Ed. note: This is the latest in a series of posts on partner issues from Lateral Link’s team of expert contributors. Today’s post marks the second 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. Read the first part here.
HOW FIRMS EVALUATE CANDIDATES (CONTINUED)
Client Diversification and Conflicts: To diversify risk, firms prefer candidates who have spread their business among a number of clients, rather than concentrating it in just one or two large ones. While they generally like high-profile clients who can raise their profitability and status, the more dominant a company, the more likely it is to create conflicts with others in that industry, whether or not a firm has an immediate conflict; further, such high-profile clients often expect that firms will voluntarily forgo representing even potential competitors (sometimes referred to as the “Microsoft conundrum”). Thus, a candidate with such a client has no chance at any firm that currently represents a competitor.
Bill had worked with a marquee high-tech client over the last decade, which constituted about three-quarters of his portable business. The client had followed Bill through several moves, but its conflicts policies necessitated the moves. So while the heft of the marquee client and its loyalty to Bill mitigated the diversification issue, a number of firms would likely shy away from hiring him because of definite or potential conflicts with his showcase client….
Expertise: Not surprisingly, firms prefer candidates with skills that can bolster their bench strength. In today’s market, few firms are hiring servicing partners who can’t at least financially support themselves, though it helps to have unique skills and the willingness to work — after all, firms do not live on metrics alone. Bill had the advantage of a desirable specialty, and a history of working well for clients who were not his own.
Personality: Few firms would reject a rainmaker solely on personality grounds (though there are extreme cases where such candidates have failed the often stated, but spottily enforced, “no jerk” rule). And though fewer would hire a veritable saint with no business, it always helps, especially for a candidate on the cusp, like Bill, to be the type of person that you wouldn’t mind spending five hours in O’Hare Airport with. Bill was an honorable, decent, and — for a lawyer with an arcane specialty — downright personable guy. Another plus.
Professional History: Too many moves too quickly raise a red flag to most firms. After long stints at two firms, Bill had already moved twice in the last three years. Fortunately, he had “good” conflict-related reasons for each of the moves that could defuse that issue.
Age: While loathe to admit it, most firms prefer younger, rising partners with decades of future productivity to those nearing retirement, especially if the firm has a mandatory retirement policy in place. Bill was in his early 60s, but appeared 10 years younger, and was committed to practicing for at least another 10 years. Although some firms might have been deterred by his age, it did not seem as if this factor would be much of a problem.
Compensation: Just as firms vary in evaluating the metrics, they also differ in setting initial compensation. Some simply give a flat percentage (usually somewhere between 33% and 45%) of collected billings to a lateral for a period, before agreeing to a guaranteed amount, thus putting the entire risk, as well as reward, on the candidate. More typically, firms using conservative calculations will guarantee a percentage of the candidate’s book of business (normally between 25% and 40%), frequently having an upside kicker if the candidate exceeds a threshold amount (e.g., 30% of everything in excess of $1 million).
In cases where a lateral doesn’t have an immediate book of business, such as one coming from government, firms will use experience, as well as others candidates’ remuneration, as a benchmark to set an initial compensation level. In the current market, most firms will bring in all but the biggest rainmakers as income partners to provide a test period, ranging from 12 to 24 months. Those with only one class of partner, or those who deem the candidate worthy of immediate equity status, must determine where the candidate fits into their formula. Given Bill’s metrics and overall profile, there was a good chance of finding a firm that would offer him a base compensation in the $325,000 range, with a share in the upside, and an 18-month guarantee.
A TEMPORALLY UNCERTAIN PROCESS
But then, there was the issue of timing. Bill wanted to move as soon as possible — ideally, in less than two months. While the sequence of events for a lateral move is pretty standard, the length of time firms actually take is notoriously unpredictable, and sometimes maddening to the candidate. I typically contact the partner in charge of hiring with a brief description of the candidate’s practice and their résumé (though sometimes candidates prefer that I send an anonymous description to gauge interest, before using their name).
The contact circulates this information internally, and if there is interest, an initial meeting is set up. If that goes well, candidates are asked for information about their billings and clients, frequently in the form of a business plan. If still on track, there might be two or more additional rounds of interviews (a trip to the home office is almost always required). Toward the end of the process, firms generally request that the candidate fill out a Lateral Partner Questionnaire (LPQ), requiring details on, among other things, metrics, clients, and professional history.
Finally, the firm’s executive committee usually meets to determine whether an offer should be made, and if so, its terms. In some firms, the entire partnership has to vote on the matter, although this being largely perfunctory, offers are frequently made beforehand contingent on the vote. Similarly, the offer is often contingent upon the candidate receiving positive references, who are usually only contacted after a candidate has accepted.
Each of these steps can add weeks, if not months, to the process — sometimes a key decision-maker is too busy to focus on the matter. The scheduling of interviews can also take weeks or months, especially during summers and the end of the year when availability is a problem. Candidates themselves can slow the process by not being available and delaying the completion of the LPQ. Generally speaking, a “fast” process takes about two months, with the average being three or four months, with some taking twice that.
All this to say, that when I first met Bill, I couldn’t guarantee him that he would be hired by a certain date, but I promised to do everything I could to accelerate the process. The next day, I sent him a list of target firms and revisions of his résumé and business plan — we finalized all three over the weekend, and I began contacting firms on Monday.
Check back next week for the third and final part of the “Anatomy” series, where Larry Latourette discusses important steps that shouldn’t be overlooked when preparing yourself for a lateral move.