Ed. note: This is the latest installment in a series of posts on partner issues from Lateral Link’s team of expert contributors. Today’s post marks the first of a three-part narrative detailing the make up of a lateral move, and is written by Larry Latourette, Executive Director of the Partner Practice at Lateral Link.
The call came on a cool, clear Thursday morning in April: “Bill” was in trouble. He had joined a midsize firm as a partner nine months earlier. Now, despite assurances to the contrary, the firm had accepted a representation that would be adverse to Bill’s main client. He needed to move, and he needed to move fast.
We met for more than an hour that afternoon covering all the critical issues: his professional history; his expertise; his clients and potential conflicts; his billings, collections, and rates; whether he would be bringing anyone with him; the kind of firm and culture that he was looking for, including additional support he would need; how much longer he wanted to practice; and the level of compensation he could expect.
Each year, about one in 20 partners faces a lateral move. The process can seem irrational and daunting, especially to first-timers. Having gone through a lateral move myself, and overseen the hiring of numerous laterals as a managing partner, I’m more familiar with this arcane ritual than most. Now, after 10 years as a recruiter guiding dozens of candidates through the process, I offer an “anatomy” of a lateral move, using Bill’s experience to demystify the journey and explain how firms evaluate candidates, which materials candidates should typically produce, the normal sequence of events, and how candidates can best prepare for them….
HOW FIRMS EVALUATE CANDIDATES
Reasons for the Move: Firms always want to know why someone is considering a move, and view some answers as better than others. “Good” reasons include an insurmountable conflict with a major client (the situation facing Bill); being in a practice area that is not part of the core mission of the candidate’s current firm and looking for a more supportive environment; wanting to move up the firm food chain in terms of sophistication of practice and clients; seeking the possibility of a leadership position when advancement is currently blocked (e.g., a practice group leader who is only slightly more senior); wanting to be at a firm with a better array of supporting practices, offices, or clients that would help the candidate’s business development; and looking to be part of a highly regarded practice group. Less desirable reasons include simply wanting more money, rampant personality conflicts within the current firm, desiring to work less, or just changing for the sake of change.
Metrics: Each firm has its own method for evaluating whether hiring a candidate makes economic sense. A big New York firm, for example, almost always looks for someone who can bill clients in the $650 to $900 range and has annual portables (or someone who could be expected to generate them, such as a very senior government lawyer) well north of $1 million; anything lower would be dilutive. Many other firms, in contrast, look for rates in the $500 to $700 range and will consider candidates with billings in the high six figures. While firms have differing policies regarding billable hour requirements (some focus only on the profitability while others expect certain minimums), they all focus on collections. A partner may have a high rate and bill $2 million, but the economics are much less attractive if they only collect 60 percent of those billings. Finally, firms scrutinize revenue trends, especially in determining compensation. Although firms sometimes make an allowance for one poor year, a consistent decline is troublesome. Firms thus will typically use the most recent year as the base amount in such cases rather than an average.
Bill’s numbers were solid, but not spectacular. He had had an effective billing rate of $550, had peaked several years earlier at $1.5 million in collections, which had slowly fallen to $1 million, almost no write-offs, and put in an average of about 1,800 billable hours.
Check back next week for Part II of the “Anatomy of a Lateral Move” series, where Larry Latourette continues to describe how firms evaluate candidates, including specifics on client diversification and conflicts, expertise, personality, and more.