This month’s London Lateral Hiring Trends Bulletin (the subject of the previous story) contains a factual inaccuracy. Stephenson Harwood is recorded as having ‘lost’ 7 partners in Q1 2012. While the 7 individuals leaving the firm all became partners at their new firms, 3 of them were not in fact partners at Stephenson Harwood.

I would like to take this opportunity to apologise to the firm for any embarrassment caused by this inaccuracy.

Partner moves in London, Q1 2012

Partner lateral hiring in the London market has returned to 2008 levels, according to my most recent research. I’ve compiled the first of what will become a quarterly review of trends in a new bulletin, with a ‘does-what-it-says-on-the-tin’ title: The London Lateral Hiring Trends Bulletin. There were 130 partner hires announced in Q1 of this year, a 12% increase on the same time last year.

I am grateful to The Lawyer for running a nice news piece on their site today, which gives a detailed run-down of some of the main findings.

Main headlines are that hiring has returned to its – peak – 2008 levels in the last quarter. Finance accounts for the greatest proportion of hires, although interestingly only 10% of the hires are going to firms with greater profitability. In the case of corporate, fully 50% of hires are moving up the ‘food chain’. This could be an interesting trend if it continues, so watch this space!

Following some comments, I’d like to point out that the base-data for this research – the newsletter LegalMoves – is a digest publication, and while it is very accurate, it is ever-so-slightly behind firms’ press releases and coverage of those releases in the mainstream legal press. This has the effect, then, of placing partner moves in a particular quarter when, occasionally, they will have left sometime before this, especially from the firm’s point of view. I am confident any apparent distortions will level out over time and will take care to reflect this more prominently in future issues of the Bulletin.

For the two-page pdf of the Bulletin, please feel free to email me at mark.brandon@motivelegal.com and I’ll get it put in the download section here on the site as soon as I can.

Another great blog from one of my favourites, The Belly of the Beast, on the current ‘struggle’ at Dewey & LeBoeuf which has claimed 80 partners since the start of 2012 and has the London partners in talks to put the office here into administration (see The Lawyer).

In the Beast’s view, “partnerships aren’t really partnerships anymore”. He cites the 20-1 spread in partner earnings as a key corrosive effect in the firm’s current dire condition.

“Those at the top of most big law firms function with far greater independence than corporate CEOs who must answer to a board of directors and shareholders,” he says. “In many big firms, a growing internal wealth gap reinforces the hubris of senior leaders who answer to no one — except each other. With Dewey’s disintegration, we’re seeing where that can lead.”

Worth a read.

Recruiters, like these, who misbehaved at client briefings would be fed gruel and sent up chimneys

I rather surprised myself last week, having co-hosted – Transatlantically, no less – an audio-conference, on my favourite topic, lateral partner hiring.

I have always been wary of presenting, not sure why precisely; perhaps a hangover from my journalistic days, when hanging in the shadows was more productive than being on a podium; and from being a recruiter, where, rather like Victorian children, a good recruiter at a client briefing should preferably seen and not heard, and if ever a question bubbled up, it should be uncontroversial and client-friendly, rather like the “Would My Right Honourable Friend not agree…” type of enquiry fired at David Cameron by the Conservative MP for Little Twiddlington-on-the-Water.

As it was, my co-presenter, Norm Clark, of US legal management consultancy Walker Clark LLC, and hit it off from moment one, guiding our mainly US listener-base through the minefield of partner lateral hiring, comparing and contrasting the UK and US experience.

From being quite a sceptic, I must admit, about the audio-conference format – where listeners ‘dial in’ and follow a guided Powerpoint presentation, with the ability to send questions and comments via a message function – I am a full-on convert. So much so, in fact, that I’m doing another one with Norm on 24 May, this time on the equally thorny topic of legal directories. As former editor of The Legal 500, as you can imagine I have the odd view or two on that matter too.

Will post full details in the meantime, but if you’d like to see what else this conference producer has on offer in the meantime, have a look at www.c4cm.com.

Cascade failures: tricky to stop, once they've begun...

I wrote back in March 2011 on the subject of what I call ‘catastrophic collapses’ – the phenomenon whereby law firms undergo rapid and complete disintegration (literally). You can read that blog here: American Stars

The main symptom of this phenomenon is the rapid-fire departure of partners, often in groups, sometimes in large teams.

Viewing a law firm as a kind of system or entity, we can see this as a kind of accelerating cascade-failure, with failure in one part contaminating another, rather like a virus or conjoined mechanical failure; each partner or team that leaves makes it more likely that another partner or team will leave.

It is interesting to note that, so far, most of these cascade failures have been of US firms – Howrey being the last high profile firm to fall entirely to pieces.

In my view, this is due to the far more fluid, and porous, nature of US firms, compared to, say, UK firms.

UK firms have spent many years assiduously ‘declawing’ their partners, diffusing client relationships as widely as possible so clients have as many touch-points as they can. This, coupled with restrictive covenants, garden leave provisions and other ‘poison-pill’ elements (mostly to do with punitive equity-release terms) provide a formidable defence against poachers who come looking for partners with clients. I call this phenomenon the ‘toxic law firm’, with that toxicity mild in most UK firms, more extreme in others.

Of course, this defensive strategy is not foolproof, but more than one predator has had its fingers burned expecting major clients to transition with the move of a partner or team only to find that it doesn’t happen.

In US firms, where restrictive covenants are practically unheard-of, and there is often an ‘at-will’, zero-notice partnership agreement, clients are assumed to move with their lawyers. There are tales, most likely apocryphal but close to the truth, of a partner leaving one US firm in New York in the morning and starting at another in the afternoon, boxes of files couriered from  one firm to the other.

Thus, when parts of the firm start to break away, revenue pretty much automatically goes with them. This is fine where the firm is in constant acquisition mode, because as long as it keeps growing, new revenue will arrive with the new partners. However, in the case of a cascade failure, where losses far outstrip gains, this can rapidly prove disastrous, not least because the cascade effect will have an escalating impact on recruitment: who wants to board a sinking ship?

I will deal separately with the effects I think both strategies have on individual partners within those firms, but for this blog, let’s stay with the catastrophic collapse scenario. Read the rest of this entry »

Is it time for major law firms to become big, grown-up businesses and have HR directors as equity partners? Some – a few – already do. This is why I think it should be a matter of interest for top law firms of all shapes and sizes: http://www.thelawyer.com/time-to-equitise-your-hr-director/1011809.article

London lateral hires by practice area, and failure rate (image courtesy of The Lawyer magazine)

My latest research into lateral partner hiring in London – the second year I’ve undertaken this exercise – is now available for download in the Downloads section of this website or, if you prefer, directly from me at mark.brandon@motivelegal.com, which may serve if you have comments or questions.  

The research looked at 2,295 partner hires in the London market from 2005-2011, and for the first time examines the relative success of team hiring (it isn’t, statistically-speaking, any more likely to mean partners hang around than if you hire them individually, btw).

I have also responded to comments on last year’s research that dividing firms into UK and US firms failed to consider the different character of US-UK mergers, or hybrid firms. I thought this was a fair point and as it happens, the hybrids seem to have been slightly more successful than UK firms and rather more successful than non-merged US firms, which seems to suggest a certain logic to the strategy, at least in hiring terms.

The research, although it did take some time to put together and check, is fairly simple in essence; it simply notes when partners were hired and whether they are still at the firms which hired them. It is for law firms to decide whether a partner they hire, and who leaves within three years, has been a success or not, although my contacts in law firm HR suggest that under five years’ tenure has to be considered a ‘failure’, purely in profitability terms.

I hazard that most lawyers moving from one firm to another would hope that they will stay longer than three years, hopefully longer than five. Lawyers do not like moving, and for good reason; there is a stigma around having moved too often and, while partners will be forgiven one wrong move which results in them having to leave quickly, they will rarely be forgiven two.

What underlies this research is a perennial theme of mine; the idea that law firms are failing too often in the lateral hire process, and that the reasons for failure are manifold and often a result of complex, interlocking factors which are not often readily identifiable. Nonetheless, too many firms are doing too little work on planning, selection and integration and far too often relying on recruiters and candidates to provide strategic shape to their offering.

Of course I have my own views on what law firms can do to improve things, and would encourage you to contact me if you would like more information or to discuss things in more detail – mark.brandon@motivelegal.com

I’ll also take this chance to plug once again the special report I wrote last year: Lateral Partner Hiring & Integration for Law Firms which is published by Ark Publishing. An abstract and sample chapter are available for download in the Downloads section (above). I am also hosting a ‘Masterclass’ on the subject for Ark Conferences on Thursday 29 March. Ark have kindly offered a 10% discount on the £495 + VAT cost of this one-day event. Simply mention this referral when you book.

Once again, thank you for your kind interest and all the helpful comments and questions I get on a regular basis.

Thanks to The Lawyer for some great coverage of my latest lateral hire research, and to those of you who have emailed me for the pdf. We’re just making the final changes to the pdf and it will be available very shortly in the Downloads section. Alternatively, email me – mark.brandon@motivelegal.com – and I’ll send you one directly as soon as it’s ready.

Many thanks for checking in, and apologies for the delay.

The Flaming Lateral: shake one measure each of optimism, hubris, machismo and chutzpah. Warning: can cause terrible hangover.

When is the best time to pull the plug on a bad investment in a partner?

This crossed my mind a few weeks ago when I noted the move of a partner I once acted for, many moons ago when I was a recruiter. He was seeking to leave the firm which had headhunted him as he was finding the environment unsuitable for his practice.

It was a familiar story; he had been hired with great promises of lots of untapped work in the firm’s client base and – rare even at the time – had been hired on a two-year escalating (!) guarantee.

Alas, in his first year he had barely billed enough to cover his guarantee and year two was looking dire. Little did either of us know that we were about to dive into a recession where his practice area was badly affected, so I can’t imagine it got much better after that.

It’s difficult to properly calculate the ‘loss’ on a partner who only just covers their direct costs, but I guess the firm’s expectation when they hired him was that he would be billing a minimum of £2m a year, probably £3m in fact, so his entire run with them – over five years – should have added up to at least £10m, I’d guess. I bet they were lucky to get £3m in toto.

Of course I could be entirely wrong. After his dreadful first two years his practice may have picked up massively and he could have had a purple patch and defied my expectations. My sources say otherwise, however, and if he did knock sixes out of the park in the midst of calamity, then why move? 

No, I suspect I’m right, which raises a number of interesting questions in my mind.

One, how did the firm get it so wrong in the first place? This is a large, highly-sophisticated, law firm with an ostensibly rigorous process but this was a really poor hire, of what was, actually, a partner with a good reputation and pedigree. And a two-year guarantee with escalator? This suggests the analysis of the business plan was sorely lacking or the projections massively over-optimistic.

Two, how did the integration process – again, a sophisticated one – fail so dramatically that the partner was talking to me less than two years into his time there. They had clearly oversold the opportunity in order to make a juicy, ‘trophy’ hire; perhaps other partners resented the feted newcomer. Certainly he was not getting the promised referrals, nor was there the latent potential in the client base, so how well had the firm researched the need among its clients before hiring?

Three, now that he has moved again, what kind of promises is he making to the firm he has moved to? And what kind of analysis did they do? It’s a good firm with plenty of money, so I doubt he’s going there on a song. I wonder if he has managed to negotiate another guarantee, in which case well done his recruiter!

But the major question in my mind is why the first firm stuck it out for so long. As I say, I could be wrong but I doubt I am, and in any event, all of us know that way too many failing partners hang around for way too long in most firms, their tenure prolonged by a combination of weakness, structural failings, wilful blindness on the part of management or simply the awkwardness of having to tell someone they’re out and the worry about what signals that might send to the rest of the partnership.

So how long is too long? When should you pull the plug?

If I am right, and the firm is staring down the barrel of a £7m mismatch between expectation and reality, the answer has to be WAY before they did. Most HR directors think two years is enough. Some reckon to know after a year. I think many feel that the partner will somehow realise they are not working out and move on, but in a poor economy this may be nigh on impossible.

This is far from the only example I have seen of law firms supping from a heady cocktail of optimism, hubris, machismo and chutzpah, the glass nicely rimed with a twist of fear that if they don’t hire him, the opposition will.

Nor would it be the first hire I have seen which has progressed from “we have budget to hire” to “let’s instruct a headhunter” to “let’s hire this guy as he’s the best of the bunch” without any proper research, business plan or strategy.

The answer seems obvious, at least to me. Yet as we see a new wave of partner lateral moves in 2012, including some partners I happen to know will fail to meet expectations, I wonder if some law firms will ever learn from duff hires, or whether the lure of cocktail hour will always remain too strong to resist.

The nice new Lawyer magazine

When I was in publishing, many moons ago, I used to have a maxim: “you can never have enough maps, graphs and tables”. I’m delighted to see that The Lawyer‘s crisp new ‘infographic’ redesign for 2012 meets with my approval, packed with tons of data in tables and colourful pie-charts.

Speaking frankly, I usually sigh inwardly when a publisher announces a redesign. What seems like a radical refresh in the hallowed cloisters of most magazine publishers often barely registers a flicker among the readership, which cares, primarily, about one thing: content. Design is usually of subliminal importance; they know when it’s not right, but otherwise just want it to look nice.

The Lawyer has managed to hit the right note on both counts, noticeably pumping-up the content while delivering it in a pleasing, modern package (albeit one that puts me in mind of Campaign, the advertising trade publication which has an almost mythical reputation among trade hacks). The result is not only very readable but also feels more weighty.

So a big thumbs-up for The Lawyer. I wonder whether it will prove to be more than its doughty rival Legal Week, which has kept pace with, and even, dare one say, splashed the odd shot ahead of The Lawyer’s bows from time to time, can cope with. While my colours are, as a regular blogger on The Lawyer’s website and occasional contributor to the magazine, quite firmly nailed to The Lawyer‘s mast, I hope not. A direct competitor always helps to keep one on one’s toes.

To use a terrible old journo-cliche, one which would have me drummed out of most respectable news-rooms, ‘only time will tell’.