Beware the drizzle makers

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  • Ah, there's the nub of it. I do concede that my example could have been better chosen.

    I was talking to someone about our Bob earlier, and they made the point better than I obviously have; Bob falls into the category of unexciting hires that undershoot their promises and sort of do enough to cover their costs, if you 'lose' some of the investment costs. However, it's quite likely Bob will sag a little bit along the way and the hire ends up being entirely uninspiring in the final analysis and may cause disruption internally, especially if he only performs averagely.

    Two further points recruiters have mentioned to me, which are worthy of mention:
    - I didn't include the recruitment fee, which could be £110k on Bob (but likely to be less, and nothing if he came direct)
    - Many incumbents are in fact drizzlemakers and will need sorting.

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  • I would be tremendously happy to be in a firm where we look at laterals on the basis they contibute 33 per cent in year one to profit. Good business that.

    People move and firms hire for strategic reasons normally and if you are presented with someone who can cover their draw and their costs in year one from what they will bring that's pretty appealling if the real reason you want them is strategic. Indeed I have seen laterals for strategic reasons brought in on immediate and openly loss making terms. Thats called the firm making "an investment" I understand. Its a question normally of whether 2 plus 2 makes five from both sides' point of view. Bob has a good practice so why should he move as well? If you want what he brings to the party you might have to be commercial about it too.

    Also it depends on how you bring in Bob in terms of costs. If you hire three associates and two PAs from day one your costs go up big time but in the recent market conditions you haven't had to do that. Most firms have the capapcity to take people in and build with them.

    I would like to know actually what the figures are for partners who were made up with the firms they trained with and how often they move. We lateral hire to replace some of those. Isn't it just a much more liquid market now and that is driven by the fact that all of our practices are so interdependent on the shifting skill sets around us?

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  • Thanks for that. The only thing I'd take issue with there is that law firms 'normally' hire for strategic reasons, otherwise pretty much agree on all points.

    I think the best firms do hire strategically, yes, but in order to do that, you first have to have an actual strategy, and many firms don't.

    As I say, I think in retrospect what I should have done is been a little more careful with my example (Bob). My attempt to show the actual costs of Bob over the first four years could have been more finely drawn. Most laterals, as you intimate, don't contribute to profitability and nor are they expected to (in most firms anyway), and if they do, that's great.

    One of the points which has been - quite rightly - levelled at my research is "what counts as success?" and there is no 'one size fits all' answer to that question, as many law firms are finding out at the moment.

    You are absolutely right about the increasing complexity of the market. I think the most successful firms and practitioners have a good handle on this. Partners made up at their firms have a huge in-built advantage over laterals, and often find it a rude shock when they move to a firm where they have to rebuild their entire business context. I don't have any figures for the whole market on the success of these moves, but it would be an interesting little project that I'll definitely give some thought to.

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  • Ok, perhaps a touch more care could have been shown with the Bob example but - to the Editor - please can we have more articles like this that actually involve thought, analysis and, in consequence, (reasonably) measured debate?

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  • I am interested to see the "rule of 3" quoted in the article and not challenged in any of the responses. As an associate, we are all under pressure to increase billing and year-in-year-out targets increase significantly in excess (as a percentage) of salary. A few years back I raised, in general conversation with a new-hire partner, the "rule of 3" and was told that that was out of date and targets these days had to be about 4 x salary to make a reasonable profit (mind you, she had just escaped a firm that had collapsed, so perhaps that is a reflection on the reason for their collapse!)

    Is the rule of 3 still a normal measure in the profession? (And am I out of date for still referring to us as a profession? :o) )

    As a supplemental issue, can someone explain why Bob, who covers his expenses and makes a contribution to actual profits by the end of Y2, is a drain on the firm at all? Assuming that Bob is not equity, once his costs are covered every £ he makes adds to the overall PEP. Is it not the case that had Bob not been hired, those profits would not have been made at all? Bob may not be the most glamorous hire, but the equity partners are still richer than they would have been without him. Profit as a percentage of turnover may fall, but profit itself rises.

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