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All the Right Moves
Despite the worst overall job market for lawyers in decades, American Lawyer recently reported that there were a record number of lateral partner moves involving the firms listed in its AmLaw 200 ranking. There were 2,775 partners who left or joined the biggest firms in the country—a nearly 11 percent increase in mobility over the year before. When one thinks of the overheated lateral market right before the Great Recession, such a statistic is eye-opening. But it seems logical to conclude that firms add lawyers only to meet specific client demands and because the firm has a strategic goal for the practice of each lawyer added.
Hiring fresh out of law school has been de-emphasized, perhaps for good, as firms emphasize lateral hiring of experienced associates and partners who have specifically desired skills or a strong book of business.
The tide running against new law school graduates is fundamental, particularly when lateral hiring of associates is an option. Take into account that considerable time was spent by partners in the recruiting and interviewing processes, as well as the education and mentoring (again often provided by highly paid partners) needed to assimilate new law school graduates into the firm culture and procedures, and the additional cost of reduced productivity in the beginning as the new graduate is getting up to speed.
The total cost can be several hundred thousand dollars exclusive of associate salary. Thus large-firm managing partners agree it takes, generally three to five years to break even on the investment in a new lawyer straight out of law school.
A better solution is for firms to only hire an associate when needed, and to make the most of another firm's investment by hiring laterally. If firms want to strengthen their performance, hiring the right lateral for the right job will create more profits. Lawyers cannot and should not remain with their firm unless it is profitable for the firm to keep them on an ongoing basis. At some point associates must earn more than they cost the firm. For lateral hires the answer can be expressed as a simple equation showing an individual's net profit value to the firm:
Billings - [Associate's Total Compensation + Direct and Indirect Expenses] = Net Profit. Hiring laterals with an existing book of business leverages billings, decreases investment, and improves profit.
If the lateral who is added comes with a strong book of client billings (as many do), the financial gain for the firm is greater. Adding laterals also resonates with corporate clients who increasingly feel that they should be able to direct how their matter is staffed, going back to the initial budget for the matter. A lawyer with greater experience, who can rip through the analysis and work, will likely be seen as preferable to a recent graduate who may have a lower rate but who will take longer to get up to speed.
The client gets a skill package and experience that more than make up for the lateral's higher billing rate.
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Following the worst economic crisis since the Great
Depression, and facing a sea change in clients' demands
and expectations, law firms must respond and adapt
quickly and effectively. Law firms must choose the kind of
law practice they will be; the marketing and business
development tactics they will use; the overhead that is
critical to their functioning; how to price, bill and collect
for services; and how to manage the cash flow cycle.
Success lies in identifying and capturing the right kinds of
clients, providing the services those clients need in ways
that add value, and ensuring prompt payment and the
ability to grow profits. This book, based on the
experiences of Ed and his clients over 20 years of
coaching and consulting, provides the keys to
successfully thriving in the new era.
Available for Pre-Sale
Ships in February 2010
Pre-Sale Price: $99
Regular Price: $120
Call or Order Online at:
1-800-837-5880
www.lawbiz.com
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Personal Commentary
As of this writing, my latest book, Growing Your Law Practice in Tough Times, comes off
the press at West Publishing. I'm eager to see the actual volume
in hand...and eager for those who read my words in this column to take
advantage of the still current pre-release discount being offered by West to
our readers. I believe you will be well served by its contents. Please
contact me to place your order or go to our web site.
This feels like a birthing process for me, obviously the closest I'd ever
come to the real thing. The bond between mother and child is special and
different, but creating something like this book is special, too.
And it's the beginning of another chapter in my relationship with West
LegalEdcenter. I look forward to working with our publisher by producing
more teleseminars this year. Stay tuned, as they say.
Best wishes,
Ed Poll
lawbiz.com
lawbizblog.com
www.LawBizForum.com
800-837-5880
Please use the URL below to link to this issue:
www.lawbiz.com/nlimages/tip-3-9-10.html
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What Readers Are Saying...
"No matter how you slice it, there is
no substitute for wisdom and
experience. Ed Poll has
demonstrated both in this eyeopening
book about the essential
elements of running a profitable law
practice. He provides practical
wisdom along with simple ways to
adopt and incorporate best practices
for each. After explaining the pros
and cons of every decision, he makes
recommendations and provides
useful guides disguised as key
principles. Buy the book so you too
can access Ed's wisdom and
experience. It's worth much more
than the investment."
STEWART L. LEVINE. ESQ.,
FOUNDER, RESOLUTIONWORKS
AUTHOR, GETTING TO RESOLUTION;
THE BOOK OF AGREEMENT AND
COLLABORATION 2.0
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