Resource

Lateral Hiring Steeplechase: A Course Map

From a risk management perspective, law firms engaged in lateral attorney hiring – particularly lateral partner hiring – should be focused on three things: conflicts, client quality, and integration. In a sense, of course, these also are three of the primary things that law firms should be focused on simply with respect to their existing group of attorneys, culture, and business strategy. If you aren’t effectively addressing conflicts, bringing in poor quality clients (clients who don’t pay, as just one example), and your culture isn’t cohesive, then you likely have bigger problems than lateral hiring. I would like to focus on the integration aspect of lateral hiring, but first will offer a few quick points regarding the investigation of conflicts and client quality in that context.

Even if a law firm has developed a modern, sophisticated approach to conflicts (read: the firm has highly trained conflicts analysts working under the guidance of one or more General Counsel office attorneys who do the conflicts identification work for every new client and matter) with respect to both regular new business and lateral hiring, the process as it relates to lateral hiring can still be bumpy: information regarding the lateral and their clients and matters might come from different people at different stages in the recruiting process; that information is subject to change or varying interpretation; and the speed with which the process needs to move at any given moment (or, allegedly needs to move) potentially is in a constant state of flux. The key to smoothing out those bumps is effective communication. As it relates to the conflicts piece of lateral hiring, there should be three primary participants involved in regular communications: the lateral, a designated partner or recruiter within the firm, and a conflicts team representative. All three should keep each other up to date with respect to progress, timing, and the inevitable changes to what clients and matters actually are portable. This should include direct communication between the conflicts team and the lateral, if at all possible. Often, potential conflicts do not have to be resolved prior to the lateral joining the new firm, but it is crucial that the lateral is not surprised about the existence of potential conflicts after joining. Direct conflicts team-lateral discussion is the best way to avoid unpleasant surprises.

Many law firms have enhanced their polices and processes for conducting due diligence on prospective clients. If the law firm operates in Europe, it likely has specific regulatory obligations that it must follow in this regard. The resources that firms use to conduct this due diligence will not necessarily tell them if the client is what some professional liability insurers call a “whiner crybaby client” – a client that is going to push back on the law firm’s advice, unreasonably haggle over rates, or outright refuse to pay some or all of the firm’s bills. In either instance, in the lateral context there often is empirical data the hiring firm can draw on to assess the quality of the lateral’s portable clients: the client’s history at the predecessor firm. The hiring firm may still need to satisfy KYC or AML obligations and may want to ask questions about how the client ended up with the predecessor firm (did the client fire its three prior firms?), but the hiring firm also has access to some information it ordinarily would not have for a new client: its effective rate, write off, accounts receivable, and work in progress history at the prior firm.

Even if a firm gets over the conflicts and client quality hurdles with a lateral partner or other attorney, the integration hurdle looms and looms large. If lateral hiring is a steeplechase, integration is the water jump. Like the length of the jump, the integration process is – or should be, if done right – a long process. Most importantly, no lateral should be exempt from the process the firm designs to ensure integration of the lawyer. The best runners don’t get to skip the water jumps and, likewise, senior partners with large books of business should not get to skip the integration process (I promise that’s the last use of the steeplechase metaphor). At least as important as integration of the lateral into the firm’s business practices, environment, and culture is that the hiring firm ensures familiarity with the lateral’s conduct and competence as a lawyer. If the hiring firm fails in any of these areas, it is at risk of creating a siloed lawyer. At best, siloed lateral hires end up leaving the new firm within a short time and the significant hiring and onboarding expenses are not recouped, or, at worst, the siloed lateral costs the firm in the form of claims.

When we talk about siloed lawyers, what we really are concerned about is unsupervised lawyers. The concept of the supervision of a lawyer applies equally to first year associates as it does to the senior partner, the supervision just manifests itself in different ways. With the junior lawyer, it occurs more naturally in connection with the direction of and responsibility for work by a partner or other senior attorney. With senior partners, it comes from working with other partners and even in using associates. If there is more than one set of eyes on a matter, it is more likely that things like mistakes or, god forbid, misconduct will be noticed. In the lateral hiring context, a best practice implemented by some firms is to assign every lateral attorney – no matter how senior or how quickly they are integrated with a client service team – a lateral integration supervisor. That supervisor should be given the responsibility (and rewarded for undertaking the responsibility effectively) for ensuring not only cultural integration and business practice training, but also knowing and understanding the actual work conducted by the lateral for the first six to twelve months of tenure at the hiring firm. Indeed, if a firm finds a lateral pushing back on the idea of this kind of integration plan, that’s the firm’s first red flag regarding the quality of the lateral.