The Lateral Race – or is it Chase?

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Manzama Maven, Eric Dewey, discusses the changing dynamics in lateral recruiting and discusses ways to improve lateral recruiting performance

I recently read an article in The American Lawyer entitled How to Hire a Home Run Lateral? Look at Their Stats! which described how law firms are beginning to use billing data, court records, personality tests and other sources of data to build a model that can predict the success of lateral partners in a new firm, comparing the process to the methods highlighted in the movie, Moneyball. Considering that the “success” rate of laterals hovers below 30% (according to a study by Group Dewey Consulting and ALM Legal Intelligence entitled, Surmounting The Lateral Partner Hiring Challenge. Lessons Learned, Best Practices and Tools for Success), it is no wonder that law firms would seek a way to improve their investment returns. However, the process described in the article leads us to think law firms are making the same false assumptions they make when they hire attorneys based on the highest law school rank and academic performance, but expect them all to be strong business generators.

It is clear that the financial investment to grow by lateral acquisition is substantial, topping $1 million per attorney on average when all of the costs associated with the move are included – yet, 70% to 80% of lateral partners don’t break even within their first full year in the new firm. Moreover, unproductive candidates sap a firm’s investment account, pose significant risk for firm morale and can erode a firm’s reputation as well. And laterals that don’t work out leave indelible impressions for future candidates.

It Begins with Strategy Confirmed Through the Right Kind of Due Diligence

The best way to improve lateral recruiting performance is to avoid making bad hires in the first place. That requires a well-developed strategy, a clear understanding of what the firm is looking for and a thorough and effective due diligence process to confirm those qualities. It requires candidates to be evaluated on more than their legal skills and personality fit, but also requires a careful assessment of the candidate’s client following and their ability to replace client work that doesn’t end up following them. The process, not surprisingly, starts with identifying the right candidates.

The firm must engage in a needs-assessment or business-planning exercise to determine which geographical areas, practices and/or industries are in growth mode. From this assessment, the firm will know the types and locations where experience and expertise are needed. Manzama can help a firm to identify trends and to monitor the movement of partners from firm to firm. While it is never advisable to make decisions about lateral hiring simply to “keep up with the Joneses”, it is highly instructive to do this type of competitive intelligence during the diligence phase. In addition, Manzama can help to identify experts or thought leaders in specific areas. Simply by monitoring the applicable topical areas, the system will reveal who is speaking, writing and working in those areas.

Once potential candidates are identified, it would appear that firms are not paying attention to what many would consider the most important selection criteria. The ALM/GDC study confirmed that assessing the dynamics of the candidate’s client relationships, the candidate’s business development skills or their managerial and leadership abilities was not an important part of the due diligence process. Does this strike anyone else as a little odd?

The dynamics of the client relationships are not difficult to observe. Firms can develop a perspective on which clients will move simply by talking to the candidate about their relationships with their top clients. There are ‘markers’ in attorney / client relationships that indicate client loyalty and company entrenchment and, as such, help predict client mobility. These markers can be identified without speaking directly to clients (although in the U.K. they routinely get around this ethics challenge). The key is to understand what those markers are and how they influence the client’s decision.

So who best to conduct this business case analysis? Lawyers have held tightly to their role in assessing lateral candidates and have resisted inviting non-lawyers into those discussions. But this may need to be reexamined. The business development and marketing professionals in the firm, along with outside consultants, may actually be better suited to assess lateral candidates’ business development skills and their client relationships. They should be embedded in the selection process early (even weighing in on strategy) and continue their role throughout the integration of candidates.

Eric Dewey is a principal with Group Dewey Consulting and is the Co-author with ALM Legal Intelligence of Surmounting the Lateral Partner Hiring Challenge. Lessons Learned, Best Practices and Tools for Success. He is the former chief marketing executive of several large law firms and consults law firms and lawyers in business development, marketing strategy, lateral hiring and opportunities research. He can be reached at eric@groupdewey.com.

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