Make Sure Lateral Moves Move Your Firm Ahead
There seems to be no slowdown in the push by BigLaw to grow through lateral hiring. New figures compiled by The American Lawyer show that in the 12-month period ending September 30, 2012, the total number of Am Law 200 firm lateral partner moves hit its highest point in three years. That meant 2,691 partners left or joined Am Law 200 firms during the 12-month period, a 9.7 percent increase from the previous year, and a 33.6 percent increase from 2010. [1]
Typically and unfortunately, lateral hiring decisions too often are made on the basis of general expectations about the new skills and business a lateral hire can supposedly bring without doing a precise business calculus about the bottom line impact that lateral hires can and should have, . This is particularly problematic when making a quick offer for fear that another firm will snatch a "hot prospect" from the open market. Buyer's remorse is too often the result. To avoid it, and keep emotions in check, firms should develop a lateral hiring checklist to cover the key items for a business assessment of the hiring decision. Be sure to include these three issues.
Financial Forecasting. A financial and marketing assessment of the new hire's client base and hourly rate can help ensure realistic expectations for the lateral's book of business. Not every lateral hire advises major clients, and not every major client follows the lateral hire. Making sure the firm is not forecasting revenue that never materializes is essential.
Client Relations. A major concern should be how well the lateral hire has communicated with existing clients, particularly with regard to their opportunities to go with the departing lawyer or stay with the existing firm. Without clear communication and a definite agreement to move their representation, clients may easily engage different legal representation while their lawyer moves to a new home. The lateral hire checklist should document the current status of client files; what client communication was made; and what was the result.
Receivables. When partners go to new firms and clients follow them, they generally take their books of "unfinished business." But clients of course have a right to seek their own choice of lawyer and may choose to stay with the lateral hire's previous firm, or seek a new one. And that former firm may refuse (to the point of threatening litigation) to relinquish control of past receivables. A lateral hire checklist should document the new hire's receivables status.
A lateral hire is ultimately a business decision. Making sure the business details are considered and documented is a legitimate requirement - even if time is of the essence.
[1] The 2013 Lateral Report (3/1/13)
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