In the Midwest, Increased In-House Demand But Happy Lawyers Linger Longer in Firms
Plenty of Jobs ... in Omaha
by Steve Anderson
Corporate Legal Times — Volume 9, Number 97, December 1999
There's more demand than supply for in-house lawyers in the Midwest, say recruiters. Many companies have turned the down-sized corner in the last 18 months and are growing their legal staffs again. But hiring in-house attorneys is complicated by the strong demand for lawyers across the board, as well as the fact that, if you can believe it, a lot of lawyers are increasingly happy in law firms.
"In the last year there has been a continuation of high demand for attorneys at all levels and only a modest supply of available people," says Howard Lieberman, president of the Lieberman-Nelson Inc. placement firm in Minneapolis. "By and large, lawyers are happier that they've been for a while. Three, four, five years ago, everybody wanted to go somewhere different. Right now people seem more content where they are.
"In years past," he says, "if you called an associate and said the words 'in-house', they would say 'I'm interested.' Now there is less of an interest on the part of the good people in private practice in moving in-house."
Lieberman says it's not that people perceive going in-house as a dead end, as they once did. Rather, they're more or less enjoying law firm life and are increasingly aware that there is no panacea.
"For a long time law firm lawyers looked at legal departments as heaven and private practice as something other than heaven," he says. "There have always been good in-house jobs and not-so-good in-house jobs. There are god-awful firms in which to work, and some really nice environments. Because firms are doing well economically, things are growing and there's a lot of optimism, people are enjoying private practice."
Aaron Williams is president of St Louis-based Aaron Consulting Inc., a national headhunting firm that specializes in-house placement. He corroborates the increasing in-house demand.
"The bottom line is, I am seeing a lot of lawyers going in-house to companies that are growing their law departments. It does seem that we are over the hump here, companies are starting to add lawyers again," he says. "I would say the market is very good."
The average Midwest salary for in-house lawyers with three to five years of experience ranges from $75,000 to $85,000, recruiters say. Eight to 10 years of experience can net attorneys upward of $100,000 a year. Salaries for more than a decade's experience, or for top in-house posts, vary widely but often lag behind comparable companies on the coasts.
That is in line with results from the Altman Weil Inc. "1999 Law Department Compensation Benchmarking Survey," which found in-house attorneys average $76,834 a year and senior attorneys average $96,770 annually in the north central part of the country. The Altman Weil survey includes a broader geographic area than the 8th Circuit - the entire Midwest, excluding Chicago.
The hottest practice areas are no surprise: M&A and IP licensing in pharmaceuticals, medical devices and telecom lead the list. Anything Internet-related is red hot. Patent work continues to make the transition from back-of-the-room pencil pushing to senior executive-level management. International transactions, environmental and labor remain strong areas as well.
On the flip side, government contracts have cooled down, with banking and healthcare stone cold.
"We've seen telecom and Internet start-up company openings--really across the country--develop in the past 18 months, particularly in the past six months," says Williams. "It just seems to be one after another. But the next really big thing is joint-venture licensing."
Lieberman sees a less obvious in-house influx of law firm litigators.
"Because big-ticket litigation has been slack at private firms, a lot of litigators are looking to become in-house litigation managers," he says. "Traditionally, law departments have hired mostly transactional people and outsourced litigation. Now more law firm litigators want to go in-house."
What's really hot, Lieberman says, is any kind of in-house position that offers stock options.
"A lot of lawyers have come to the realization that the only way that they can make more money is by working harder," he says. "There is a perception, right or wrong, that if you go in-house you can get stock options and start to amass some real wealth."
Williams sees the same desire. The problem, he says, is that law firm lawyers making $195,000 salaries are chasing start-ups that want to offer them $70,000 plus $50,000 in options, or just the promise to go public. The question is of how to pay the bills until a potentially big IPO payoff actually hits the bank, if it ever does.
"We are seeing people who really are risk-takers, true entrepreneurs, seeking to hire true entrepreneurial-minded lawyers," Williams says. "There is a shortage in the market of the people who really understand what they're getting themselves into."
The growing in-house demand is tempered by a well-founded fear that law department life is not as stable as it once was. Merger shake-ups can hit second-tier markets particularly hard. Because there are simply fewer corporations in a given Midwestern city, attorneys purged from a merged company's legal department may have to pick up their family and move if they want to continue working in the same sector.
"With M&A going on as hot and heavy as it is, there's a certain amount of fear that you take a position in-house and next thing you know, your job is gone," says Lieberman. "Whereas if you stay in private practice and develop a client base, you have a sense of tenure that you don't ever have in-house."
Timothy P. Mahoney, vice president of The Esquire Group in Minneapolis, says continued consolidation has reduced the number of Midwestern in-house positions in large law departments.
"There's growth among small and mid-sized law departments, but there are no Honeywells moving back to Minneapolis with 65 in-house lawyer positions," he says.
Williams says the consolidation crunch is evident in the steady stream of corporate M&A openings for lead deal lawyers. Every size company, even the ones going in the IPO direction, are growing through acquisition, he says. And some industries, such as pharmaceutical and chemicals, see steady consolidation.
"You can't just stay out of those industries. Many of those industries are where all the openings are developing," says Williams. "It's very easy to chase who you think is the biggest company in the industry and then six months later find that they've sold off several divisions and you're out again. At the same time, you could go to a company that is clearly a takeover target and realize that it might be five or 10 years before somebody gets their act together to acquire the company. In the meantime you'll get great experience. The days are over when you could make one in-house move and say, 'This is the last move for the rest of my career.'"
Mahoney says that as a result of in-housemerger concerns, there is a small reverse migration of people from law departments to law firms. This is driven by the belief that it's better to get out sooner than later, he says.
Law firms are becoming more creative in the ways they attract in-house attorneys, he says. Specialiaztion through practice group development is attractive lure back to law firms.
"We see that particularly in the high-tech IP areas--people moving out of in-house intellectual property groups into law firms. It happened here recently with the Dorsey & Whitney firm.
"The old adage was that if you wanted to move from in-house to a law firm, you had to have some kind of book of business. That's still true for a lot of people, but if you have a significant amount of experience in a hot area such as IP or M&A, the law firms have so much work that they can justify bringing you on even at a senior level."
But Lieberman says people are by no means moving from legal departments to firms in droves. Though the rules which once made that impossible have relaxed, it's still difficult and uncommon, he says.
Green, If Distant, Pastures
Another function of the bullish economy is that fewer burned-out big-city lawyers long for the quiet comfort of their Midwestern roots.
"Back when things were really bad in the early 1990's in places like New York and Los Angeles, we had a lot of Minnesotans who wanted to come home and a lot of non-Minnesotans who wanted to move here," says Lieberman. "They heard this was a place where everybody was happy and nice and left work at 5 o'clock every day to coach their kid's soccer match.
"We used to find a lot of New Yorkers who said they didn't want to raise their kids in New York. We're getting almost none of those now. The pay scale is incredibly thin in those areas. The law has failed to notice that the cost of living has skyrocketed [in Minneapolis]. If you're earning $175,000 in New York and you can come home and make $72,000, that's a hard sell."
But Williams says that the Midwest still has a lot to offer for those willing to broaden their horizons to prairie scale.
"For those who are willing to go anywhere, the Midwest offers tremendous opportunities that aren't found elsewhere in the United States. There is an unlimited supply of companies in small Midwestern locations that have a hard time high-quality counsel. The supply of openings in many respects is larger than the supply of candidates who are willing to go to those locations."