LATERAL PARTNER RECRUITMENT: The New Competitive Challenge

By Jean M. H. Fergus
American Lawyer, January/February 1999

For better or worse, law firms are reshuffling their partnership decks to meet the demands of a growing global marketplace. U.S. and U.K. law firms today rely on lateral partner hiring as a tactic to ensure firm stability, enhance practice capabilities and increase firm profitability. Every day, law firms are proudly announcing the addition of a key lateral partner or partner group.

To say times have changed is an understatement. In the not too distant past, lateral mobility was relatively nonexistent. In fact, when a partner left a law firm, speculation arose as to what he or she had done wrong. As mobility increased, the stigma shifted to the law firm, with questions asked as to why the law firm could not keep its partner talent. Today, however, lateral partner movement is a commonly accepted phenomenon.

The new challenge for those firms that are competing for partner talent in the global marketplace is how to attract key partners from competitor firms. To do so effectively, it is necessary first to understand why partners leave their firms. This is important from the standpoints of recruitment-how a firm attracts the partners it wants-and management-how a firm keeps these partners once they've joined.

Why Partners Leave
The key motivators in the current domestic and international marketplaces are platform and management.

As the world has gotten smaller, partners in certain practice areas are recognizing that their horizons have gotten bigger. These partners are eager to gain access to new clients with global needs that will afford them greater professional satisfaction. Other attractions include access to practice areas that are nonexistent at their present firms, enhancement of prestige by either moving to a firm with a "trademark" name or assuming a greater role within its hierarchy, or exercising more control and responsibility over their department's direction. The lateral marketplace now offers opportunities for these partners to reach their goals by moving to better-positioned firms.

Dissatisfaction with management remains a significant motivator as well. Weak or poorly managed firms lead many partners to consider other options. Contrary to popular thinking, partners rarely leave their firms solely because of money. However, partners want to realize an appropriate return on their "intellectual capital" -- their time, energy and skill -- in much the same way they would look to other business investments. Fiscal health is a primary responsibility of firm management, especially in order to take advantage of opportunities in the global marketplace.

However, a delicate balance is required to maintain both profitability and the firm's cultural environment. Firm management must be sensitive to the institution's historic cultural values. A too-sudden shift will create internal conflict resulting in the departure of partners who do not share the new set of values. In Zen terms, these partners are no longer "at one" with the firm.

One recent four-partner defection from a top New York law firm underscores this reality. These partners were well compensated and well positioned within their practice area but the firm management had changed to a more aggressive, bottom-line approach which was inconsistent with the firm's previous set of values. During my discussions with them, they articulated this by saying the firm was less collegial than it had been when they were elected to the partnership, although the firm itself had become more profitable. They chose to move to a firm with a lockstep system of compensation which, they felt, assured a more team-oriented environment.

Attracting The Best Lateral Partners
On both sides of the Atlantic, the methods of lateral partner recruitment have undergone significant changes. Many U.K. firms are relatively new players in the lateral partner recruitment market. Hiring partners from competitor firms was just not done, not at least openly. Using the technique traditionally relied upon for the hiring of junior solicitors, U.K. firms paid recruitment agencies to place ads in legal publications announcing a firm's interest in a partner candidate that fit a specific profile. In this way, firms could argue that they had not called the partner, he had called them. However, the effectiveness of these hit-or-miss ad campaigns has been called into question. Advertising tends to pull in only those partners who are already unhappy and shopping for a new firm. The best partners are just too busy to read ads or to respond to them. Increasingly, U.K firms are following their U.S. counterparts in relying on the discreet and targeted approach of legal search consultants.

In the U.S., law firms utilize legal search consultants to help them hire partners and partner groups.

Law firms routinely retain the search services of an experienced consultant, giving the search consultant confidential information about the firm's strategic goals while placing their own partner talent "off limits" to the search consultant's other clients. In this close pairing, the search consultant becomes an important tool in helping both to devise a law firm's hiring strategy and to implement it effectively.

By using a targeted approach to lateral partner hiring, U.S. firms avoid some of the pitfalls associated with a more opportunistic method. U.S. firms found that waiting for a partner to call directly or waiting for a search consultant to call "marketing" a lateral partner was not sufficient to meet their growth needs. The drawback was that the partners in the market for another firm affiliation tended to select only the firms they or the search consultant knew and excluded those firms with which they were unfamiliar. Many firms found that they were a day late, only learning about a key partner's availability when they read in the legal press of his joining another firm.

Rather than waiting for opportunity to knock, U.S. law firms now do the knocking, targeting key partners with practice skills that fit in with their overall growth needs. Here the role of the search consultant is invaluable. Sitting down with the firm management, the search consultant can help formulate a plan to address their long-term goals.

As part of implementing this plan, the search consultant undertakes a market evaluation, identifying the key partners with the practice skills required, along with an analysis of how these partners are compensated and the likelihood of each candidate's potential interest in the opportunity offered by the client firm. This enables the firm to place candidates in a competitive context where their practice skills and other attributes can be compared with similarly situated candidates.

The candidate pool is then carefully whittled down to a handful of targeted individuals. The search consultant works with the law firm to fine-tune an appropriate message tailored to the individual's particular situation. This further benefits the firm by assuring that only those partners the firm deems appropriate will hear their message, reducing the risk of confidential strategic information entering the marketplace. Indeed, we have conducted searches where the candidate pool consisted of just three qualified partners.

During the candidate approach stage, the search consultant will draw out important questions and concerns the candidate may have and seek to address them with the client prior to any face-to-face meeting, thus eliminating "paper fits" that are unlikely to satisfy the client's or candidate's needs.

The Right Fit
During the interview process, both sides should take time to evaluate their own strengths and weaknesses. It is in everyone's interest to minimize the risk of making poor hiring decisions. Figuratively sitting on the same side of the negotiating table, each should candidly discuss what they have to offer and what they expect from the other.

The importance of hiring a partner who will fit in with the law firm culture cannot be overemphasized. Firms, as well as people, have their own personalities. There are many examples of mismatched marriages of partners and law firms. I recall the fallout after a very staid New York law firm hired a very high-profile litigation partner with a well-known volatile personality. He left after two years to join another firm. The firm then threw itself a party to celebrate his departure. However, I could not help but wonder how this happened. Did they overlook the partner's personality because of his substantial business base? Or did they lack the finesse to effectively manage a high performer? The partner's ultimate failure was also their failure.

Due diligence on client conflicts and billing history is standard protocol. More frequently, additional due diligence includes personal and professional references on the partner being hired. The search consultant is useful in putting together these reports. References should include former partners, former associates and other partners in the same practice specialty who have worked with the partner candidate. This information is important not only to support the firm's nomination process, but it also is an important tool in managing the new partner once he or she is on board. Also, the firm should make an inquiry of the bar association to check for any disciplinary action involving the potential partner and to verify bar status.

Integrating The New Partner
The real test to a successful lateral partner addition comes after the partner has joined the firm. Lateral partners need to be managed in a different way from the homegrown variety. These lateral partners have been part of another firm and have a basis of comparison that non-laterals lack. And they have already determined their threshold of commitment. Three years ago, we analyzed lateral partner retention of New York law firms over a ten-year period and found that one-third had left their firm. The saying "lateral in, lateral out" is truer today than it was then. One very high-profile New York corporate partner, now at his fifth firm, is rumored again to be on the market.

Cooperation among partners is key to the integration of the new partner. The law firm should ensure that prior to bringing in a new partner, the partnership has reached a consensus that this person is valuable to the firm and all agree to help in his or her success within the firm. Those law firms with a history of lateral partner recruitment have somewhat of an advantage here.

The law firm should recognize the difficulties the new partner will have in his or her own transition to the new firm. Studies have shown that a person making a career move can suffer as much as a year-long period of disorientation. He or she may miss the old office, its routines, and other personal ties established at the old law firm. The firm should make an extra effort to put the new partner on firm committees, seek his or her input on decisions, and involve the partner in social and professional events. A periodic check on the new partner's progress is helpful in making the new partner feel valued.

Benefits Of Lateral Partner Recruitment
Lateral partners and practice groups offer many benefits. They can bring in new ideas, new practice expertise, new clients, and new energy. They force a firm to look outside itself and appreciate the talent in competitor organizations. They can bring a firm greater stability as firm revenues grow and its practice base diversifies. They can enhance a firm's prestige and reputation in a key practice area. They can help attract other lateral partners.

Yogi Berra, the great New York Yankee baseball player, may have expressed it best: "The future," he said, "ain't what it used to be." U.S. and U.K. firms have awakened to the opportunities lateral partners offer a firm. The competition for these key additions is intense and will continue as such into the next century. The challenge for law firm managers will be to attract, motivate, and retain these highly mobile assets.

© 2003 Fergus Partnership Consulting Inc.
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