The Lateral Hire. Hero or Zero?
Every law firm is talking about the effect of alternative business structures. How will new money affect old ways, and what difference will it make, to whom and how.
At the same time firms are rightfully concerned about their own profit levels and associated increasing client expectations.
The traditional response to patchy levels of work is to rely on the counter-cyclical elements of a full service law firm: if Corporate and Real Estate are down, Insolvency and Litigation will pick up the slack. This recession is different. Banks have been cautious in forcing companies into liquidation both for political and economic reasons. If the assets are a liability, a bank does not benefit by owning them directly, and may in turn anger its new government shareholders.
In the face of these unexpected market conditions firms have therefore decided to concentrate on sectors or even geographies where growth will be more likely. This in turn lead to a desire to hire the right lateral partners (i.e the ones who fit with the new strategy), and fire the wrong ones. The wrong ones are a combination of partners whose practices no longer fit, and partners who are no longer fit to practice in the New World order. A harsher edge has emerged.
Lateral hires are hired to fit together like lego bricks, bringing in complementary expertise as well as building up the existing core. But does it work? Laterals fail at an alarming rate. in October 2011 Mark Brandon of Motive Legal produced an excellence piece of research showing just how few laterals succeed. http://www.motivelegal.com/wp-content/uploads/downloads/MotiveLegal_LateralPartnerMoves2.pdf . Looking at 1944 lateral partner moves in the period 2005-2010, he discovered that about a third left by the 3 year point and almost half (44%) had left the receiving firm after 5 years.
What can firms do to prevent this happening? The success of a lateral hire depends on both the lateral and the receiving firm.
The lateral is often ill-prepared for the harder edged culture of the recession-hit firms who have decided that laterals are the answer. It's not a soft and collegiate world. Laterals need to be very clear about expectations, resources and timeframes. A hiring firm may talk about long term investment, but once the lateral arrives monthly partner financial reports send a continuous stream of concern to other partners. A lateral has to quickly find friends and influence them.
The receiving firm is also to blame. The firm can tell the potential lateral one thing and the incumbent partners another. There is often very little practical feedback and support in the initial stages, and often a general resentment from the firm's less-successful (and often senior) partners that the lateral is sucking work from existing partners. Whilst the lateral knows what they are supposed to do - and are committed to it - there is rarely a matched urgency and drive amongst the incumbent partners. Promises to arrange client lunches and coffees often fail to materialise.
A more detailed critique of the anatomy of failure (and what to do about it) is in the associated white paper. The problem is a cultural one. Just as seed can only be successfully sown in a field prepared to receive it, so too can a lateral only thrive in a firm who are set up to host and integrate lateral hires. A good question might be "How long have your laterals lasted?" You could also ask your laterals what the firm could be doing more of/less of to increase the ease of integartion and speed to full performance.
A firm that keeps laterals but does not integrate them may be in a worse position. Lateral hire partners were marketable because their client base was portable. Without integration, their client bases will stay semi-detached, and the firm will become a bazaar of sole traders, hawking their wares to passing clients but jealously guarding their own turf. Not sector-focused but just geographically co-located.
