Features

In the October 2009 issue of Hong Kong Lawyer, we wrote about the legal job market in Hong Kong when we were starting to see the first signs of recovery in both the financial and employment markets. The Hang Seng Index was hovering around the 21,000 mark, bank lending was on the rise and an increase in IPO activity was starting to inject a little bit of confidence and stability back into the markets after months of negativity.

As a result the city’s firms have seen a significant increase in business deriving from Hong Kong, Taiwan, Mainland China and south-east Asia, as well as India and Indonesia, especially in the areas of capital markets, funds, banking, shipping and litigation.

Naturally we expected to see a slow but steady increase in demand to add first class lawyers to existing teams. However, where in some practice areas we have seen significant staff growth at selected firms, others have stalled, choosing to retrain existing resources instead.

Some firms might have been looking to add specialist lawyers but upon realising they could not find what they were looking for, they pulled out of the job market and revaluated their needs. Other firms have seen a decrease in turnover and have chosen to keep staff levels at post redundancy levels. This has lead to an increasingly contradictory legal job market that has become ever more difficult to predict.

Previous predictions

In October, we predicted steady growth in numerous sectors for a variety of reasons. In order to balance the books during the global financial crisis, many firms made a large number of redundancies. Based on the increasing levels of IPOs and financial transactions, we predicted that as the level of business increased, firms would need to consider hiring again to ease the workload of their existing teams. In addition, we suggested that the Hong Kong economy’s customary ability to bounce back quicker and stronger than most would further encourage hiring levels. But we also implied that those firms with robust financials and ambitious business plans would see the global
financial crisis as an opportunity rather than a threat and use it to grow in less ‘traditional’ lines of business, including shipping, restructuring and insolvency, and regulatory, in order to diversify their business.

The current legal job market

The legal job market started stirring from its comatose state at the beginning of 2009 and proceeded to show signs of life towards the end of last year as firms started hiring again. Bearing in mind that Hong Kong typically sees markets grow at an unprecedented rate when things are going well, we actually started to see a major transformation particularly in the capital markets and funds sectors at certain firms. The growth in business levels in these practice groups was so dramatic that firms started vying for the best candidates in the market.

Not only have these firms ‘dipped their toes’ back into the hiring market but they have actually started aggressively competing with each other for the best talent. This lead to the development of a ‘candidate driven market’ where the most sought after lawyers now have their choice of firm in these particular practice areas. This proved an amazing turn around from a few months prior where the message from potential hiring partners was usually something along the lines of – ‘great background, but we’re just not hiring’.

If the growth continues across all practice areas, the ‘candidate driven market’ will become the rule rather than the exception. However, some of the more forward thinking and gutsy firms are stealing a march on their competition and will benefit hugely in the end from taking this approach.

In addition, other markets in the region have also improved, further fuelling competition for the brightest talent. Emerging markets in the region such as Singapore, Jakarta, Bangkok, Mumbai and Mainland China continue to grow and produce fantastic opportunities for the more ‘flexible’ of job seekers.

Private practice

Generally, the private practice market has seen an increase in available job mandates this year. Certainly, the number of legal recruiters has increased and that can only mean firms are hiring again. It still appears to be dependent on how well the firm is set up, their existing footprint in the market and their game plan for growth across Asia. We have seen a trend towards firms only committing to growth in the areas they can accurately predict will grow and this tends to fall into practice
groups where they are strongest.

On the flip side, we have seen some movement in areas where the more ambitious firms, particularly those well placed for growth and with long-term goals, have been able to reactivate their development plans.

Christine Chang, joint managing partner of Maples & Calder (Hong Kong), says: ‘The volatility that we experienced in the market over the last 18 months or so appears largely to have stabilised. It is now possible to start dusting off the long-term strategy plans and look again at headcount. What the global financial crisis reinforced in our thought processes was never to compromise on the quality of recruits. Investing in strong corporate, funds and finance teams paid off as we demonstrated our technical abilities with respect to restructuring and enforcement scenarios.’

In-house

The in-house market has been slightly more predictable, especially in financial services. If the banks are doing well, departments will grow. The market has shown and continues to show a steady growth and the demand for suitable talent is now well under way across the sector.

Salaries and packages have increased and improved as companies compete for the best candidates in the market. Ben Cooper, vice president of In House Legal & Compliance Recruitment for CML in Asia, says: ‘2010 has seen a dramatic increase in movement across the in-house recruitment market. At the moment it is primarily replacing headcount, but we are also seeing growth hires, especially in the areas of structured finance, derivatives and debt capital markets. Compliance is exceptionally buoyant, with the majority of banks, funds and financial services firms looking to hire for an increasingly rare and sought-after skill set, often having to look further afield for roles that traditionally require local experience. The market has quickly become one where high quality candidates are scarce and this, combined with the pay freezes and low bonuses in previous years, has led to a marked increase in the level of compensation for most new hires.’

The fight for top class talent

Admittedly, not all industries and practice areas are competing for new hires; it is safe to say, however, this is the case in most of the growing sectors such as capital markets, funds and litigation. It is also true that some firms are being left behind and suffering from their late arrival back into the job market. There is a misconception that now is the time to start hiring because there is an abundance of great candidates out there. But those lawyers have already secured lucrative moves – that is not to say that no exceptional talent is available – it is just that firms now have to show their commitment by offering above market rate packages.

Most firms have suffered from hiring freezes and salary caps for a couple of years as it affects what they can offer, but it is imperative to catch up and rethink compensation packages to avoid falling further behind.

Threats from home and abroad

People are increasingly transient these days and, more often than not, happy to relocate to other parts of the world in pursuit of a good career move. For some people, finding a job during the global financial crisis proved impossible until they opened themselves up to the possibility of relocating overseas.

In certain practice areas, most notably funds, most lawyers’ skill sets are transferable to other jurisdictions. Subsequently these professionals can work anywhere, which means local firms are not just competing for talent among each other, but also with firms in New York, London, Bermuda, Cayman Islands, Canada, Ireland and Australia.

Hong Kong will always be a choice destination for top talent as the gateway to the rest of Asia and a phenomenal place to live and conduct business, however, when talent from overseas has the flexibility to consider a number of different options and destinations, social issues such as rent prices, general cost of living and pollution become deciding factors.

The possible implications of this, for firms, are obvious. If the talent a firm is trying to attract is tempted to join a competitor in another city then it is not only the firm that misses out but also the other jurisdiction benefits where Hong Kong does not.

Now the dust has settled, new opportunities arise

There is no doubt the global financial crisis has reshaped many companies’ outlook and long-term strategies which also translates into new opportunities. Most forward thinking firms are taking this as an opportunity to diversify into new areas and jurisdictions they typically would have avoided in a more robust market. Some firms are using the opportunity to establish themselves in markets, other than their traditional core business sector, which in turn presents job seekers with attractive alternatives.

Nigel Binnersley, administrative partner of Blank Rome (Hong Kong), says: ‘With the increased activity in the corporate/IPO markets, there are some good opportunities for the more entrepreneurial lawyers in Hong Kong. There are now gaps in the corporate legal market for new suppliers to build a presence in this sector by offering a fresher and more agile approach to a deal. Firms such as ours that are expanding their platform across Asia in the finance and capital markets practice areas can offer a mutually beneficial platform and a fresh challenge to an ambitious senior lawyer.’

Getting the right people

To get the right people, a good starting point is to have robust and ambitious hiring strategies. In order to achieve the strategies and objectives, the right suppliers are needed. It is important that firms looks carefully at who their suppliers are and how they represent the firm in the market to ensure tidy and timely delivery of relevant candidates and value for money.

Here are important points to consider when selecting a recruitment agency:

• Form closer ties with suppliers. Now is the time to pull your recruitment suppliers closer. You must make sure you are happy with their procedures, ethics and that they fully understand you and your firm, where you want to be and why you are hiring.
• Accurate representation in the market. It is a small market and recruiters are a reflection of you so their message must be clear and concise. They must take the time to get to know their product (you) and you must spend the time educating them.
• Be as flexible as you can be on packages. Competition for the top talent is increasingly stiff but no one wants to be pulled into a bidding war. Sometimes being just a little more flexible can show prospective candidate how serious you are and help sway their decision.
• Do not procrastinate. Time spent deliberating over a candidate you ultimately want to offer allows the candidate time to secure other interviews and receive other offers. If your internal procedures allow you to move quickly you should oblige.

Going forward

It seems obvious to say but it is imperative that a firm’s hiring and growth strategies work in tandem to ensure that it is staffed with the best talent available.

In terms of hiring levels, Hong Kong will no doubt continue to be driven by the financial markets that are in turn driven by world events. Companies that did well after the global financial crisis, those that are forward thinking, aggressive and determined to evolve and grow in the region, will continue to hire, albeit at varying paces. They will always succeed in attracting the best talent and not necessarily because of their name and how well established they are, but also because of their
strategies and the opportunities they can offer.

Rob Green
Director, CML Recruitment
r.green@cmlor.com.hk