Three Overlooked Elements in Law Firm Lateral Hiring Analysisaderantuser
The promise of lateral hiring is accelerated growth. For that reason, hiring more laterals consistently ranks among the top law firm growth strategies.
A recent study published by Robert Half Legal found that nearly a quarter of lawyers surveyed said their firms “will increase its hiring of partner- or senior-level attorneys in the next two years.” In addition, more than half of the attorneys in the survey believe lateral hiring was “very effective” or “somewhat effective.”
The lateral hiring rationale is straightforward: convince a leading lawyer from another firm to join yours and bring their book of business. It’s a category of growth that looks great on paper but is far more challenging to achieve in practicality.
“Inflated expectations are a sure fire way to transform an appealing plan into an expensive mistake.”
Why? Because most laterals are either oversold or the expectations are simply not realistic. In fact, our internal research suggests that unrealistic expectations are the biggest misstep law firms make in pursuit of laterals. Inflated expectations are a sure fire way to transform an appealing plan into an expensive mistake.
Clients, for example, have the deciding vote in whether or not they move legal work with a lateral. At the same time, law firms are working hard to strengthen client relationships – making client accounts sticky – in order to reduce the risk of that happening.
None of this means that lateral hiring isn’t a viable strategy. Instead, it means it is a growth strategy with inherent risks that should be addressed prior to hiring a lateral with a thorough analysis.
Here are three overlooked elements we routinely observe in the lateral hiring decision process.
1) Ensure laterals hiring meets a strategic purpose
Wall Street dealmakers strive to avoid falling in love with a deal and for good reason. Passion or personal interest can cloud judgment and lull business into fruitless transactions.
A similar notion is at play when law firms fixate on hiring a lateral or a group of laterals based on a gut feeling. This only serves to increase the level of risk assumed.
A better approach is to analyze the law firm’s business and identify a clear strategic purpose for lateral hiring. Is the purpose of laterals to grow a new practice area, strengthen an existing practice area or break into a new geography? What does the firm really want to achieve with a lateral?
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2) Benchmark lateral hires performance metrics
Before hiring new laterals, a key question law firms should strive to answer is: What is our lateral hiring track record? In this context, past performance can be an indication of future results.
We recommend firms forensically review lateral benchmarks. For example, did that lateral or group of laterals meet the first year objectives?
Baseline metrics include revenues, billings, production and the number of net new clients brought to the firm. It’s important to analyze not just the working metrics of an individual attorney, but also the collections they are responsible for managing.
In addition, firms should examine how laterals continue to grow a business rather than just the book that may or may not have followed. This means, for example, looking at new matters opened, the frequency with which they are opened, and whether or not that work is shared or siloed.
Tools like Aderant Spotlight Analytics, a business intelligence application, are very useful for such quantitative analysis. The software enables law firms to track some 200 key performance metrics in support of lateral hiring, including billing, revenue and collections.
3) Analyze the cultural fit
For all the above discussion of the quantitative, lateral analysis should also include the qualitative. This means comparing the culture of the gaining firm and the losing firm alongside the adaptability of the individual attorney.
For example, some law firms are known for a collegial environment where others relish an “eat what you kill” culture. The latter will likely find it is better served by hiring a rainmaker rather than a technical legal expert. On the other hand, that technician is likely to be a better fit for a law firm seeking to fill a skill or practice area gap.
In culture, the firm size and environment are factors to consider as well. A lawyer moving from a firm with just 20 partners to a firm with 700 partners may experience culture shock in grappling with the many systems and tools for collaborating and getting legal work done. Likewise, an attorney in a big firm moving to a smaller firm may be surprised by the apparent lack of support systems.
This is a critical part of the analysis beyond just the “fit” because too many lateral hiring mistakes may disrupt a law firm’s existing culture.
Lateral Analysis is Just the First Step
A systematic analysis of lateral hiring is just the first step in executing on a plan to use laterals to drive law firm growth. This examination focuses on thinking through the potential pitfalls in lateral hiring and building a business case for mitigating the risks.
In our conversations with law firms, we have observed the most successful lateral hiring programs also develop a clear plan for integration and support after a lateral has joined a new firm. Law firms should develop a blueprint for how it’s going to help laterals get to where they need to go – the expectation may be for the book of business – but the ultimate goal is growth.
Note: Don’t forget to register for our complimentary webinar series: Analytics in Action: Lateral Hiring. The third in the three-part series is being held on October 13, 2016 at 2:00 p.m. EDT. Recordings of the webinar will be made available – so register for notification.
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