By Murdocca, Raffaele V.
Strategies: The Journal of Legal Marketing , Vol. 15, No. 2
Throughout the last several years, many law firms were seeing a decrease in revenue and profits because there was less deal work, clients were keeping more work in-house, clients refused to pay for first- and second-year associate work, and clients were successful at preventing significant annual rate increases or worked out alternative billing arrangements. As a result of this shift in legal services, law firms were looking at other ways to grow revenue. One way to grow revenue and profits was through the acquisition of lateral partner talent.
The industry averages about 2,400 lateral partner moves a year, with close to 2,700 lateral moves in 2012. In the "2012 Am Law Study on Strategic Planning at Law Firms," respondents were asked what the firm's top business strategies were for this year. The number one response was "growing the firm's revenue" and a very close second was "talent acquisition and retention." If you talk with law firm leaders, they would say these two go hand-in-hand.
An ALM-LexisNexis survey cited in the American Lawyer found that when firm leaders were polled, 70 percent are expecting to hire more lateral partners over the next five years and 96 percent said pursuing lateral acquisitions is part of their growth strategy over the next two years. As one can easily surmise, growth by lateral partner acquisitions is here to stay for the short and long term.
So what about lateral associates? During the recession, firms cut their summer associate classes significantly. The National Association of Law Professionals (NALP) reports that the summer associate classes are much smaller than they were at pre-recession levels and smaller classes are the new norm. As a result, there will be fewer first-year associates in law firms. This is due to the fact that summer programs are expensive when firms would like to cut costs, and clients do not want to pay to train first- and second-year associates. This downturn in summer associate hiring and the reduction in permanent offers started in 2009, along with many associate layoffs. As a result, there is a lull of associate talent with three to six years of experience. Therefore, many firms are now looking for lateral associate talent, for both on-track and off-track partnership positions, to fill the void.
Now that we've established that lateral partner and associate talent is needed, the question is how do law firms find the talent? The best way to find lateral talent is through an internal referral source. Partners would like to grow their firm with strategic partner selections and, therefore, will reach out to peers at other firms. The managing partner or hiring partner at the acquiring firm will also specifically target certain lateral partner candidates through referrals and then reach out to potential partner candidates.
On the associate front, many firms give bonuses to their associates for referring other associates to the firm. Associates will also apply on their own when they see postings on a law firm website or ads placed through local bar associations, local legal newspapers or social media sites. Lateral partners are less likely to apply on their own, but may reach out to former law school classmates or peers at competing firms. …