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Successful Lateral Integration for Law Firms

Tuesday, July 9, 2013
By Julie Savarino, Business Development Inc.

Lateral hiring/acquisition is—by far—the number one strategy used by the majority of major law firms to increase revenues. The current pace of lateral hiring and turnover continues unabated. In addition, the total percentage of new revenues generated by lateral hires/acquisitions is in the double digits for many law firms (while the total new revenues generated by organic growth for most major law firm is flat or in the single digits).

A recent American Lawyer/LexisNexis survey found that, as a way of growing, 96 percent of law firms surveyed planned to hire laterals in the next two years, and 75 percent expected to continue to hire laterals over the next five years. However, only 28 percent of respondents said that hiring laterals had been “very effective” over the past five years, and 10 percent said hiring laterals was either neutral or negative. These results suggest that original expectations are not being met on either side.

High Expectations, With Average to Low Success Rates

In a lateral hire or acquisition, expectations are high on both sides, and for the law firm those expectations usually extend beyond what the individual lawyer will bill and collect. Just as the new lawyer anticipates enhancing his/her client current client relationships and creating new ones by joining the firm, the number one and greatest expectation of most law firms is that the lateral’s book of business will come with him/her and add immediately (or within 60 to 90 days) to the firm’s revenue stream. The second greatest expectation on both sides is that the lateral’s clients will buy/purchase/use other services the firm offers. Third, is the expectation that the lateral has a set of skills and experience that can be offered to existing firm clients. If less than 30 percent of lateral hires/acquisitions are rated as “very effective,” these three expectations are too often not becoming reality.

Why is the success rate for lateral hires so low? If approximately 70 percent of laterals are considered less than effective to one degree or another, obviously the original, pre-deal expectations have not been met on one or both sides. In any addition of lawyers, whether individual lateral hires or acquisition of a firm or practice group, both sides spend considerable time discussing the details and mutual expectations. Yet rarely are the precise expectations of both sides clearly spelled out and mutually agreed upon in a written plan that assigns responsibilities, timelines and is continually assessed during the approximately two years required for full integration.

Defining the Lateral On-Boarding and Integration Process

Successful lateral hiring is a process that takes time and the integration process in particular is often not as well supported as it could be within most major law firms. The lateral retention and turnover rates at any individual law firm can be improved upon by creating a more formalized integration program beyond simple orientation and a few, informal follow-ups. Several firms offer laterals a full menu of integration services/options that may help to attract laterals to the firm, improve lateral satisfaction rates, and help the lateral embrace the firm culture.

From initial identification to the lateral’s start date, significant of hours involving law firm and practice area leaders, lawyers and staff are devoted to the lateral identification, search, courtship, vetting, due diligence, selection and hiring processes. Increasingly, knowing that so many laterals end up leaving the firm, many partners are asking: “Why are we spending such an inordinate amount of time, effort and resources finding and hiring laterals and so little time and effort to ensure they stay with our firm?” In simple business terms, law firms need to decrease their lateral attrition rate and increase the lateral retention rate through effective integration. As noted, this process takes time. In firms with over 150 lawyers, successful integration may take at least two years at least, and at larger firms, even longer.

On the front-end lateral identification, due diligence and hiring processes, most major law firms have a well-organized internal process, and/or a checklist with associated steps of ‘who will do what’ and when. In the deal negotiations, expectations are discussed but not always understood. Putting expectations in writing to ensure accuracy and clarification may help improve a law firm’s average lateral success rate. Most law firms detail in writing the actual or potential clients the acquiring firm hopes will move with the new lateral. But there is rarely complete or ongoing support to assist with the actual client transfer process and to help ensure that the maximum number of clients or amount of business will come to the new firm. Surveys show that the number one reason that partners leave their firms for competitors is due to “lack of support.”

Interestingly, when comparing the results of overall lateral satisfaction surveys versus satisfaction surveys of actual clients, their results are about the same: approximately 7 out of 10 (on a scale on 1 to 10 with 10 being the highest). This highlights a tremendous opportunity for most major law firms, in that a slight increase in the level of satisfaction from both laterals and their clients, say from a 7 to an 8, would yield significant benefits in terms of time and costs savings and increased revenue. Therefore, adopting a plan to improve overall satisfaction could benefit many firms. And some of the country’s largest law firms are doing just that.

What Some Major Law Firms Are Doing

One international law firm, Mayer Brown, has implemented a leadership-driven strategy to handle overall satisfaction from both the client and lateral perspectives. The firm recently assigned full-time responsibility for global lateral recruiting and integration to Chair Emeritus Herbert “Bert” W. Krueger. Bert explains that “laterals are an important part of the life blood of our firm and that is why we have a formal, organized approach and support processes to help insure their success.” While he admits that “there is no magic bullet,” Bert uses a formal, written pipeline to track all lateral needs, targets and efforts. In this pipeline, the lateral is assigned one or more firm sponsors, who may include the head of the office where the lawyer will be based, relevant practice/industry group head(s) and another senior lawyer. Bert’s work dovetails effectively with that of another senior partner, Debora de Hoyos, who served for over 15 years as the firm’s Managing Partner. Debora now serves as the firm’s Global Client Relationship Partner overseeing Mayer Brown’s global industry sector groups, client teams and related client satisfaction and global business development initiatives. In that capacity, Debora meets with prospective and new lateral hires and initiates appropriate connections with relevant firm lawyers, client teams, industry groups, resources and/or other interests within the firm.

Before each lateral starts at Mayer Brown, the firm’s full integration team, led by Bert and supported by three staff members, works with the lateral to draft a business plan and also create an integration budget to insure the new hire can travel to other offices, meet new colleagues and attend relevant events. “True integration is not fast or easy,” says Bert. “Initially, integration requires a concerted effort because everyone is so busy,” he points out. “After a year or so, we find most laterals have assimilated/integrated within the firm and my reports to management reflect that.”

Greenberg Traurig is another major firm built on laterals. Less than 25 years ago, it had approximately 100 lawyers and now has over 1,750, the vast majority of whom were lateral hires (not firm acquisitions). Given this high volume of additions, Sandy Grossman, Director of Lateral Integration at the firm, says, “My role is to shortcut the internal information and connection processes. For example, if a lawyer wants to know who works for a certain client, which lawyers are involved in what pro bono effort, or any other question—because of my history with the firm and institutional knowledge and relationships, I am able to respond immediately or within a very short time.”

It is important for the firm to clearly define the clients, skill sets, industry experience and contacts it is hoping to get from laterals in the short and longer term. It is equally important to define for laterals what they are going to get and when. As Cathyann Bixby, Director of Lateral Growth and Integration at Ballard Spahr LLP states, “Lateral hiring and integration is not about going down the aisle and simply picking then buying what you want. To be successful these days, selling the firm and its features and benefits are equally as important to ensure that what both the lateral and the firm expect from the relationship is reasonable and delivered.” To accomplish this, another major law firm formally “maps” each lateral’s skills sets and capabilities across the firm so that the lateral represents more than simply “buying a book of business.”

Another large firm has refocused about half the time and efforts of its internal marketing department on internal business development (or “inside sales”) to identify lawyer and client needs and ensure the right lawyers are working with or known by appropriate clients and other lawyers within the firm. With more than half of the firm’s new revenues coming in from laterals, the firm decided to invest more to insure their success.

While many major firms initially hire laterals in an of counsel-type arrangement to insure expectations are met before promoting them into full partnership, one major law firm has created specific, alternative career tracks to attract quality laterals not interested in working and/or billing full time or even ever becoming partner.

Some newer law firms employing alternative business models are not only cannibalizing a significant percentage of legal work that used to be serviced by large traditional law firms; they are also attracting and retaining a significant percentage of laterals due to their ability to offer varying work schedules, career paths, client mixes and compensation packages.

For example, Axiom represents these trends through its insourcing practice (placing seasoned lawyers to work in house for General Counsel) and its outsourcing practice (assigning teams of lawyers to design and execute entire functions). According to Liana Douillet Guzman, Vice President of Communications for Axiom, that means “we offer a range of career alternatives to laterals. If we are recruiting for our insourcing practice, we attract senior attorneys looking for a more self-directed career path. For our outsourcing practice, we attract accomplished junior attorneys with three to seven years’ experience who work alongside project managers, technologists and senior attorneys on large-scale, complex, managed services projects.”

Another relatively new legal services organization, Cognition LLP, is based in Canada. It is comprised mainly of lawyers with prior experience practicing in both major, private law firms and in senior in-house positions. So, the firm’s lawyers, all of whom work as independent contractors, are invariably laterals from one or more previous, high-level positions. Director of Lawyer and Client Happiness Lesley Henry focuses both on lawyer and client satisfaction. She says, “When new lawyers join the Cognition team, we approach integration by first considering each lawyer as a unique individual, with different skills, preferences and styles. We work to create a sense of connection from several perspectives, with colleagues and clients, within the firm, its values and culture and social and personal interests.” Lesley continues, “Because we hire mainly highly experienced and successful laterals, our clients get the benefit of their diversity of knowledge and approaches without having to foot the bill for training or integration.”

How Most Law Firms Fall Short

Unfortunately, the majority of law firms still rely on the more traditional, mainly reactive approach to lateral identification, hiring, on-boarding, and integration, which usually went something like this: “We need an X lawyer in Y office” or “five of our best clients need Z service . . . let’s identify a lawyer we can hire to provide that service.” When lateral hiring was not as competitive and law firms were not as large, this process might simply involve asking the firm’s lawyers if they already know someone who might be interested and be a good fit. This informal, “buy” based approach to identifying and hiring laterals is still commonly used, as are outdated, up and/or out-type career paths.

Once hired, most laterals still are immediately put to work on providing service to their clients and/or other firm clients and lawyers. Often there is little or no formal integration process; the new lateral starts billing and firm leaders move on to their next priority. Rarely is anyone within the firm responsible for keeping track of laterals, ensuring integration and reporting back to leadership. Successful integration of the lateral is often more or less assumed. This produces a reactive, informal and “lateral of the moment” approach to lateral hiring, retention and integration that is no longer the competitive standard.

Few firms have a person or department dedicated to lateral integration. Most law firms have several employees who assist in integrating new laterals, but for most it is only a small part of their job and firm leaders “expect” that the integration process will succeed. Most law firms still rely on a rather informal process of involving different support departments at different times and for different tasks/deliverables. For example, recruiting staff helps drive the front end process, conflicts and finance assist in the due diligence process, human resources (HR) helps upon hiring, practice group representatives assist in early days, marketing helps with announcements and contact integration, etc. The lateral’s practice group may assign a primary mentor (usually the practice group leader), who takes the new hire to lunch or dinner, explains committee and training meetings of interest, and checks in within 60 days or so to “see how things are going.”

Ways Law Firms Can Improve Lateral Success Rates

Some major law firms have recognized the inefficiencies and disconnects inherent in this traditional approach and have made concerted efforts to upgrade their lateral on-boarding and integration processes. At least three Am Law 200 law firms have implemented formal, business process improvement programs, projects and methods (such as BPI, Six Sigma, Kaizen, etc.) to significantly improve lateral on-boarding and integration. These firms measurably increased their lateral retention rate while decreasing their lateral attrition rate. Such process improvement projects include having one key person and/or committee organize everything into one place and define the key steps and timing associated with lateral identification, hiring, integration, development, retention and attrition. This involves organizing and coordinating all the tasks, people and information required for each step in the process, “mapping” it from start to finish.

Fisher & Phillips, a large labor and employment law firm, recently created a project team, the objective of which was to assess, review and upgrade the firm’s on-boarding procedures. According to Raffaele Murdocca, the firm’s Director of Recruiting and Professional Development, who is a member of the team, “we interviewed about a dozen recent hires to determine what works and what could be improved and then we created a specific checklist of items/tasks each new hire should accomplish within the first week, first month, first six months, etc.” Raffaele continues, “While the checklist is currently a simple document, we are working to encode and embed it into our firm’s intranet so that new hires can either print it or track it live as they prefer.”

It is crucial to follow up regarding the on-boarding and integration process, through collaborative review, analysis and tracking. One point-person or committee should “own” the entire process by being given the overall responsibility for it and for reporting to firm management. Because true integration in most cases takes well over a year to be effective, the steps on any on-boarding checklist for both the firm and the lateral should extend well beyond the first 90 days. Even adding a simple bi-monthly check-in after 90 days would likely increase the new hire ROI for most law firm laterals. This check-in would need to be organized, tracked, managed and reported on by someone with knowledge of the firm, who has the ear of key leaders or otherwise has influence within the law firm.

These steps result is a more time- and cost-effective approach, greater awareness of its importance within the firm and ultimately increases lateral retention rates. As Greenberg Traurig’s Sandy Grossman says, the continuing goal is to “make lateral integration our firm’s way of life and keep it well-known that it is a part of everyone’s job at the firm. We all remember what it was like to be the new person and so we have a ‘how can I help?’ attitude embedded within our law firm culture.”

Individual initiative is a significant component to successful integration for any lawyer, in any firm whether home-grown or lateral. If a lateral expects to arrive at a law firm, sit back and wait to become fully and successfully integrated, that expectation will make for a less than effective move. Obviously, effective and long term integration is a two-way street. The lateral also needs to make efforts to communicate and get to know the people within the firm and its clients; waiting for others is not usually an effective approach in any law firm. As Sandy Grossman says, “I often remind laterals and all our lawyers that if you want to simply sit in your office and wait for your phone to ring, you may want to become a solo practitioner.”

Importantly, the ultimate goal with any lateral hire is to ensure the lawyer is happy, survives and thrives. The goal for each lateral hire should be for the lateral to remain at the new firm, in a capacity where lateral, clients and firm all benefit. What benefits no one is to have “serial” laterals who have moved to and from three or more firms in relatively short order. The formal on-boarding and follow-up processes described here will go a long way toward avoiding that situation. As Mayer Brown’s Bert Kruger states, “The lawyers we want to attract to our firm are already successful and are doing well wherever they currently practice. We want to make sure our firm is where they remain in the future.”

Julie Savarino is an attorney and managing director of Business Development Inc., a certified women-owned company that helps law firms and lawyer generate measureable new revenues. Julie serves as a strategist, advisor, service and program developer, trainer and/or coach for many law firms. www.BusDevInc.com  

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