Lateral partner hiring is regularly referred to as ‘buying a book of business’, and it’s fast becoming one of the most effective ways for firms to strengthen performance at a time when financial cuts are becoming necessary for many. In fact, the majority of law and accountancy firms view lateral hiring as a growth strategy within itself. Partners themselves may have a myriad of reasons to consider a lateral move to a new practice; to increase compensation, to boost reputation, to develop more business, or to find a more suitable work/life balance. Anecdotally, we estimate that each year, as many as 5% of partners make a lateral move.
Of course, for anyone thinking about making a lateral move, there are considerations to be addressed. For associates, for example, one of the primary considerations is how a lateral move would affect existing track to partnership. However, for partners, there are a whole new set of aspects to take into account. So before sitting down and completing that lateral partner questionnaire (LPQ), here’s what to consider:
Motivation and Ambition
The Up or Out: When Partners Have to Go report by ALM Intelligence suggests that between 40 and 50% of lateral partner moves don’t work out, and fail within the first 3 years. Additionally, more than one third of laterally transitioning partners have been with the originating firm for 10 years or even more. This highlights the risk of moving from a long term position into an opportunity that may not pan out, so there must be solid motivation and ambition behind making such a significant career leap. Carefully consider why you’re thinking about change, and what benefits you are expecting from moving.
Once there is a clear and firm rationale supporting and backing the decision to make a lateral move as a partner, there is a need to consider whether or not there is also a business case. Fortunately, it is becoming easier to obtain financial records and other valuable information which can help to create a solid business case for a lateral transition. It is essential to form a strategic plan for the move which should always make sense from a business perspective; not just yours.
While partners have a fiduciary duty to the originating firm, the nature of this duty is often unclear, and the act of making a move with clients is relatively commonplace. A guarantee of ‘portable business’ is often used as a selling point by partners looking to move to a new practice, but how portable business really is depends on the relationship with existing clients. Consider a client’s right to choose, and don’t assume your clients will always choose to move with you; take into account that personal or legal conflict, or dissatisfaction with new billing and collection practices can affect decisions.
Once again, while fiduciary duty to the originating firm is expected, there is something of a grey area when it comes to including others within the lateral move. It is vital to consider any associates, paralegals, secretaries, or even other partners who are instrumental in client retention and ongoing business development; anyone that is integral to the guarantees of portable business made to the new practice or likely to defend against your move is left behind. It is important for partners to work to find the right balance between their personal preferences for staff, and justifying their book of business.
In addition to fiduciary duty, the originating firm may also include more direct and specific restraint of trade, which must be taken into account before making a lateral partner move. It is important to remember that restriction on competitive activities may be more enforceable for partners than for associates, due to the higher bargaining powers that come with the position. The originating firm is entitled to protect their legitimate business interests, and may include anti-team move covenants.
Tips for a Successful Lateral Move
There are strategies that can be deployed to mitigate the risks highlighted above and the likely success of a lateral partner move can be increased significantly through the creation of a strong and strategic plan. Here are some tips for building a plan for a lateral transition:
- Prioritise what is important in a move and understand why you’re looking into lateral transition. Money? Reputation? Opportunity? Balance? Determine what you want, what you need and what you’ll accept.
- Do your research; ensure potential practices have the resources, scope, reputation, client base, and practice breadth to enable you to achieve what it is you, your clients and your team want from the move.
- Maintain secure means of communication with law practices and headhunters during the early stages and uncertainties of a lateral move, to prevent unnecessary rumours/gossip.
- Honestly analyse what went right — and what went wrong — at your current firm. Seek to replicate the good stuff and avoid the problems to maximise the chances of lateral success.
- Consider the risk of remaining with your current firm; there are reasons you are considering a move. What if this never changes or you decide to ‘put up’ with a sub-optimal environment which leads to a lack of ambition and stagnation?
Despite reports that law firm lateral hires dropped by 7% in 2016, and by 8% in 2017, there were still 445 recorded lateral moves in London alone throughout 2017. Lateral partner moves are certainly showing no signs of dying out, as firms are increasingly looking into growth opportunities while partners continue to seek out optimal environments. When done well, a lateral partner move can prove to be highly successful, pushing both firms and individuals to another level. However, it is essential for partners to honestly consider many aspects beyond personal desires and take appropriate measures to increase your chance of success.
To download a free copy of Ortus Group’s Guide to Making a Lateral Move, click here.