Legal Business Blogs

‘You can’t buy loyalty’ – Fieldfisher’s Lohn on the dos and don’ts of making the lateral hiring game pay off

For most law firms, growth connotes success. Strategies to deliver the desired growth will usually rely on a steady, sometimes significant, stream of lateral partner hires. These new partners are perceived to be integral to the future success of a business – a supply of fresh talent which can expand different practice areas, enable a firm to enter new jurisdictions and access new clients.

Successful law firms openly entice an assortment of lawyers from other firms to initiate or strengthen their offering. Success or failure of lateral hiring has consequently become important and the art and science of the lateral hire is becoming an increasingly analysed issue. Firms need to understand how a ‘lateral’ becomes an established and successful partner of their new firm – so what is the magic formula for success?

Only a generation ago law firms would pride themselves on not hiring at partner level. This approach routinely produced high-calibre partners, infused with an ingrained culture, which in turn was assimilated into the next generation of associates. Firms were proud of their individuality; their cultural DNA was distinct and neither strengthened nor weakened by external influences.

As big US firms emerged in the 1960s and 1970s, lateral hiring developed apace, provoking an abundance of articles and books advising on how best to go about it. London firms caught up spectacularly from the 1980s onwards. In an intensely competitive lateral market, UK law firms – alongside their US counterparts – now play the game to hire the best laterals they can find.

The requirements for successful lateral hiring are easy to document: find the right people, assist them to perform and keep them when they perform well. In reality, recruitment, performance management and retention will often present challenges in the demanding environment of a modern law firm.

Fieldfisher has an active lateral hiring programme. A number of our key leadership positions are filled by individuals who joined the firm as partners. They are not considered laterals any more – they have been assimilated. Our gene pool of talent has been strengthened and our firm enhanced by the success of our hiring. But we cannot claim always to get it right: we make mistakes. And when we do, we try to admit to them. And we are not alone. Despite the received wisdom about laterals being good for business, their failure rate remains high.

According to research by The American Lawyer/LexisNexis, although 96% of US managing partners state that lateral growth is part of their strategy, only 28% of lateral hires are considered ‘highly effective’. UK research by Motive Legal Consulting showed worse results. Forty four percent of lateral partners hired in London were no longer with the same firm five years later. Some practice areas fare particularly badly: corporate (67%), finance (57%) and litigation (65%). These attrition rates point to widespread mistakes on a significant scale. The art and science of lateral hiring is not yet perfected. And yet the wisdom of the current practice is rarely questioned. There is no lateral rulebook which defines clear metrics to measure success, just the retention statistics which suggest that expectations are manifestly not being met on either side.

From our experience as a mid-sized City firm with a growing international reach, getting the right people through the door is critical. Our infrastructure and expertise enables us to attract big clients, yet we are small enough for partners to know each other. As with others of our size, much of our recent growth since 2005 has been managed through focused lateral hiring. Unlike some other firms, we do not look for a type; regimented corporate lawyers in dark blue suits do not stalk the corridors of our offices. Nor do we try to shape new lawyers into a Fieldfisher mould. If it ever existed, that mould has long since been broken.

Instead, we identify candidates as individuals. Entrepreneurial, enthusiastic and energetic are three adjectives that perhaps best describe what we seek. Diversity is a much-overused word. Yet we find that embracing the potential of new and different makes good business sense as well as providing a more congenial working environment. Fieldfisher is an eclectic amalgam of individuals – far removed from the mono-cultural mix that still prevails in parts of the City.

The elusive trick for those of us running law firms is to get the hiring process right more often. We are all opportunistic: accommodating talent when it presents itself. But adding numbers to just boost revenue does not deliver success in our experience. And problems always occur when laterals over promise and under deliver. The data implies that firms could do much more in agreeing realistic targets, integrating laterals more intelligently and monitoring performance more diligently. Anecdotal evidence suggests that many firms in London still have modest integration processes: planning and mapping are often absent.

Managing expectations on both sides at the outset is key, based on plans that are credible, carefully crafted and agreed. Laterals are invariably expected to bring work with them. Initial support should focus on converting work that was anticipated to follow: facilitating the migration of clients, adding to the firm’s revenue stream, and enabling further work to crystallise. In reality, some clients go with individuals, some stay with firms; usually there is some combination of both.

A critical factor in successful integration is remuneration and how it is structured. Ameliorating the financial risk and making pay too conditional on individual performance may unwittingly prolong an integration process. Real success should be a measure of a lateral’s ability and desire, not only to sell themselves in the marketplace, but also to sell their clients to the wider firm.

A ‘me first’ attitude to billing and client recognition may handicap early integration. Overtly harsh early scrutiny of lateral performance may lead to a reluctance to share clients in case an exit is needed. And, however well a firm remunerates a lateral, you cannot buy loyalty; you gain it by developing trust and respect.

Laterals who fail to migrate their clients quickly risk being labelled as failures or disasters. They have no track record with a firm and may be exposed to harsh judgement – subject to a process of scrutiny that longstanding partners often avoid. Invariably, the laterals are blamed; firms rarely blame themselves. But a lateral who underperforms in year one can excel the following year. Backing them or sacking them is a matter of judgement – it is the art, not science, of hiring that applies here; the ability to judge human character and its propensity to deliver success.

Partners need to see their firm as laterals may see it and to welcome the new ideas that laterals bring with them as much as they welcome their new clients. Lawyers are people, not commodities, and their personality and ideas have the capacity to enhance a partnership. The human capital of a lateral gives further heterogeneity to a firm’s DNA and the potential for a stronger, more vibrant and successful partnership.

We have found that structured integration is an important component in successful hiring. Firms must work to help a new lateral find their voice; allow them to demonstrate that they are worth more than the sum of their billings. The onus is equally shared. Laterals need to be self-motivated in developing internal relationships, formally and informally, while the firm has a duty, collectively and individually, to be engaged. And friendly – a word used too sparingly in the law firm lexicon, save in the context of developing clients or attracting trainees. Collegiality cannot be forced. It takes time. Human relationships develop gradually and cannot be fast-tracked, however smooth and well-managed the initial integration process.

Finally, firms should learn to listen carefully to new partners. Listening, of course, is not the same as agreeing – an important difference for lawyers who are notoriously bad at talking too much and listening too little. It is worth remembering that laterals sometimes left their old firm because they felt no-one was listening to them.

So when does a lateral stop being a ‘lateral’ and is considered a ‘partner’? Two years is commonly cited as an average to become fully embedded and considered a true partner but as in any club, society or team, a new or newish member might be welcomed straight away by some, and treated cautiously for years by others. A more nuanced view would suggest that laterals become more quickly embedded when financially successful and, importantly, are attuned and accepting of the firm’s internal politics, and where they fit within their new office paradigm.

And it is all worthwhile when we get it right: the planning, the targeting, the migration of clients and the cultural enrichment derived from our new partner. We forget the failures. We bask in the reflective success of our new colleague. But to repeat the feat – it is back once more to the art and science of the lateral hiring process.

Matthew Lohn is senior partner of Fieldfisher.