October 12, 2005
Lateral Hiring of Partners by Law Firms
There are business reasons for lateral hires but it isn’t a piece of cake.
Lateral hiring of a partner is a mini-acquisition, fraught with many of the same problems. Phyllis Weiss Haserot, President of Practice Development Counsel reported that 40% of new partners have now come into their firm as a lateral hire. I find that amazing considering the difficulty of making a success of a lateral hire. But I have no reason to question her 40%. In fact, I would say that if you want to find out how to be successful with lateral hires, she and her Web site www.dpcounsel.com are one of the best sources around.
Acquisitions and lateral hires are not always winners. At the partner level, lateral hires are usually “book of business” deals. Law firm’s aren't just hiring talent; they are acquiring a new book of business. Like any acquisition, there should be some motivation other than just getting bigger. The deal should be a part of the law firm’s strategic plan or at a minimum consistent with it:
Movement into a key geographic market place
Expansion into a new or adjacent practice area
Acquisition of strategically important key clients
Continuity issues—addition of a future firm leader
Addition of cross-selling opportunities
For dominant market share
There are a lot of train wreck hires that sounded good but jumped the track early.
- The ability to move clients is usually over estimated.
- Acquired clients with cross-selling needs already have someone meeting those needs so cross selling is not as easy as might be expected and, at best, takes far longer to realize.
- You know what you know, and moving to a new practice area may only look like greener grass.
- In today’s environment, key clients have less loyalty to a particular firm or attorney.
- The new hire grew into partner material in a totally different environment and is likely to resist changing to become one of the team. Likewise, the team has worked hard to get where they are and are going to be skeptical and judgmental of the newcomer.
- You face the risk that you have added a “problem partner” or one with “bad habits” that will be disruptive or even divisive.
- The addition requires a significant investment on the part of existing partners:
- It takes time, usually six months, before the firm can expect collections to begin to fund the additional cost.
- Initially non-productive cross-marketing investments and efforts negatively impact exiting business and productivity.
The risk is great enough to be cautious. The firm without prior experience should approach lateral hiring slowly. Several laterals in a short time period can easily turn into a losing “bet the firm” move. Carry out due diligence. Check references, have an extensive background check performed, talk to ex-partners and employees of the lateral’s existing firm, talk to the lateral’s clients, etc. Even then, add laterals only under a two- or three-year probationary plan. Either party can walk away. Don’t underestimate the investment existing partners will have to make. There must be multiple partners who own the deal and are determined to make it work. Without mutual ownership, mutual destruction is more likely.
When adding someone new, I ask the following questions:
Can they do the job?
Will they do the job?
In this environment?
With these people?
I know from experience that the "in this environment" and "with these people" questions are the hardest answers to determine in advance and are critical to success. That holds true for lateral hires. If they come aboard to play by their rules, not your rules, and/or don’t fit the existing personality of the firm—that addition is going to be unpleasant and unprofitable for all.
Related posts
Filed under HR by Tom Collins