Data: Keeping it real
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Retention rates are a good way of gauging a law firm’s success, but only if you know how to cut through the spin and decipher the figures
Each year aspiring lawyers are flooded with law firms’ latest newly-qualified (NQ) retention rates. The figures are represented as percentages and are calculated by the number of qualifying trainees that accept roles in law firms following the completion of their training contracts. But why are these results important?
In short, retention rates can be indicative of a firm’s growth and sustainability. For example, if a firm has no NQ positions available in a particular department for the coming year, it implies that the practice area is not generating enough work to justify the additional overhead costs.
However, an NQ retention rate must not be taken as a standalone figure, but looked at in the context of the firm as a whole and the state of the legal market. Neither should it be used as the determining factor in your choice of firm, as it is just a small part of the bigger picture.
Bear in mind that only five years ago Lawyer 2B reported that the now-defunct Halliwells kept on 100 per cent of its NQs. Indeed, the Manchester-based outfit’s demise was partly a result of the financial crisis, which saw many other firms defer trainee start dates.
When looking at NQ retention rates you need to consider how the figures are calculated, where they come from and why they have come about.
The figures are influenced by a number of factors, such as the firm’s qualification job offers, the number of positions available in each department and the trainee’s own opinion of the firm they have spent the past two years training in.
Along with the NQ retention rate, a firm will often provide its offer rate and occasionally the number of seats available in each department.
You should be wary of statistics being bandied around, as firms often make up their own rules on how to calculate retention rates, so you may not be getting the full picture. For example, if a law firm provides the acceptance rate against the number of trainees that chose to apply for NQ roles, rather than the total number of qualifying trainees, it can give a warped picture of the NQ retention rate.
Alternatively, graduate recruitment teams might provide only the offer rate and not how many NQs actually accepted positions. The offer rate can provide an idea of how the firm values its trainees, but if the acceptance rate is a lot lower it might be worth questioning why a trainee would turn down a position in a pretty shaky NQ job market.
If a trainee decides not to accept a job offer, often it is because they did not get their seat of choice or were offered the seat but in another country.
If a trainee chooses not to apply for an NQ role, it could be to do their own experiences at the firm. They may have had a low level of responsibility, a bad relationship with colleagues or generally clashed with the firm’s culture.
However, it could be something as simple as relocating to be with a partner or family, or deciding to move to a more intimate law firm on the high street.
Since the recession, many firms have been announcing their qualification job offers late, and autumn 2012 was no exception.
This year, there are some larger qualifying trainee cohorts due to a knock-on effect from the deferrals that took place in 2009 and 2010. With that in mind, there is a good chance that retention rates will be lower in percentage terms as it is unlikely that even a very profitable law firm could justify keeping on the additional NQs.
Overall NQ retention rates in the top 20 firms, which typically have larger cohorts, are lower than for autumn 2011, with only two firms achieving above 90 per cent, while last year six posted 90 per cent and above.
Of the magic circle firms only Allen & Overy experienced a rise in retention, from 72 to 79 per cent, while Clifford Chance, Linklaters and Freshfields Bruckhaus Deringer retained 77, 78 and 89 per cent respectively, compared with 83, 93 and 96 per cent last year.
However, each of the firms’ trainee cohorts for 2012 were noticeably higher compared with 2011.
For example, in 2011 Clifford Chance retained 43 out of 52 trainees, compared with 48 out of 62 this year.
Elsewhere in the top 20, usual frontrunner Slaughter and May has dropped down the table after posting an 87.5 per cent NQ retention rate, dropping from 100 per cent last year. The firm kept on 42 out of 48 qualifying trainees, compared with 59 in 2011.
DLA Piper’s figures were also down on last year, posting an NQ retention rate of 83 per cent after 75 out of 86 trainees accepted NQ roles at the firm. In September 2011, the firm retained 90 per cent after holding on to 69 out of 77 trainees.
Ashurst and BLP’s results were lower than in September 2011, when the firms achieved 93 and 95 respectively. However, CMS boosted its NQ retention rate slightly after posting an 80 per cent rate in September 2011.
It is important to remember, however, that firms posting 100 per cent retention rates often have smaller intakes. Take Farrer & Co and Howard Kennedy, which both achieved a 100 per cent retention rate by holding on to all of their trainees, keeping 10 and 4 respectively. Law firm giant Linklaters’ 78 per cent will see the firm retain 51 NQs.
Reported results from further down the UK 200 table suggests that retention has risen overall, with 11 surveyed firms reporting a rise against four reporting a fall. However, with firms perhaps being more likely to report positive rather than negative results, this needs to be taken with a pinch of salt.
The lowest reported retention in this qualification round came from Scottish firm MacRoberts, which kept just two of its 11 trainees, or 18 per cent, blaming the result on “high retention the previous year and the fact that market conditions continue to be challenging in many sectors”.
With many firms recruiting trainees four years in advance, calculating how many NQs will be needed is a constant challenge for graduate recruitment teams. How a firm’s retention will progress and the effects of the changing economy on that rate is an even more difficult task for an applicant.