Lawyer attrition is a reality of our industry. Unfortunately, so is a significant lateral hire failure rate. It doesn’t need to be. There are simply, effective ways to protect your investment.
A 2013 American Lawyer/LexisNexis survey found that over 70% of respondents identified lateral hires as part of their talent management strategy over the coming five years. That’s a significant investment, as laterals aren’t cheap. A UK study by Mark Brandon of Motive Legal Consulting (who investigated 2,000 lateral hires from 2005 – 2011) determined the average cost of a lateral hire to be £ 100,000. Compare that to an earlier NALP Foundation survey which found that the cost of investment and recruitment for a typical associate is $250,000.
Considering the lifetime potential earnings of a lawyer, that wouldn’t be so bad if the retention rate was a little better. The same survey found that on average, of 75% of associates leave their firm within the first five years. Brandon’s research on laterals identified that 33% left within three years and 44% had left by year five.
We all expect some attrition, but at least the remaining lawyers are productive, aren’t they? Not really. An earlier Bloomberg Law study stated that 70% of law firm laterals are considered unsuccessful (unable to hit their financial targets) and 10% were considered absolute failures. Brandon’s survey declared that 32% were absolute failures. And by the way, Brandon reminds readers to consider soft costs as well, such as loss of opportunity while the lawyer was with the firm and under-performing, loss of firm credibility in the marketplace, strategic drift, and morale problems.
So why do we continue to invest in a business vehicle that isn’t working? Lawyers move firms, move into other industries, or retire. A firm needs critical mass to serve its clients. Firms also need a good range of professionals, by area of focus and by years of experience. Gaps are noticed by clients and may result in a lack of confidence or termination. Firms might bring in professionals to expand knowledge base in a certain area, or to prep for the retirement of an older professional. Laterals that come in with a good book of business are no brainers – provided they fit with the firm culture and can hold onto their book. (Stats suggest that you can assume a lateral will hold onto about 1/3rd of their declared book of business).
Laterals are a reality, but their low success rate can be improved. All of the research points to the same three success factors:
- Better planning for partner hires;
- An improved hiring process;
- An integration plan for all new hires.
Strategy v. Opportunity: The research notes that firms with a large lateral turn-over rate tend to hire opportunistically, instead of as part of a talent strategy closely aligned with the firm’s strategic plan. If you don’t have a strategic plan then how do you know how many lawyers you need, where, and at what year of call? Many firms consider laterals when an opportunity is placed in front of them. It’s difficult to assess such an opportunity when we have no plan to assess it against. Clearly, the fear of losing a great opportunity to the competition should not be overly compelling, given the low rate of success for laterals. Have a plan. Stick to your plan. Be proactive rather than strategic in your lateral hires.
Guide the Process: The core competency of a lawyer is not recruitment. You are probably best-served by bringing in experts. But you need to give them proper guidance. If you ask a consultant to do a job, they will do it. If they are good, they will ask you to be very clear on what you want done, how you would like it done, and they’ll ask you what success would look like. Few firms know the answers to those questions, so it becomes clear quickly that they don’t want to be asked. In that case, the consultant will guess at the answers and commence with their work. No wonder so many lateral hires fail. Be more involved in the hiring process.
Shorten the Road to Success: Lateral hire research by Heidrick and Struggles /Winmark has identified that it takes between 18 and 24 months for a lateral hire to perform to a desire standard. That said, most partnership don’t have that kind of patience; they expect to see tangible results in 6 – 12 months. Laterals need to prove very quickly that they were worth the effort.
You can significantly speed up lateral hire integration and productivity with a proper integration plan. A good plan would include an assessment of the lateral’s skills and capabilities, training on any shortfalls, coaching through development of a better understanding of the products, service offerings, culture and key contacts within their new firm, exploration of the best target market for the lateral, development of an initial integration and business development plan for the lateral, and coaching/assistance through the initial implementation of that plan. Sometimes this type of service is available through in-house marketing departments. Alternatively, I offer this service through my coaching practice. The cost of this service is so reasonable it’s a no-brainer – like changing the oil in your car to avoid having to replace a burned out engine.
Laterals are a reality of our industry, but lateral failure doesn’t have to be. Successful lateral programs seek to improve performance and retention statistics. Integration planning/coaching can dramatically assist with both.