The Legal Circle of Life

I was honoured to be a part of panel discussion at the recent Georgetown Law Center Symposium “The Shrinking Pyramid: Implications for Law Practice the Legal Profession.”

Several thoughts occurred to me while attending this event; one of which I’ll share with you now.

There was some discussion about the fact that lifelong partnership at one firm is a relic of the past; there is a constant merry-go-round of lateral partners moving from firm to firm to firm. We see this in Canada as well. Lateral hires typically move for more money (and sometimes for firm management reasons) but paying more money to a lateral hire means that her rate will also increase, which means that clients pay more.

From a firm management point of view, bringing in laterals with a “book” of business can be a very dubious proposition – most often these lawyers are more loyal to themselves than to their partners; so building a firm around a group of individuals who may leave at any time with their “book” is not a structurally sound decision. It also reduces the ability to make any long term investments, as laterals demand large immediate compensation for the revenues brought in by their “book” – failing which, they will leave.

But firm strategy is also flawed when it demands that young lawyers go out and build a “book” of business in order to make partner. What is overlooked by firm management is that when that lawyer does follow instructions and build her “book,”she is then able to leave the firm with her “book.” Again, firms are setting themselves up for self-destruction.

The lateral merry-go round is exacerbated by clients who claim that they hire the lawyer, not the firm. This of course emboldens lawyers to be even more “me-centric” and less interested in the long term health of the firm, as the lawyer can simply leave with her “book” whenever she wants.

So we have an interesting circle of life.

The less loyalty that clients show firms, the more lateral movement increases, which in turn weakens firm structures, reduces the incentive for law firms to make long term investments in better and more efficient client service, which in turn increases legal fees paid by clients.

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Comments

  1. Thanks for the post, Mitch. There are so many reasons why laterals at different stages of their careers move, but I disagree that they typically move for money (or short-term gain).

    I’ll focus my comments on senior laterals with a significant book of corporate clients. From my experience, most move because their clients would be better served by another firm, because the lawyer him- or herself would be happier and because the governance of the new firm fits their practice priorities.

    Hiring committees charged with executing long-term firm strategy see through shallow “me-first” attitudes in potential hires. Clients won’t follow these lawyers to new firms, either because they’re dubious, because they weren’t as loyal as the lawyer thought (indicative of poor relationship management skills) or because the value proposition of training a new client team at the new firm doesn’t exist.

    Loyalty cuts across many levels of client relationships. Firm infrastructure, governance, leadership , capacity, market position and a thorough onboarding program are issues for any lateral to consider before making a move (not just a signing bonus to compensate for risk).

  2. Gary Luftspring

    Natasha, all good points however I have seen few laterals move for less money and there is overwhelming survey evidence that laterals who move once are more likely to move again so clearly not all firms, or I suspect few firms, are actually acting in the way you suggest they should. So in the end Mitch’s comments resonate. What isn’t said is that not all firms, big, small, mid-size are equally profitable. That divide is growing so there certainly is ability to move as a lateral and be compensated and valued more because some firms are simply more profitable be that because of management or happenstance. Certainly recruiting firms seem to be busy these days.

  3. Excellent points regarding retention, earning potential and profitability, Gary. Thanks for sharing your perspective!