Client-facing lateral hiring? Surely not…

Is your firm's lateral hiring strategy client-facing?

The majority of law firms, especially those outside the top flight, operate some kind of sector strategy, which is expressed in a cross-departmental group. This applies even when a sector and a department look contiguous – eg Real Estate – because the sector play will draw in experts in construction, property litigation, property finance and tax etc, many of whom may be based in other departments. 

But how often do firms hire to the needs of their sectors?

In my experience, hiring mostly takes place where revenue budgets sit – at departmental level. The needs of a sector group are secondary to the needs of the contributing departments, and in particular their revenue and profit targets.

What the sector is able to field is whatever the department can spare when it’s not engaged on more important activities. This isn’t much of an issue for sectors like Insurance, where the skills of the specialists map neatly onto sector needs and where it’s possible to have a Corporate cell, for instance, sitting with Insurance, but it’s more complicated for sectors like Retail, Energy and Financial Services, for instance.

This, in my view, hampers the development of true sector focus and deep commercial understanding – a criticism of law firms which comes up time and time again in client interviewing. It also inveighs against a more strategic approach when it comes to lateral hiring.

Directing hiring strategy to the needs of a cross-departmental sector group is challenging. Targets live at departmental level, so a partner’s revenue – and therefore their income – will be under pressure if they’re working in sectors where margins are lower or in venture areas, where the service is developing, work is patchier and rates have to be kept keen. I’ve seen this happen a lot with Commercial partners, who are often the glue that binds a sector play together. Because the sector isn’t a place they can ‘sit’ in budgetary terms, they can get pushed from pillar to post, end up demoralised and effectively penalised if they spend time trying to develop the sector, or indeed just struggle for work if partners from the big departments aren’t that committed to the sector.

Taking a different approach can not only save time and money but result in better hires. Hiring driven from an in-depth strategic plan at the sector level, provides a far more attractive context for hiring good people, because people always want to be part of a story, not just a revenue bolt-on.

Most of the big firms don’t do it because their primary focus is on departmental revenue. Much easier to hire a generalist with a following apparently sufficient to ‘wash their face’ than undertake a proper gap analysis at sector level and enrich the service offering via truly targeted hires.