March 10, 2006
Law Firm Selection Process for Laterals
There are a number of studies that address issues surrounding lateral movement among law firms. Two important sources includeNALP, the National Association for Law Placement, and IOMA, the Institute of Management & Administration.
A NALP foundation survey looked into the issue of why laterals leave and what makes them stay. For managing partners, the important finding is that laterals don’t leave or stay for compensation reasons. At least compensation is not at the top of their list. This finding agrees with IOMA’s report that as far back as 1997, surveys indicated that higher compensation was one of the least important factors in getting lawyers to switch firms. What is number one on their list? It is something that midsized firms are equipped to deliver. It is professional development.
Midsized firms are in an excellent position to give lawyers exiting the mega firms what they are looking. The problem is two out of three lateral additions are turning out badly. Laterals represent a significant source of work-experienced lawyers and, unfortunately, most of the time midsized law firms are not successfully taking advantage of the resource. What is going wrong?
It all comes back to the selection process. It is easy to determine if a candidate has the needed qualifications. When you hire, you have confidence that they “can do the job.” The unknown is “will they” in “this environment” with “these people.”
IOMA points to these mistakes in the selection process:
- The firm relies on the word of a partner that a prospect is a “good catch” and skip normal due diligence. It usually takes 18 to 24 months to move a bad addition out of the firm. Hiring is too important to skip the basics. Partners need to agree on a regimen of steps that must be taken prior to offering a candidate a position with the firm.
- Making room for a good catch. No matter how good a candidate appears to be, adding a new lateral places stresses on the organization. Hire only for pre-defined economic and/or strategic reasons.
- Not doing adequate due diligence regarding the lateral’s expectation of bringing clients with him/her. The mobility of clients is almost always overstated leading to disappointment among firm partners and a drop in expected compensation for the lateral.
Successful addition of laterals is all about the screening process. The former President Reagan’s mantra, “Trust but verify,” fits the selection process well:
- Verify whether the candidate really has the credentials reported
- Confirm the experience listed on his/her resume.
- Understand his/her reasons for leaving the existing firm
- Check with his/her clients and personal references.
- Check with people that haven’t been listed as references that you think should have been listed on their resume
- Do a thorough conflicts check
- Check for complaints, insurance claims, and past investigations of the candidate or former partners.
- Determine the candidate’s financial status and perform a credit history check.
- Identify all of the clients the candidate has worked on, the type of work done, the billing arrangement, the primary client contact, and who at the former firm was the attorney in charge
- Review a multi-year history of billed hours, collected fees, billing rate, write offs and adjustments.
- Is the lateral bringing in additional staff? You must consider each as you would if hiring any new professional employee or staff
You must thoroughly understand the candidate’s current compensation arrangement and level of compensation for a multiple year period. Also, the candidate must clearly understand and agree with the compensation arrangement that will apply following their addition to the firm.
A lateral with a book of business is a small acquisition; treat it as such. Laterals bring their baggage as well as their book of business with them.
The step most often omitted by midsized law firms is testing the candidate in an effort to determine if the individual possesses the characteristics and personality traits that are likely to make them a success in the interviewing law firm. You should test all candidates using a professional testing service or using tools like the Meyer-Briggs typology test (available on the web) in an effort to determine if the individual “will do the job in your environment with your people”. If, like most firms, success in business development is a requisite skill, your test should also be targeted to determine the presence of personality traits conducive to relationship building and business development.
IOMA published the “Complete Guide to Lateral Hiring & Integration Best Practices for Law Firm Leaders” in 2005 containing case studies of actual practices in place at selected firms. It also includes an appendix containing the Lateral Recruitment and Due Diligence Checklist used by Sullivan & Worcester, LLP when pursuing a lateral addition at the partner level. Page 44 of the guide includes a test used by some firms for evaluating whether a candidate will make a good fit for their firm. Pages 48 and 49 include critical interview questions as well as a reminder of the questions you should never ask. For the firm without a track record for successfully recruiting and assimilating laterals, the publication is well worth its $299 cost. Another source that warrants your interest is the numerous articles written by Joel A. Rose of Joel A. Rose & Associate, http://www.joelarose.com and particularly his article titled A Primer on Due Diligence for Acquiring / Merging with Lateral Hires.
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
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Filed under HR by Tom Collins