TRP 308: [Legal] 2025 State of the Legal Industry Report with Phil Flora

[00:00:10] You're listening to The Rainmaking Podcast, hosted by high-stakes headhunter, author, and professional speaker, Scott Love. You're listening to The Rainmaking Podcast, and my name is Scott Love. Thank you for joining me on the show. This is part of our Tuesday series where we talk about issues relating to just the legal industry. And our special guest today is Phil Flora, VP of Sales at SharePoint Legal Insights.

[00:00:40] At SharePoint, Phil leads the SharePoint Legal Insights Division, the industry-leading legal intelligence platform delivering real-time market insights, strategic forecasts, and more than two decades of historical legal data to support business strategy development and recruitment. SharePoint Legal Insights brings over 20 years of legal intelligence to their suite of legal technology solutions. And today, Phil and I are discussing the 2025 State of the Legal Industry Report.

[00:01:07] Now, you can download this report in PDF form. Wherever you listen to this podcast, go to the show notes. You'll also be able to connect directly with Phil as well. As always, this podcast is sponsored by SharePoint Legal Insights, formerly known as Leopard Solutions, turning legal intelligence into opportunity. And also, it's sponsored by The Rainmaking Magazine. Don't lose business to the competition. Read this publication to keep business development top of mind.

[00:01:35] Visit therainmakingmagazine.com today to chart your course to greater rainmaking success. And now, here's my conversation with my good friend, Phil Flora. Thanks for listening. Hey, this is Scott Love with The Rainmaking Podcast. Our special guest today is Phil Flora. Phil, thanks for joining me on the show. Thanks, Scott. I appreciate you having me on. It's always great chatting with you. Always is. And let's talk about the state of the legal industry report for 2025. Let's dig right into it.

[00:02:04] And let's start with lateral hiring. Tell me about the trends that you've seen for last year in lateral hiring, Phil. Yeah, so it was a robust year for lateral hiring, not only within the AMLAW 200, but really across all law firms. We tracked close to 6,000 firms. The MLAW 200 saw close to a 9% year-over-year growth in lateral hiring. And then firms outside the MLAW 200 saw similar growth as well, close to 9%.

[00:02:33] The majority of the lateral hiring within the MLAW 200, or a good portion of that, actually came within the MLAW 50. 40% of all lateral hires within the AMLAW 200 fell within the largest 50 firms. It just shows that the larger firms are continuing to grow and separate themselves. But again, lateral hiring is not specific to the large firms. We're seeing it all throughout the industry.

[00:03:03] Midsize, everyone's trying to keep up and stay competitive and grow and support their clients. And why do you think that is? What do you think are the factors that contributed to that, Phil? What's your take on that? Yeah, I mean, I think what we saw, and this came out of the data from looking at the actual growth in the specific practice areas. What we saw this year in 2025 was more demand across the transactional practices and the typically, you know, regulated practices.

[00:03:32] You know, there was significant growth in like the immigration and government practices, which are sort of secondary practice areas. But when you're seeing growth in those areas, litigation is always going to take the lion's share of all the lateral hires just because it's the most it's the largest practice across the industry.

[00:03:51] But when you're seeing growth and significant growth in some cases across those other practice areas, corporate, real estate, banking, and in some cases, like I said, health care, immigration, government. That's really when you see the explosion in the market because, you know, there's always the I guess the evergreen hires that happen, you know, especially at the partnership levels with books of business and litigation.

[00:04:17] But when we're seeing the influx of such growth in transactional practices, that speaks to demand from our clients and also, you know, the sort of volatility that's happening in the industry led by, you know, sort of deregulation and a lot of other things that are sort of changing from D.C. and out. Yeah, that's interesting. And when I was reading this, it reminded me of how COVID happened and all of a sudden people thought bankruptcy was going to skyrocket.

[00:04:45] Well, the government stepped in and did something good and helped America out. And then you saw there was an increase in litigation, especially insurance, policyholder representation, litigation, labor and employment. And then 2021, we know how that happened. It was it skyrocketed because of all the pent up demand. And what I see in the report, I think of 2024, because my niche, I recruit corporate and finance partners. So I talked to a lot of people and some of them said it was kind of soft. Everything last year got better.

[00:05:12] But then the tariffs cause people to really wonder, is it going to grow? So it's almost a kind of a sigh of relief seeing these figures and what the data shows us what really happened. And I think some ways I wonder, are law firms going to become overconfident when you look at their profit increase from 2025? And if you didn't do 20 percent profit increase, you aren't a big deal. That's kind of the trend I see with that. Is there anything else related to lateral hiring that we should take from this report and pay attention to, Phil?

[00:05:42] Yeah, I mean, I think the biggest I mean, again, these are the biggest numbers we saw since the sort of I call it the 2021 to 2022 correction from the pandemic. Right. There was explosion, as you talked about post pandemic. You know, there was basically nothing that happened in 2020. And then everything started ramping up towards the second half of 2021 and right into 2022. And as you talked about it, a lot of it came in those corporate areas.

[00:06:08] But also a lot of it was also driven by associate hiring, which to me isn't necessarily sustainable. Whereas if we saw in this, which is a little different, council hires saw the biggest year over year growth. That was up 18 percent from where it was in 2024. And then partner hires also were up. Associate hires were up. But what we saw, especially within the MLA 200, the peaks council and partner hiring was the highest it's ever been since we were tracking it.

[00:06:38] So to me, that's more sustainable growth. You're hiring people that are experienced attorneys that might have books of business. The less there's less chance of, let's say, churn happening with those folks. Right. Whereas we saw, you know, in 2023, there was some, you know, when things slowed down, they there was some removed, you know, you know, they've removed some associates. They got rid of them. They, you know, whatever, fired them.

[00:07:05] So I think it's a more sustainable growth, which I think is going to be interesting to see as things go. You know, the questions around entry level hiring, associate hiring. And that's a whole nother separate topic, you know, that we could chat about. But I'm pretty bullish on where things are moving just based on the patterns that we're seeing. I do, too. And when you look at the council hiring, that increased 18 percent, that was a surge. Those people, like you said, sometimes they have a book.

[00:07:32] Usually they don't. Usually it's more of a cost than a profit center, which tells me you have to bring people on board because the client demand requires that, which means firms are making those investments, which gives everybody a good comfort level that this is a pretty positive trend overall. That's really interesting. Let me ask you about lateral retention. What did the report show for 2025 in terms of retention?

[00:07:55] So when we track the retention, we actually look at how many people, you know, stay at least three years from the time they enter the firm. And we do that both for entry level hiring and we do that for lateral hiring. So when we look back over time, we actually went back to 2015 and we tracked, you know, how many people post joining the firm stayed at least three years.

[00:08:19] And typically what we saw on a continuous basis, we actually looked at 2015 to 2023 because, you know, 2024, 2025, those hires are still it's that three year period hasn't ended. But when we look at 2015 to 2023, essentially just a little bit more than half the associates you hire will not stay past that three year mark. So it's 52 percent was the retention percentage for associates. 52 percent of them will stay at least three years.

[00:08:48] 76 percent of them of partners stay at least three years. So essentially one in four of the partners that you hire that you think or you're investing a lot of time, effort and money into one in four of them are going to leave within three years. And then look at councils. It's actually around two out of five will leave essentially within that three year period.

[00:09:11] So we talked a little bit about more sustainable hiring when you see the growth in councils and partners, but it is still something that firms need to make sure they have a good process in place to integrate these folks into the firm, to ensure that they're leveraging all the different resources the firm offers to them, because there's a good chance that a good percentage of those folks are still going to leave in a very short period of time. That's right. How do you think that compares to previous years?

[00:09:38] Are there any lessons we can take from this in terms of the retention rates that you've seen for last year? Yeah, I mean, the numbers of those numbers speak. Those are really over. Those are sort of over an eight year period. So those are normalized. We haven't really seen much variation from that. We're looking at just last year alone. You know, we're seeing sort of a similar trend to what we've seen if you look back.

[00:10:04] And so I'm not really seeing much variation really in the data, you know, more recently than what we've seen previously. So the retention, I will say, I will call out retention is better, you know, when it comes to the larger firms. So if you look at, if you compare AMLA 200 to non-AMLA 200, non-AMLA 200, those rates are actually lower than they are within the AMLA 200. That speaks to more of the struggles that the midsize market has in identifying people.

[00:10:34] And then once they identify them, you know, keeping them on board and not getting them tempted to leave and go to, you know, quote unquote, greener pastures where they potentially can make more money. So I'm not really seeing too much of a variation. You know, I think this is still really a new focus for firms to be really, I mean, you know, I think you've had some conversations with firms around the things that they need to do to hold on to people. And, you know, the initiatives firms are putting in place, they're trying different things, right?

[00:11:03] They're trying the expansion of non-equity partner tier. They're trying to put people in more of a council role and give them more flexibility. So I don't know if they're going to have a media impacts. I think this is something we'll have to see five years from now if the retention rates vary. But we haven't really seen much variation in the last 10 years. Yeah, that's interesting what you said about the larger firms have an edge over the smaller ones.

[00:11:26] I sometimes wonder if it's just because of the resources they have or because they're more deliberate about process improvement and hiring consultants and experts to really help them improve those processes. What do you think about that, Phil? What do you think about what I just mentioned? Yeah, I think that's across the board. I mean, obviously, you know, compensation is probably going to be a little bigger. So I think that's going to be a factor.

[00:11:51] But I 100% think the resources that are available, whether it's internal resource, external access to external resources, they do have an advantage. There's no question about it. I mean, you look at, again, the numbers are all coming out for the MLAW 200 right now. And, you know, there's been significant gains and a lot of it comes through the market. But it also comes from rate increases. And these firms are, you know, making significant amount of money, especially the largest firms.

[00:12:20] So they're going to have more opportunities and more resources. But I think, you know, at the end of the day, you know, the attorney has to balance it all with what's, you know, the right fit for them. You know, and people's priorities change over time. So you have, you know, firms need to be cognizant of offering opportunities for attorneys that want different paths. And I think we're seeing more and more of that, too. That's interesting.

[00:12:44] A trend I've seen is that smaller firms have been more open to being acquired by a larger firm. But you can't call it that. You call it a merger or a combination. And tell me about that. What has your data shown in terms of law firm mergers from last year? So last year was the highest number of transactions that we've seen since we've been tracking, which is well over 10 years. There were 59 mergers or combinations transactions over the course of 2025.

[00:13:14] Now, there's been a lot in the press of the large AMLO 200 combinations, the transatlantic combinations that are happening. You know, we've seen and certainly that takes the attention of most folks. But believe it or not, most of the a good percentage of the transactions or the combinations happened at firms that were outside the AMLO 200. We saw 22 of the 59 happen between firms that were less than 150 attorneys.

[00:13:44] That number actually midsize firms, the midsize grouping of firms went from back in 2021. There were 17 combinations that happened amongst midsize firms. And that has gone up to 36 as of last year. So midsize being sort of in that category of, I would say, you know, 50 to 250-ish, you know, or thereabouts. So the larger majority, you know, 36 of the 59 are happening in that midsize group and smaller.

[00:14:13] That speaks to their trying to figure out how best to compete, how best to leverage the financials and the cost of operating a business. You know, you can, if you have more attorneys, maybe your costs can be, you know, could be blended or spread out across more attorneys and makes your profits per partner better. You know, it makes hopefully the firm, you know, run more efficient and everything else. There's challenges, though, when you have combinations.

[00:14:41] And we're seeing that, you know, on the retention side as well. You know, when we looked at this at the end of 2025, you know, we're tracking from the date the combination goes live. Of those 59 combinations, the average retention across those, and some of those could have happened just a few weeks before the end of the year, the average retention across all of those was 92% post-combination.

[00:15:05] So, you know, you'll see a lot of times when there's combinations, there's also, you know, conflicts. Attorneys have to, you know, identify that, you know, the firm, the combining firm isn't, you know, something where they have conflicts with their clients. But then also culture. I mean, there's, you know, a lot of times you join the initial firm for a reason. And when those two firms come together, you're going to look for a new home. So we're seeing a lot of that as well.

[00:15:30] I mean, there's definitely retention is a significant concern for a lot of these folks post-combination. That is. I think going back to what we mentioned with COVID, back then, 2021, the big firms relaxed their requirements for associates. They started picking off the small firms. An AMLA 50 firm, well, we'll take someone from an associate from a firm that's below the AMLA 200 because we have the demand.

[00:15:53] And so those smaller firms started seeing associates leave, which means that the partners in those firms are saying, I'm not doing associate-level work. I'm going to go to another firm, maybe a larger one that has resources, and I'm taking my clients with me. So sometimes those smaller firms where years ago I'm never going to merge, now it was a decision of not what's the best opportunity, but what's the least worst decision.

[00:16:16] Do I continue to decline or do I join in with a larger firm and relax my expectations of what I had hoped for? And in the end, it works out well if those firms really do have a good business case. So that's a trend I've seen. What do you think about that perspective, Phil? No, I mean, 100% agree with everything you said. But I think it's interesting.

[00:16:37] When we did our webinar on the state of the industry, Tim Corker, and I know he just recently had on it, spoke about it and said, mergers aren't necessarily a strategy. It's a mechanism to execute on your strategy. And if your strategy is to grow and you're trying to find the most logical way to grow, that could be a tool that you guys can use in your toolkit. But you have to do it. You have to be mindful.

[00:17:03] I mean, we've seen some firms do it and use it very well. I mean, you look at Taft and how much Taft has grown over the last 10 years. They've executed a number of combinations and now are a national firm when they originally were just a player in the Midwest, Ohio, Michigan area. Now they're a national player, Amblon 100. But we're seeing it also with some of those mid-sized firms.

[00:17:29] I mean, you know, Spencer Fain and a number of other firms that are sort of in that mid-sized grouping, they're performing multiple combinations as well. So if it's something that you're able to execute on, it could be a great strategy to help the firm grow. If it's something that you're just thinking of trying, I think you better make sure that you're either consulting the right people to help with that process or making sure that you have full buy-in from the partnership that you're making the right decision. That's great advice, Phil.

[00:17:58] And when people do that, they see that their partners stay and their partners start getting promoted. So tell me about that. What have you seen in terms of partner promotions from the data from last year? So this is another area where we saw record numbers in partner promotions last year. It was over 50% higher in 2025 compared to 2024.

[00:18:20] 3,732 new partners that happened in 2025 was by far the highest number that we've ever recorded. 70% or just over 70% of those lateral of those promotions were to people that joined or to attorneys that joined via lateral. And that is almost double where it was in 2015.

[00:18:43] So when you think about, you know, attorneys joining law firms and staying long term and eventually becoming partnership, the partnership track right out of law school more times than not, or just, you know, just a little less than a third of the time. You're the one that's going to join at a law school and make your way all the way to become partner. Now it's more than two thirds of the folks that become partner are joining firms via lateral. So it's just things that attorneys need to consider long term as they go.

[00:19:12] Now, part of the expansion we've surmised based on the growth of the non-equity partner tier has to do with that. So you've always seen Kirkland as a firm that has grown significantly over time with their partnership track. And a lot of it was because they were pretty well known with having and offering a non-equity partner tier.

[00:19:33] But we're seeing now the data suggests that 87 of the of the AMLAW 100, more and more firms are adding a non-equity partner track as either a placeholder to, you know, put laterals that are just coming on to, you know, basically test out, you know, whether it's going to work or not. Or just as an alternative option for folks that maybe aren't looking to be full equity partner or and they're looking for sort of like a hybrid opportunity.

[00:20:01] So the expansion of that, I think, has really, you know, it's tremendous. I mean, you've seen some firms that historically didn't promote more than 10, 15 attorneys in a year have double that in 2025. And a lot of it has to do with probably the rollout of that and that a second tier of partnership class. That's great, Phil. Let me ask you this. What have you seen related to artificial intelligence and AI related risks?

[00:20:30] What does the data show us in that regard? So a couple of things we saw, you know, one of the big things we saw last year was that the U.S. courts, there was a and this was an action. This was something we found or we saw from there was a lot of A.I. hallucinations and U.S. courts recorded 487 instances of A.I. errors during 2025, which was 10 times more than it was in 2024. So we're definitely seeing that the use of A.I. is exploding.

[00:20:59] There's no question about it. And one of the things that we found from our report was that 63 percent of midsize firms have adopted using A.I. Most of it is, you know, simple tools like Copilot and other tools like that that integrate with a lot of the Microsoft suite products and so on and so forth. But, you know, more and more firms are using it for contract review and they're using it for, you know, document review and legal research.

[00:21:27] And when you start getting into that, you have to be obviously really mindful at the data you're you're the A.I. is sourcing is accurate and verified. And you're not just taking that and just using it in whatever work that you're submitting to either court filings or working on behalf of your clients. Hallucinations are increasing with the use of it. And it's it's it's another tool in the toolbox that will make firms more efficient.

[00:21:54] But it's something that, you know, it needs to be there's got to be a form of checks and balances placed in on it, just like anything else. That's great, Phil. And with this report, how can our listeners get a copy of that? We have it on our SurePoint dot com website. They can go on there. And actually, when you go to the website, we have a splash page popping up right away. It's just went live on Tuesday. The I think it was what's today? Twenty six. We're on Tuesday the 24th.

[00:22:21] It went live so they can go to the website. They could download a copy. It's free. It's great content. There's over 37 pages. We touch on all the big things that are happening in the industry right now. And there's a lot going on, as you know. So it's really informative information. And I think it could be really helpful and directional for the industry. That's great. And for everybody listening, we'll put that link on the show notes and just go to the show notes wherever you listen to this podcast. And you'll be able to get that directly.

[00:22:48] And by the way, SurePoint is our main anchor sponsor of the podcast. So I appreciate your involvement with that, Phil. And tell us about the other project that we're working on. Tell us about the Managing Partner Lab. Yeah, so Managing Partner Lab, we launched that last September. We did our inaugural Managing Partner Lab at our Ignite event.

[00:23:09] So every September, we have our user conference for all of our clients and prospects and folks that want to just come and learn about technology and what's happening in the industry. So that's always in September. So last year, we had our first one-day Managing Partner Lab. And it was a success. We had about 25 or so managing partners from firms of varying sizes.

[00:23:31] And, you know, the conversation was a lot about technology and talent and all the challenges that firm leadership deals with on a continuous basis. And then based on feedback, we decided that we would do two this year. So we're doing one in New York in mid-May on May 14th and 15th. Two-day event.

[00:23:51] Again, really the main themes are around the challenges faced by mid-sized firms and their leadership around technology and talent, which are really two big drivers that a lot of firms are dealing with right now. So have a lot of great speakers, a lot of great content that are going to be there. And then we're doing another one again at our September event, which will be in Savannah, Georgia this year.

[00:24:12] And it'll be another, you know, I think we're doing it as a one-day event during that in conjunction with the larger Ignite event that we're going to be doing. That's great, Phil. Thanks for joining us on the show. And for everybody listening, like I mentioned, we'll put all the information where you can download that report directly, as well as a link that can get you info on the Managing Partner Lab. Phil, thanks for being on the show today and for sharing all of this information with us. Appreciate it, Scott. Thanks for having me. It's great seeing you again.

[00:24:42] Thank you for listening to The Rainmaking Podcast. For more information about our recruiting services for international law firms, visit our website at attorneysearchgroup.com. To inquire about having Scott speak at your next convention, conference, sales meeting, or executive retreat, visit therainmakingpodcast.com.