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  • Two elephants in the room here: (1) the panel system, which presumably must make it far harder for even genuine "star" partners to take clients with them when they move; (2) the glut of partners made-up during the good times (i.e. the ten years or so before the crash) who may still be knocking around in the profession for another 10-20 years. Forced or semi-forced moves (of already underperforming partners) as partnerships restructured must account for a lot of the figures in the article. What happens to all these people going forward is also a big story - not least as they may be bed-blocking for current and future mid-level upwards associates, for many of whom partnership prospects are at historic lows.

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  • Good points both. There is a real tension between the differing strategies pursued by the different cultures (UK and US firms). UK firms' diffusion of client relationships across the firm, which plays well to the panelisation of relationships, is in direct opposition to the client-ownership model favoured by US firms. This, I feel, makes it much more challenging for many UK partners to move and may be one important factor in the higher failure rate among US hires.
    Alas, for UK partners anyway, the pendulum does seem to be swinging gradually in favour of the US firms. Partners need to be careful that the systematic 'defanging' inherent in the diffusion strategy operated by UK firms as a defensive mechanism doesn't leave them high and dry.

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  • Fascinating article - thanks Mark. Do you have any pre-recession data? I expect that corporate, finance and property laterals would have enjoyed greater success in the boom years. To what extent do you think that your findings are just a sign of the economic times?

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  • Hi Sally, thanks. My data only goes back to 2005, when this stuff started being collected in very comprehensive form, I guess it will build up over time. The market has changed in the meantime too, of course. While it has become more acceptable to move, client relationships have become larger and more difficult to port from one firm to another as they become more embedded across greater numbers of partners (the diffusion strategy pursued by UK firms).
    I think what lies behind the data is that this is quite a complex enterprise, and as with much data, the deeper you dive into it, the less apparent are the lessons and the greater the effect of rogue results.
    To my mind, more work needs to be done by firms on the planning and integration of hires, and by firms and candidates alike during the process. Far too many lawyers still treat the process as of secondary importance until it comes to the crunch, and I think as a result, quite a few mistakes are made in terms of choosing final destination.

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  • I run a search boutique and thought that I wouldcompare this research against the individuals that I have helped to move in the last 5 years. Of the 26 partners that I helped to move in the last 5 years, five are no longer with the firms.

    However, on a deeper analysis, three of those that have since moved on were senior associates going into partnership which were high risk (but low cost) investment hires for whom the platform and support offered by the firm would have been at least as important as the ability of the partner. The other two could fairly be seen as bad hires.

    Interestingly, the bad hires were both candidates that I placed into firms that I do not know well and were actually contingency "opportunistic" hires for the firms rather than the planned, strategic hires that came through search.

    I suspect that my experience is fairly typical for search firms. In my experience, there is much more thought given to the fit and role of a lateral search hire. Also, there is often more buy-in and responsibility taken by the firm for the success of hires that come in this way. With opportunistic hires, firms may be more prone to sit back and see if the candidate delivers.

    I also want to comment on the following paragraph in the piece:

    "One could argue that it is in fact against the recruiter’s interests that a hire lasts. If someone only lasts two years in post, not only is it not the recruiter’s responsibility but when the partner does leave, they may well get the candidate back and the post to recruit for once again - a nice win-win-win. With churn like this it is little wonder the legal recruitment market in London is saturated with players eager to join the free-for-all.

    "Firms need to ask themselves whether their suppliers have a genuine conflict of interest or whether this is just a quirk of the system they have to live with. Firms might also quiz recruiters more carefully about what they are doing to overcome this and what they can do to ensure that not only are they finding suitably qualified hires, but hires that will endure, before parting with the eye-­watering sums often associated with a search assignment."

    In fact, search relationships are hard won by recruiters and it would be senseless to opperate a "churn" policy. Much better to help our clients to find the right people and help them with the next strategic lateral hire. It is an approach which also allows us to sleep at night.

    Litigators will recognise the slur as being no different than the equally falacious arguement that litigators are conflicted when it comes to settling cases because settlement turns the tap off on their fees. In both cases, it is a logic that only makes sense if you start with the axiom that the individual litigator/recruiter is greedy, immoral and stupid.

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  • Fascinating stuff, with so much to mull over. A few thoughts spring immediately to mind:

    I have seen law firms recruit at Partner level and there may be 5, 6 , 7 or more interviews with literally dozens of interviewers involved, but when if one analyses the process it is probably a case that the same interview is simply repeated 5,6 or 7 times and that there’s little variety or robustness to the process. The decision to hire is often made by the key stake holders during the first two interviews and thereafter it was a case of the potential recruit simply avoiding doing anything wrong to ensure consensus is gained. In short, firms may benefit from designing more robust and varied selection processes that really get to the crux of the matter.
    Business Plans are too often just numbers on a piece of paper. I know of one law firm FD who calculated that, on average, actual billings were only two thirds of those projected in the business plan. Firms would be advised to conduct similar analysis and plan accordingly.

    It's impossible to tell from the data, but it would be interesting to know if there are differences in the success of lateral hires made on a proactive basis (i.e. law firm advertises or conducts a search for a lateral) and those made on a reactive basis (i.e. firm is approached by a Partner who is looking for a move). In the former instance the firm's desperation may be higher and so risks are taken; in the latter the candidate might just be one of those people who moves every two to four years, oftentimes because there are performance issues.

    I'd be interested to see how these success rates compare to similar fields such as accountancy, senior sales positions or investment banking. In comparison the story might be "Two thirds of lateral hires work!" (though I doubt this would be the case!). Similarly, perhaps firms accept - albeit grudgingly - that 1 in 3 fail and account for that.

    These figures have to be set against the biggest economic meltdown since 1929. These are not ordinary times.

    Perhaps recruiters need to share more of the risk and move to a fee system which sees more of the fee being paid in line with the recruit's performance and tenure.

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  • @Anonymous search agent
    No 'slur' intended, I assure you; simply that the system means there is an inherent advantage to agents if a hire does not last, just as there is an inherent advantage to litigators if cases go to court rather than settle. Hence, while ethical agents and ethical litigators will pursue best-case for their clients, the system allows for less scrupulous individuals to churn. This is exacerbated in recruitment because the industry is almost entirely covert, with virtually no information-sharing between clients. It is therefore almost impossible to work out if and where abuse is occurring.
    Bravo to you for your 'sticky' hires; the figures clearly demonstrate that not all agents are as diligent/careful/long-sighted/lucky as you are. If my research has one purpose, rather than casting slurs as you seem to intimate, it is to try to encourage clients to ask more questions of their recruiters, to plan hires better and to think more carefully about the process as a whole. Only in that way will the best providers emerge; while it remains below-the-radar, it remains a free-for-all.

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  • These dates from before the crash (and one would assume figures have worsened since then), but tables 26 - 30 show some benchmark figures.
    Whilst the figures for lateral hires still compare poorly, this report provides some sort of context. Similarly, the responsibilities of a Partner for generating revenue are exponentially higher than most other walks of life and therefore it is perhaps not unnatural that there should be a higher rate of attrition.

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  • Very interesting. You are correct about the responsibilities of partnership, but I'm afraid to say that many of the partners I met when I was a recruiter were woefully unprepared to make a successful move, in terms of their attitude and ability to develop business. Most partner business plans I came across were unsuited to the task at hand, and the introduction of Partnership Questionnaires or templates (beloved of US firms) have not improved matters greatly, designed more to get partners across the hurdle of management board approval rather than creating a workable and dynamic business plan. The sad truth is that many partners find themselves incapable of functioning successfully in anything other than the environment in which they were nurtured; both partners and firms need to do more work on planning and integration if they want hires to succeed.

    My friend Ed Reeser, a law firm management expert in the US, neatly outlines the systemic problems created by law firms failing to get this right: "It takes time to ramp up the cash flow and deliver a profit due to the up front costs of underwriting both the recruiter placement fee and the 'pipeline' of receivables. A minimum of 15 months is typically involved, and it can run to three years or more for high priced additions. What this should demonstrate is that it can take several winners to overcome the drag of a single loser. But with the high percentage of losers relative to winners, the overall strategy for most firms is on balance.....a loss, and sometimes a big loss, financially."

    This would seem to me to speak pointedly to dangers of the 'suck-it-and-see' opportunistic recruitment policy that anonymous search agent mentions. I can think of one or two firms in the market which are labouring under untenable bank debts created by funding unsustainable, poorly-managed opportunistic hiring strategies which have built turnover at the expense of profitability and done nothing, in the long run, to improve the fortunes of the firm. I think we will see more high profile failures before this recession is out.

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  • Mark - I agree, as I say, Biz Plans can become "just numbers on a piece of paper", but I think you have phrased it in a more apposite way!

    It's all about risk really, isn't it? Whilst I can't quite believe I am saying this, perhaps it's the hiring law firms which are carrying too much of the risk as Partner remuneration (indeed lawyer remuneration) carries too high a guaranteed element for a role which has much to do with unguaranteed fee generation. Similarly, perhaps recruiters could re model fees to reward the tenure and/or performance of the candidates they introduce.

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  • I'm struggling a bit here. Why should the recruiter share the risk after the partner has started? At that stage the recruiter is out of the picture and the success or otherwise of the hire is down to the ability of the partner and the firm to execute their business plans. Furthermore, many of the "failed" hires will not be caused by performance issues, but rather the partner will not stick because the firm has been unable to successfully integrate the partner into the culture of the firm.
    Again, all of this seems to be predicated on the suggestion that the recruiter knowingly "sells" a dud candidate to the firm. Where does the recruiter get his information from? The answer is that he uses figures provided by the candidate which is combined with promises made by the firm as to the additional work that the new "synergy" will bring from existing clients. Moreover, any business plan that is produced will have been approved by the candidate as an accurate reflection of their practice etc. Either the candidate has been lying or he has an unrealistic expectation of the portability of his practice. The recruiter is in no position to judge that and is certainly not in a better position than the firm who is opperating in the same market and is in a position to do the necessary due diligence. At the very least, they should be insisting on, and taking up, references from all major clients, which is not something that a recruiter can do.
    I tell you what, I'll reduce my recruitment fees to 5% on the basis that the firm pays me that year after year for as long as the candidate is at the firm. To be completely fair, I'll make it 5% of actual remuneration for each year so that the firm pays me less if the partner's remuneration goes down due to performance issues. On the off chance that the partner is earning more 5, 10 or 20 years down the line, I may see an upside. Who wants to share the risk with me?

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  • Re:
    "Hence, while ethical agents and ethical litigators will pursue best-case for their clients, the system allows for less scrupulous individuals to churn. This is exacerbated in recruitment because the industry is almost entirely covert, with virtually no information-sharing between clients. It is therefore almost impossible to work out if and where abuse is occurring."
    Is this a real issue or a non-issue? Are you saying that there is a real issue with unethical recruiters (and indeed unethical litigators) or not? As far as I can tell, there is scope in all areas of business and indeed life, for people to act unethically if they are that sort of person.
    If you are just saying "here is how recruiters could cheat if they wanted to" it is really a complete non-point. By your own admission, you have no idea at all whether or not anyone is actually acting unethically.
    The reason that I used the word "slur" in my last post is because it only becomes a point if you assume that your average recruiter is inherently more dishonest than your average litigator or, say, cleaner (I could write a long essay on ways that my cleaner could theoretially rip me off - she has me keys after all). For the record, my cleaner is a lovely lady and I have never had any reason to suspect that she would do anything unethical.

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  • Haha, yeah I like that! Would certainly give recruiters a much greater incentive to help develop candidates' business plans rather than just clicking the 'Forward' button on their email...

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  • Good article. I hope that our managing partner has read it.

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  • @ 3:04pm.

    Fair points, but perhaps we recruiters need to try a bit harder if "The recruiter is in no position to judge that...", because I think, with some effort and desire, we should be in a position to form some form of judgement. It's where the "consultant" half of the job title kicks in, in my opinion.

    "Why should the recruiter share the risk after the Partner has started?". Because we have just billed the client a not insubstantial amount of money, because we want to develop a relationship with the client, because 1/3 of hires - according to Mark's analysis - fail, because we feel we have a moral responsibility to the client and candidate, because there might be a better way of doing this, a better way of billing clients and, finally, perhaps because it's just the right thing to do.

    Would I do it? I am giving it some serious thought and pondering ways I could structure it without over complicating it. As it is I cap my fees because I think it's fair and equitable.

    Copy and paste this into your browser for a different perspective:

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  • Re Anonymous @3.04pm.

    My point is that there is nothing to suggest that we don't feel a moral responsibility or that we don't act ethically. What would be more helpful is to speak to the partners that moved on and find out what happened. Anecdotally, even after the event, partners often talk about lack of support from the firm and a failure to integrate into the culture of the firm.

    I was being flippant about the point regarding the ability of the recruiter to make judgments. Of course we can, and we do. However, it is certainly the case that the recruiter is in no better position to make the judgment than the firm. Furthermore, there is another elephant in the chatroom which is the very real question about the degree of respect that lawyers in general have for recrutiers and their judgments particularly when they make be working with them on a contingency basis for the first time.

    On charging structure, we charge in the way that we do because it is how clients want to pay us. They want to pay for "results". Perhaps the problem lies in the fact that the "results" in question are simply the hiring of a candidate. The fees are substantial because they are, in fact, paying for the other 97% of work that recruiters do for no reward at all.

    I would be more than happy to be paid on some other basis of success, but still need to be properly compensated for my overall working year. So I will share the risk that a hire doesn't work out despite me acting honestly, ethically and consultatively at every stage, but would expect you to pay a higher rate when the hire is succesful. The great thing about this approach is that those firms that are good at making these things work would effectivly subsidize those firms that habitually fail to make hires work. I suspect that reducing the firms with poor success records would lead to even more speculative hiring.

    Alternatively, I'd be happy for firms to pay me on an hourly rate for the work I do for them, successful or not - but that would be a bizarre way to pay for services wouldn't it?

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  • Statistics. None of the information shown demonstrates what is likely. It merely demonstrates what has happened in the past. If a coin lands tails three times and then heads once, its still 50/50 on being heads or tails. The stats also need to be taken into context with the failure of partners who had not been laterals. Have partnerships shrunk in the last few years? In particular practice areas that have seen general wastage - is there a correlation between shriking practices generally (eg real estate) and the fact that a higher proportion of partners have left? There might be. We also need to consider the reality that when undertaking statistical analysis smaller samples are more likely to show larger swings - so once you get into small practice areas there might only be a few dozen moves and as such is this sort of a sample worthwhile - the study refers to 15 different practice areas - some of which probably relate to only a few handfuls of hires. Is it worth also looking at associate wastage during the same period - is it just a case of last in first out rather than there being no particular fit. If this is the case there would be a correlation between laterals partners and lateral associates and it might not be related to hiring culture / the way in which hiring is conducted / the process - but rather something more obvious. The newbee has less of a network than the incumbant. You need a network to survive.

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  • Nick has it mostly right but the larger problem is that this "report" fails to define success and failure in the context of lateral hires.

    Treating each lateral departure as a failure is sloppy and inaccurate. Departing partners may join a client and so cement the relationship they brought to the firm; they may retire leaving the client relationships they came with or they may, after a few years of profitable performance move to a firm better able to support them and their clients.

    Given that these reports constantly refer to the cost of "failed" lateral recruits it is rather shocking and plainly unhelpful that no effort has been made to determine the proportion of failures that actually cost the firms involved any money at all.

    Even on the existing method of reporting roughly 60% of laterals are deemed a success. Were one to add in the number of laterals who move on as "good leavers" and who had contributed to profit in their time at a firm the percentage would be a good deal higher.

    Mr Brandon's periodic reports are useful to prompt debate but are not safe to rely on when assessing the value of lateral hires.

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  • @anonymous 10.38am

    As it happens, I agree with much of what you have said! As I have repeatedly said, it is up to firms to judge the success or failure of laterals for themselves, but as I have repeatedly observed, much of the time this is simply not happening. Business plans are rarely examined to judge success or failure; most firms I have spoken to admit to doing no retrospective analysis of success or failure, simply taking a 'gut-feel' view.

    I realise the word 'failure' is a contentious one, but my conversations with top HR directors are consistent in that they feel that lateral partners who last less than 4-5 years can be regarded as having failed, except perhaps in special circumstances (going to a client, introduced a good new client which the firm retains), given that, in the main, they have not yet made a meaningful contribution to firm profitability.

    Equally - as I also point out - staying is not necessarily a badge of success. I quote one managing partner who refers to many lateral hires as "drizzle-makers", which is a phrase with great resonance. I suspect many firms would admit that the majority of their lateral hires have not been transformative.

    As to examining the real costs of lateral hiring, that is practically impossible, especially given that most firms don't know themselves. I myself undertook something of a stab at the issue (featured in The Lawyer, 31 October 2011), but once again, the data only gives us some broad conclusions.

    Only one final point, I have never claimed that my researches are "safe to rely upon" (whatever that means...), but hopefully they do prompt debate. To my mind, lateral hiring is a delicate and complex business which will be unique to each firm and each partner. If I have proved that it is not the sure-fire solution to every problem faced by the growing law firm, then I think I have made my point, but somehow I think there is a long way to go before the legal market examines its lateral hiring addiction in more detail.

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  • Look at football. Fans hate it when teams sign squad players but most lateral hiring looks like this - it doesnt improve the overall offerring. When Man Utd sold their squad players to the likes of sunderland, their squad players were still squad players even in an environment where you'd think they would shine - this is because the man utd team / coaching / set up raised them beyond their natrual abilty. Sometimes a superstar takes a step up in quality of team but becomes a squad player - look at charlie adam when he joined liverpool and most of the strong players from middling teams that have joined man city to sit on the bench or in the squad. Very few superstars from middling teams join other teams and become superstars - as they rely on system and team set up. Superstars from top teams are always superstars....well apart from fernando torres.

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