Hiring laterals is a risky business: finally, the statistics that tell us quite how badly US firms have got it wrong
Is hiring partners laterally a waste of time? Well, no. Every now and again a new partner snatched from the loving embrace of a rival works out beautifully.
But groundbreaking new research by Motive Legal Consulting, published today (14 February), provides some much-needed empirical evidence to back up several crusty old legal market truisms.
Such as: ’there’s no longer such a thing as a job for life’; ’there’s never been more mobility in the UK legal market’; or (and this one is many a UK lawyer’s personal fave) ’US firms are much more brutal places to work than ours’.
Motive’s research strongly suggests that the latter argument in particular may have legs. It analysed the fates of 1,944 lateral partner moves over a five-year period, asking a simple question: “Was each individual partner lateral hire made during that period still at the firm they had joined?”
The results were astonishing. Within three years of joining, a third of all partners had moved on. And after five years that jumped to 44 per cent.
By some distance the poorest performers were US firms. Over five years US firms in London took on 540 partners. In certain core areas, such as finance, 45 per cent of these partners had left their firms by July 2010.
Take a shorter timeframe and the results are just as startling. Of all the partners hired into US firms in London from the start of 2006 to the end of 2008, a total of 330, 36 per cent had left by the end of 2010. At UK firms over the same period, 27 per cent (221 partners) had moved on by last year.
The immense cost of hiring alone should be a warning as to the importance of these figures. One senior HR director estimates that the average cost per hire at his firm is £150,000. On those numbers, that 36 per cent translates into £17.8m worth of wasted effort.
Any US firm that has borne the brunt of partner exits in recent years – think Mayer Brown, Paul Hastings or White & Case – will no doubt already be all too familiar with these statistics.
In London it has always been suspected that plumping for a US firm was a significantly more risky proposition than joining a UK rival. Now there is proof that this is true.
The sheer numbers involved in Motive’s research – 1,944 London partner moves made between 1 September 2005 and 31 July 2010 – highlight the extent to which the UK legal market has changed in recent years.
As the executive partner of White & Case’s London office Oliver Brettle points out, until 10-15 years ago the law was the type of profession where people did not move around very much.
“I think there’s an element of law catching up with the rest of society in terms of people being willing to move to further their careers,” argues Brettle. “The thing is, once a partner’s moved, and if the moving process was less stressful than they’d thought, then they may be more likely to move again.”
That mobility has been helped by the fact that in recent years many firms have been more than happy to show they are willing to move people on through redundancies and restructurings.
“I think people started thinking they’d better be prepared to look after themselves,” says one partner at a City firm.
Brettle’s firm was one of the biggest partner loss casualties last year, but he insists that White & Case is taking steps to reinforce its growth with a more cohesive culture.
“We believe that the organic growth model we’ve adopted is working well,” stresses Brettle. “In terms of integration of laterals, it’s a long process, but things like moving partners around the globe all help cement relationships in a global firm.”
Mark Brandon, founder of Motive and author of the research, says the results clearly flag up two key themes: in many cases hiring partners laterally simply does not work; and US firms are worse at it in London than their UK counterparts.
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