We’re coming up on the one-year anniversary for Dewey & LeBoeuf closing its doors … a move based in large part on a lack of understanding for the business of law and a glut of lateral hires with guaranteed contracts. A few weeks after the bankruptcy filing for the once-prominent firm, I moderated a panel on law firm strategic growth plans. Going into the discussion, the Dewey news and gut instincts led me to believe large law firms would become much more conservative in their approach to lateral hiring. My instincts turned out to be misguided.
Reality is running contrary to expectations. Get on the internet and explore any of the surveys done in the U.S. and abroad: lateral movement continues to rise at accelerated rates. Almost every law firm is pursuing growth through individual or team lateral hires; organic growth is falling well behind in large law expansion strategies.
Since so many law firms are adopting the lateral approach, they must be enjoying a tremendous success rate with bringing on new partners this way. That’s likely another assumption without a basis in reality. More than one-third of laterals will leave their new firm or be released within a five-year span. On top of that number, add the laterals and groups that are underperforming expectations but haven’t left … yet. You’ll find your failure rate climbing close to the 50 percent mark.
Which brings up the key question: Why? Like most business of law answers – in matter management, pricing, partner compensation, and other fundamental areas – the answer often lies at the beginning of the process. Simply put, law firms do not do a good job building a solid business strategy or process around lateral recruitment and talent management.
In my experience, many lateral hires occur as knee jerk reactions to changes in the legal marketplace, which causes a chain-reaction of ill-conceived steps:
- A focus on short-term opportunistic factors … instead of extensive analysis into firm growth plans and cultural assessments to help new partners succeed in their new environment.
- A default to out-of-touch recruiters and obsolete methods for identifying lateral targets … instead of a data-based recruitment process vetted with the senior firm leadership team.
- A “sink or swim” shove into the deep end of the new firm … instead of a detailed onboarding process that gives laterals proper guidance and a clear understanding of key success criteria.
Given the costs associated with recruitment and retention – and the negative client and public fallout from a failed lateral – you would expect firms to devote more effort to creating a clear and proven lateral strategy and engagement process. Having a rock-solid starting point is essential if you want growth to occur in a way that benefits the firm and its people in the long run. Every other component of hiring and recruitment is completely secondary.
We’ll look at more of these topics over the next several weeks as a way for you to build a more effective and thoughtful lateral acquisition strategy. Look for Part 2 of the Lateral story soon.