remains underutilized, and law firms will need to accelerate adoption in 2025 to remain competitive.
Office Openings, Closures, and Work Trends
Expansion into Emerging Markets
Law firms are increasingly establishing presences in emerging markets to capitalize on regional growth opportunities. For instance, Reed Smith's recent launch in Atlanta with nearly 40 lawyers, primarily from Morris, Manning & Martin, underscores Atlanta's rise as a significant business hub with a strong private equity presence.
Other markets showing significant expansion include Texas, Florida, and Colorado, where firms are strategically positioning themselves to attract corporate clients in industries such as technology, energy, and finance.
1. Geographic Expansion Trends
Law firms continued to expand strategically in 2024, with California, Texas, Colorado, and Florida seeing the most law firm office openings. Surprisingly, Colorado emerged as an area of interest, particularly in energy, finance, and tech law. In total, California saw 17 new office openings among AmLaw 200 firms, while Texas followed with 10.
Source: Americanbar.org
2. Work-From-Home and Hybrid Policies
The debate around remote work and office mandates continues, with law firms struggling to balance associate preferences with firm culture and client demands. Younger attorneys strongly favor hybrid and flexible schedules, and many firms recognize that fully in-office mandates could hurt recruitment efforts.
Source: Thomsonreuters.com
However, firms also acknowledge that face-to-face interactions remain essential for building client relationships and mentoring young lawyers. This has led to the adoption of more structured hybrid models rather than full returns to the office.
Source: Bloomberglaw.com
The Role of AI in Law Firms
AI adoption remains a hot topic in the legal industry. While law firms have been slow to adopt AI, the corporate sector has moved forward aggressively, increasing pressure on firms to incorporate AI tools for efficiency and cost savings.
According to the 2024 Legal Trends Report by Clio, firms are billing 34% more of their cases on a flat fee basis compared to 2016, and firms using AI are more likely to bill exclusively with flat fees. This suggests that AI is expected to increase legal productivity, allowing attorneys to focus on high-value, high-billable work.
Some law firms have invested in AI-driven search and hiring platforms to improve efficiency in recruitment and cross-marketing initiatives. However, AI remains underutilized, and law firms will need to accelerate adoption in 2025 to remain competitive.
Calls for Accelerated Technological Adoption
Industry leaders are advocating for faster adoption of technology within law firms to maintain competitiveness. Christina Blacklaws, former Law Society president, emphasizes the need for integrating generative AI and other technologies to address issues like access to justice and to keep pace with global advancements. She also highlights the importance of incorporating technology training in legal education to prepare for emerging challenges related to transparency, bias, and privacy (The Times).
Looking ahead, several key trends are expected to define the legal market in 2025:
AI Integration Will Accelerate – Law firms must develop AI policies and training programs or risk falling behind competitors.
Alternative Fee Agreements Will Gain More Traction – The traditional billable hour model is under scrutiny, with clients demanding greater cost predictability and value-driven legal services.
Mergers and Spin-Offs Will Increase – Law firm combinations will continue, with many lateral groups spinning off to form new firms due to conflicts, rate pressures, or cultural mismatches.
Diversity Metrics May Decline – Fewer diverse students enrolling in elite law schools may impact future hiring, according to NALP’s 2024 Diversity Report.
Recruiting and Retention Will Remain a Challenge – Younger attorneys are prioritizing work-life balance, requiring firms to rethink lateral hiring strategies (Thomson Reuters).
Mid-Sized Firms May Gain Market Share – Cost-conscious corporate clients are turning to mid-sized firms, which are seeing growth in market share.
More Law Firm Mergers and Consolidations – Economic pressures will drive more law firm mergers to maintain profitability.
AI and Legal Tech Will Reshape the Industry – Firms investing in AI-powered legal tools will gain a competitive advantage in efficiency and cost-effectiveness.
Key Takeaways for Law Firms in 2025
Given the trends outlined above, law firms must adapt to remain competitive. The following strategic approaches can help firms thrive in an evolving legal market:
Invest in AI and Legal Tech – Firms should integrate AI to enhance productivity, reduce costs, and improve client service.
Adapt to Alternative Fee Models – Offering flexible pricing structures will help firms retain corporate clients.
Strengthen DEI Initiatives – Firms must proactively implement policies to improve diversity and track meaningful metrics.
Enhance Lateral Hiring Strategies – To attract top talent, firms must create competitive compensation packages and foster a supportive work culture.
As the legal industry continues to evolve, firms that remain agile, innovative, and proactive in addressing these challenges will maintain a competitive edge in 2025 and beyond.
Read Our Previous Legal Market Reports Here
About Harrison Barnes
Harrison Barnes is a prominent figure in the legal placement industry, known for his expertise in attorney placements and his extensive knowledge of the legal profession.
With over 25 years of experience, he has established himself as a leading voice in the field and has helped thousands of lawyers and law students find their ideal career paths.
Barnes is a former federal law clerk and associate at Quinn Emanuel and a graduate of the University of Chicago College and the University of Virginia Law School. He was a Rhodes Scholar Finalist at the University of Chicago and a member of the University of Virginia Law Review. Early in his legal career, he enrolled in Stanford Business School but dropped out because he missed legal recruiting too much.
Barnes' approach to the legal industry is rooted in his commitment to helping lawyers achieve their full potential. He believes that the key to success in the legal profession is to be proactive, persistent, and disciplined in one's approach to work and life. He encourages lawyers to take ownership of their careers and to focus on developing their skills and expertise in a way that aligns with their passions and interests.
One of how Barnes provides support to lawyers is through his writing. On his blog, HarrisonBarnes.com, and BCGSearch.com, he regularly shares his insights and advice on a range of topics related to the legal profession. Through his writing, he aims to empower lawyers to control their careers and make informed decisions about their professional development.
One of Barnes's fundamental philosophies in his writing is the importance of networking. He believes that networking is a critical component of career success and that it is essential for lawyers to establish relationships with others in their field. He encourages lawyers to attend events, join organizations, and connect with others in the legal community to build their professional networks.
Another central theme in Barnes' writing is the importance of personal and professional development. He believes that lawyers should continuously strive to improve themselves and develop their skills to succeed in their careers. He encourages lawyers to pursue ongoing education and training actively, read widely, and seek new opportunities for growth and development.
In addition to his work in the legal industry, Barnes is also a fitness and lifestyle enthusiast. He sees fitness and wellness as integral to his personal and professional development and encourages others to adopt a similar mindset. He starts his day at 4:00 am and dedicates several daily hours to running, weightlifting, and pursuing spiritual disciplines.
Finally, Barnes is a strong advocate for community service and giving back. He volunteers for the University of Chicago, where he is the former area chair of Los Angeles for the University of Chicago Admissions Office. He also serves as the President of the Young Presidents Organization's Century City Los Angeles Chapter, where he works to support and connect young business leaders.
In conclusion, Harrison Barnes is a visionary legal industry leader committed to helping lawyers achieve their full potential. Through his work at BCG Attorney Search, writing, and community involvement, he empowers lawyers to take control of their careers, develop their skills continuously, and lead fulfilling and successful lives. His philosophy of being proactive, persistent, and disciplined, combined with his focus on personal and professional development, makes him a valuable resource for anyone looking to succeed in the legal profession.
About BCG Attorney Search
BCG Attorney Search matches attorneys and law firms with unparalleled expertise and drive, while achieving results. Known globally for its success in locating and placing attorneys in law firms of all sizes, BCG Attorney Search has placed thousands of attorneys in law firms in thousands of different law firms around the country. Unlike other legal placement firms, BCG Attorney Search brings massive resources of over 150 employees to its placement efforts locating positions and opportunities its competitors simply cannot. Every legal recruiter at BCG Attorney Search is a former successful attorney who attended a top law school, worked in top law firms and brought massive drive and commitment to their work. BCG Attorney Search legal recruiters take your legal career seriously and understand attorneys. For more information, please visit www.BCGSearch.com.
Harrison Barnes does a weekly free webinar with live Q&A for attorneys and law students each Wednesday at 10:00 am PST. You can attend anonymously and ask questions about your career, this article, or any other legal career-related topics. You can sign up for the weekly webinar here: Register on Zoom
Harrison also does a weekly free webinar with live Q&A for law firms, companies, and others who hire attorneys each Wednesday at 10:00 am PST. You can sign up for the weekly webinar here: Register on Zoom
You can browse a list of past webinars here: Webinar Replays
You can also listen to Harrison Barnes Podcasts here: Attorney Career Advice Podcasts
You can also read Harrison Barnes' articles and books here: Harrison's Perspectives
Harrison Barnes is the legal profession's mentor and may be the only person in your legal career who will tell you why you are not reaching your full potential and what you really need to do to grow as an attorney--regardless of how much it hurts. If you prefer truth to stagnation, growth to comfort, and actionable ideas instead of fluffy concepts, you and Harrison will get along just fine. If, however, you want to stay where you are, talk about your past successes, and feel comfortable, Harrison is not for you.
Truly great mentors are like parents, doctors, therapists, spiritual figures, and others because in order to help you they need to expose you to pain and expose your weaknesses. But suppose you act on the advice and pain created by a mentor. In that case, you will become better: a better attorney, better employees, a better boss, know where you are going, and appreciate where you have been--you will hopefully also become a happier and better person. As you learn from Harrison, he hopes he will become your mentor.
To read more career and life advice articles visit Harrison's personal blog.
