The stiff competition for talent in Hong Kong has been exacerbated by the rapid expansion of PRC firms. With the talent market tighter than ever, firms need to go above and beyond offering an attractive salary in order to hire and hold on to the best and brightest.
Law firms in Asia have been busy making lateral hires this year, logging more than 100 partner appointments in the first half of 2017.
The most active hirer has been Morgan, Lewis & Bockius, which landed 14 partners for its Greater China offices – almost all from Orrick, Herrington & Sutcliffe in January and February. In July, Withers snapped up Winston & Strawn’s Greater China commercial practice head Mabel Lui plus five more corporate lawyers.
China is the main driver when it comes to recruitment for international firms. Moreover, the competition has been complicated by the growing presence of PRC firms, and 26 of them now have offices in Hong Kong.
“China is a key focus for recruitment at Baker McKenzie in 2017 and beyond, and there is strong competition for legal talent at all levels across both Beijing and Shanghai,” says Vanessa Harris, Asia Pacific associate director of talent management at the firm. “We are seeing PRC firms extremely active in recruiting litigation and arbitration lawyers, while banking and projects work is also on the increase, thanks in part to the Belt and Road initiative.”
While PRC firms may not be able to compete with global firms for top talent on salary alone, they can offer what ambitious associates crave: career advancement.
“Some lawyers have moved from inter-national law firms to PRC outfits in Hong Kong with a view to quick career progression, including the possibility of rising to the partnership almost immediately - providing they have a decent portfolio of business - but also with the opportunity to work more autonomously by developing their own client base and also diversify their skill sets,” says Ricky Mui, director of the legal and compliance, commerce, finance and contract division at recruitment firm Robert Walters Hong Kong.
For example, Haiwen & Partners, which set up shop in Hong Kong in March, recruited Max Hua as a partner from Cleary Gottlieb Steen & Hamilton, where he was an associate.
CAPITAL MARKETS CROWDED
With more PRC firms setting up offices in the already saturated Hong Kong market, competition for corporate work from Chinese clients – the drivers of transactional work in the Asian financial hub – has become fiercer than ever.
Despite the new reality, some international firms – mostly those headquartered in the U.S. – stubbornly want to only do the most high-end, lucrative work, where their share of the pie is steadily shrinking. Frustrated lawyers who are starved of work end up leaving to do work that is less high-profile, but nevertheless decent.
“We are seeing partners move from these U.S. law firms to other international firms or even local firms as a result,” Mui notes. These firms tend to charge a lot more for deals, and thus lose out on mid-tier IPO and M&A work to local and PRC law firms who are willing to be much more flexible.”
Generally, though, firms are now avoiding practice areas where they will have to compete on price and are looking to focus more on niche and less commoditised areas instead.“Where firms are looking strategically to grow is often around areas where there’s less fee pressure,” says Carl Hopkins, Asia managing partner at global legal search firm Major, Lindsey & Africa. “Capital markets, for example, is very price-sensitive and turning a profit is a significant challenge.”
Litigation and regulatory enforcement proceedings such as probes led by the Securities and Futures Commission or tied to the U.S. Foreign Corrupt Practices Act could see more growth, says Hopkins, “perhaps because the potential consequences can be so severe on companies under investigation.”
Firms are also focusing on diversification, adds Hopkins. “If you look back to 2007 or pre-global financial crisis, everyone was doing Hong Kong capital markets work. But that isn’t the case now, and you need to have a balanced office, so you want to make sure that you don’t just have a capital markets team,” he says. “You have litigation because it’s counter cyclical, so that when the capital markets are quiet, litigation might be busy.”
MORE THAN MONEY
While money is often the main factor in the competition for talented lawyers, most firms set a limit on how much they can offer, no matter how deep their pockets.
“Each law firm will have its own pay scale tied to PQE levels, and lawyers will need to be paid within those salary bands by way of policy,” explains Mui. “So there are limits to compensation when it comes to the associate and senior associate levels.”
Hopkins agrees, saying that most firms have pay standards they’re not prepared to fl out, especially for associates. Though a few firms like Kirkland & Ellis do break the bank, most don’t because there’s a cost imperative, he says.
“If you compensate a star lateral at $5 million, you’re making a loss unless they generate a certain level of revenue,” he points out. “Currently, firms are not prepared to make such investments here, so we would expect to see a re-evaluation of offers that might be made to attract star lateral partners.”
Firms are thus thinking beyond salaries in order to attract and retain talent. Offering onsite secondments to clients or international secondments to their other international offices is one way, shares Mui. Another is the opportunity to further their legal education or offering to pay for Masters or MBA programmes, providing that it benef ts the firm, he says.
Diversification of experience is another reason why lawyers might switch firms. “Too often, we see associates at larger firms only work on IPOs or ECM – limited areas from where they find it difficult to expand their skill set,” says Mui. “Although they are paid very competitively, most associates would rather look for a firm that can provide them with a more diverse range of work and clients. For example, corporate lawyers would rather work on a mix of corporate M&A, fund formation and private equity deals as well as IPO work.”
Firms can offer benefits outside the office as well. DLA Piper recently announced it had increased parental leave in the Hong Kong office, offering a market-leading 18 weeks for maternity leave and 10 days for paternity leave, both with full pay.
“Adoptive parents will enjoy the same benefits available to birth parents,” share Qiang Li and Satpal Gobindpuri, Asia co-regional managing partners at the firm. “We also offer maternity coaching to support new parents.”
Pro bono work is also another perk provided by the firm. “We understand there are lawyers who have expressed their desire to join DLA Piper because of the pro bono work that the firm is engaged in,” they say, adding that the firm is the first in Hong Kong to appoint a full-time pro bono counsel.
“We also have existing lawyers who have said they feel a strong sense of belonging because of their pro bono engagement,” say Li and Gobindpuri. “It also gives them gratification from helping others.”