Law firms should approach every hiring decision with a focus on asking the difficult questions about external and internal relationships.

As a search company, research we have undertaken shows that almost 70% of lateral hires do not meet the full expectations outlined in their business plans over the first year. Other recent research suggests that 20% of partner hires leave their new firm after just one year and up to 50% within five years.

As the legal profession starts to recognise this underperformance/over-expectation issue at partner level, it also appears that firms are beginning to do something about it. Historically, lateral partner agreements were agreed on the basis of trust and a handshake; fine sentiments but they do not in any way a guarantee that expectations for either hirer or hiree will be met. We have found that over 50% of the top-50 UK law firms are now using an external due diligence provider, and over 70% of US practices operating in the UK and mainland Europe have done the same.  

Generally, lateral hires fail for one of two reasons:

  • The hiring firm fails to accurately establish whether the prospect is genuinely ‘who they say they are’ specifically in relation to client relationships, management abilities and style, cultural affinities, business development/‘rainmaking’ ability, personal characteristics, previous track record and personal reputation.
  • The hiring firm fails to deliver on its side of the bargain by not offering a planned and structured partner/client integration process.

A thorough due diligence process should examine two fundamental areas:

  • External relationships (clients, referrers, peers, etc).
  • Internal relationships (managers, peers, subordinates, team members etc).

If we look at this more closely, there are a range of criteria which need to be investigated via a due diligence process in order to shed light on whether a prospective partner hire is a viable one:

Is the candidate misjudging their following (in terms of clients and value)?

In 17% of the business plans we review the probability of clients following the partner concerned have been materially overstated. Whether this is deliberate or not this inevitably causes problems down the line when expectations are not met. Interestingly, we have also seen that in 15% of cases a following has been understated – although not so problematic this is worryingly reflective of a lack of understanding about personal client relationships.  

The right offering for the transferred client

A thorough due diligence process should not just focus on whether clients will remain loyal to the travelling partner but, just as critically, whether these clients can be safely integrated and embedded into the new firm.

An overall match

The hiring firm should question whether an individual will fit in with its culture and people; exploring these more subjective criteria such as management styles and personal characteristics through current and previous peer references as well as professional references. As such, it is as important to achieve the right subjective match with regard to personality profiles and internal relationships as it is to understand the external client relationships.

The key to a successful lateral hire

  • Firms with good track records in lateral hiring find a way to ask the difficult questions. They do everything they can to acquire as much of the relevant information (regarding external and internal relationships) as possible.
  • Support hiring decisions through a proactive planning approach with ability to flex plans as and when challenges (or unforeseen events) occur.

The right questions

Law firms should approach every hiring decision with a focus on asking the difficult questions about external and internal relationships – only by asking these difficult questions can you properly test the business plan, thereby reducing the risk of failed hires and greatly increasing the probability of a fully and successfully integrating new partners.

Clients often ask for a focus on client/referrer relationships, business development ability, personal and professional characteristics, technical ability, management experience and profile/reputation in the market. It is, as such, critical to have insight into all of these areas in order to fully inform a lateral hire decision.

Finally, law firms should only use a due diligence process as one of a number of decision-making ‘tools’. In this way, a well researched and comprehensive due diligence report should not be used in isolation but instead will inform and facilitate the overall views, opinions, knowledge and perspectives of the decision-making team.

Dan Watts is director and consultant at Edward Drummond