Lateral Hiring Addiction: Can Law Firms Wean Themselves?

Topics: Client Relations, Lateral Hiring, Law Firms, Leadership, Midsize Law Firms Blog Posts, Talent Development

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Against serious odds, I am about to suggest that most law firms should seek “recovery” from their partner hiring addiction.

It’s a phenomenon that has grown from a miniscule consideration in the early 1980s to the key marketing strategy in perhaps the majority of firms in the last few decades.

It seems unstoppable. But has it been a successful strategy or a self-defeating one?

According to a 2016 study by ALM Intelligence, a majority of lateral partner hires bring in less business than promised and don’t meet firm expectations. Yet like confirmed gamblers, firms continue the pursuit. At last some are using performance analytics to try to determine who is paying off and who is not.

What do firms stand to lose from this addiction?

Morale, cultural stability, client relationships, perceived consistent brand and valuable talent — all having a negative impact on firm finances, especially if the lateral has scored a lucrative signing deal (usually up to two years).

And what do lateral hires stand to lose?

Disruption of their business when they need to make another move, loss of unhappy clients they brought to the new firm, damage to their reputation and prestige when the news gets out of their lack of success.

Why is the weaning so difficult?

  •        Firms are prone to inertia in the competitive chase they hoped would prove successful if they just gave it another try. (Again, sounds like the confirmed gambler, right?) Every time they score with one lateral, they believe all over again.
  •        It seems easier than developing and nurturing younger talent, though that would actually cost less and help maintain a cohesive firm culture. They are miscalculating the risks and misjudging the comparative job-hopping probability of ambitious associates and free-agent-minded lateral partners.
  •        They view grabbing lateral partners with a client-base and reputation to be perceived by the marketplace as a sign of growth and a strategy for the future — when it might be the opposite. And it may be viewed by the rising generation of senior associates and junior partners as potentially blocking their opportunities for promotion and leadership.

Recovery Tactics — Shifting to More Reliable Options

What could firms do better?

  •        Improve the lateral integration process, whether a group, a partner or associates;
  •        Analyze the reasons for the lateral acquisition failure;
  •        Execute more and better cross-selling with accountability and follow up; and (most importantly);
  •        Place meaningful focus on developing and retaining talented younger professionals — from smarter hiring to orientation to training, with special attention to mentoring, coaching, sponsoring and learning what retention strategies work for generation cohorts and individuals.

Realistically, I know most firms won’t abandon their lateral acquisition tactics, and sometimes they make sense for plugging holes in otherwise well-thought-out growth strategies. In any case, law firms need to be clear on their goals and which alternative strategies will best lead to fulfilling those goals. They need to weigh short-term vs. long-term goals (the playoffs this year vs. rebuilding for the future).

Conducting Lateral Success Analysis

Some firms are adopting performance analytics. For example, Littler Mendelson created its own software to predict likely return on investment (ROI) on the laterals it hired, and also gain insight into whether they are likely to stay or jump-ship for other opportunities. (After the first move from an original firm, lateral moves seem to get easier.) Overseeing this process is Zev J. Eigen, Littler’s global director of data analytics, a data scientist with a Ph.D. from MIT. He looks at relational data to predict the lateral’s cultural fit.

In addition to innovation within law firms, there have been new innovations introduced elsewhere such as tools that enable firms to track metrics, including hours, billing, revenues, expenses and profitability so firms can see what’s working and who is responsible.

Perhaps it’s too soon to know if relying on these numbers is the answer to reducing disappointing results with lateral acquisition. However, incorporating data and focusing on talent development and management are useful steps and ones that clients would likely encourage.

Data analysis is only one part of the equation, however. Think about what revered baseball great Derek Jeter said in a recent interview about his entire baseball career with one team: “That’s the thing I appreciate the most, because it’s the only place I’ve ever wanted to play. When you’re in it, you don’t really think about it too much because you just come to work and do your job. But after I’ve retired, I’ve realized how special that’s been.”

Then look at the numbers.