ALM Legal Intelligence has released the “Risky Business: Rethinking Lateral Partner Hiring” report in partnership with Decipher, a leading provider of lateral partner due diligence and intelligence services. The report analyzes the opportunities and risks law firms face in the lateral hiring markets.
The Risky Business report draws its insights from a survey conducted by Decipher and ALM Intelligence, interviews with numerous heads of talent from national and international firms, and data from ALM Intelligence’s Legal Compass, which includes information on over 10,000 lateral partner moves. The report gathers insights from these varied sources, providing compelling evidence that the rewards associated with hiring lateral partners have made the practice an essential part of operating a successful law firm.
“The ALM Intelligence team is thrilled with the findings that came out of this partnership with Decipher,” said Nick Bruch, Principal Analyst, ALM Legal Intelligence. “This report, and the market intelligence within it, provides a clear-eyed picture of the opportunities and risks law firm face in the lateral hiring space. The data we collected diagnoses many of the primary problems firm face when hiring partners in the lateral markets. It also provides straightforward, implementable, steps to address those problems.”
“The survey results and report really punctuate the challenges firms face in achieving measurable results from their lateral hiring programs. This is a clarion call for greater transparency in the lateral market,” said Howard Rosenberg, Co-Founder and CEO of Decipher.
The report also finds the allure of increased revenue and profitability has dulled firms’ senses to the immense risks inherent in the lateral hiring process and finds that the cost of acquiring lateral partners is incredibly high as are the failure rates. Beyond these financial considerations, firms face significant risks from issues related to malpractice, workplace harassment, and conflicts.
“The collective wisdom of the industry seems relatively clear firms need to carefully consider how they source and vet their candidates. The traditional methods just aren’t working. With failure rates at close to 50%, these mistakes are taking quite a toll on firm performance,” noted Michael Ellenhorn, Co-Founder and General Counsel of Decipher.
ALM’s Legal Compass shows there were almost 9,000 lateral partner moves in the five years between 2014 and 2018. While some firms do more hiring than others, no single firm accounts for more than 3 percent of the total moves among the Am Law 200. In fact, lateral partner hiring is more common than most appreciate. Data from ALM Intelligence’s Legal Compass shows that 97% of Am Law 200 firms made a lateral partner hire in the past five years. Slightly more than half averaged at least one lateral every two months over that period, and one-quarter averaged at least one lateral per month. This is the equivalent of a firm completing one sizable acquisition per year. This data dispels an important myth that lateral hiring is only important to a subset of large law firms. It also underlines the fact that getting hiring right is important to all firms.
Key features of the ALM Intelligence / Decipher report include:
• Lateral Hiring Market: ALM Intelligence estimates that between 2014 and 2018, the total book of business moving between Am Law 200 firms due to lateral movement was $17.1 billion.
• Nearly Every Firm Hires Laterally: 97% of Am Law 200 firms made a lateral partner hire in the past five years. Slightly more than half averaged at least one lateral every two months over that period, and one-quarter averaged at least one lateral per month.
• Low Rate of Retention: 40% to 50% of lateral hires do not last 5 years at their new firm.
• No Promise of Book of Business: 62% of lateral partners underperform in delivering their stated book of business.
• Inconsistent Due Diligence: The scope of what constitutes due diligence varies widely from firm to firm and candidate to candidate.
• Use of Human Intelligence: Confidential third-party source interviews can shed light on a candidate’s personality, potential cultural fit, and business development skills, and can catch serious ‘red flags’, all of which would otherwise not be accessible to the hiring firm.
To find out more about the report and download the Executive Summary, visit at.alm.com/.
For law firms who plan to grow with lateral hires, Decipher (decipherglobal.com) is the corporate intelligence provider that lowers risk and empowers better decision making. Unlike basic screening services, we combine quantitative data with human intelligence to accurately assess candidates’ business, legal skills, work style and character. Armed with this information, our clients grow safely and more efficiently, with success rates four times the industry average.
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