Law firms have been in a “slow growth” phase ever since the nation began its recovery from the Great Recession. As we mentioned when we discussed the 2013 Am Law 100, “success now comes in the form of single-digit returns with regard to key financial metrics,” with Biglaw gains described as “modest” and “spotty” across the board.
Big-name lateral hires can sometimes bring in enough positive publicity and fanfare to make even the sickest of firms seem like the very picture of health and vitality. According to the latest American Lawyer Lateral Report, those lateral moves can be likened to a peacock’s tail: they offer “no advantage” for a firm’s ultimate survival, and may hinder the firm in the future. It happened at Dewey, and it can happen at other firms if they’re not careful. If only partners’ attentions weren’t so easily grabbed by the promise of higher profits.
So if this growing reliance on lateral hiring is truly capable of destabilizing law firms, wouldn’t you like to know which firms did the most lateral hiring over the past year? We’ve got the details for you….
According to Am Law’s 2014 Lateral Report, there were 2,522 moves in and out of Am Law 200 firms between October 1, 2012, and September 30, 2013 — which is funny, considering the publication was “unable to find a relationship between a lateral partner hiring strategy and higher law firm profitability.” What? There’s no statistical relationship? Whatever, lawyers are bad at math — very, very bad:
Perhaps this is telling law firm leaders what they already know. A 2012 ALM–LexisNexis Survey reported that only 28 percent of managing partners reported that lateral hiring was “highly effective,” defined as “most laterals have been retained and contributed to business growth.” Yet, in the same survey, 96 percent of managing partners reported that more lateral partners would be part of their firm’s growth strategy for the next two years, edging out business development (94 percent), pricing strategies such as AFAs (72 percent), lawyer development (71 percent) and client relationship management (65 percent).
So which firms didn’t care whether lateral hiring was “highly effective,” and continued to hire laterals out the wazoo anyway? Here are the top five firms of 2013 (by percentage of total partnership):
- Husch Blackwell: 16.5 percent
- Fox Rothschild: 16.0 percent
- Adams and Reese: 12.6 percent
- Sheppard Mullin: 10.9 percent
- Gordon & Rees: 10.6 percent
Congrats to these firms on all of their lateral pickups. You’re the flashiest firms on the block. Go on and shake those tail feathers; we just hope it won’t be to your detriment.
You want to know which firms had the most defections last year, so we won’t leave you high and dry. These are the top five firms partners fled like rats from a sinking ship (by percentage of total partnership):
- Dickstein Shapiro: 17.0 percent
- Patton Boggs: 15.4 percent
- Edwards Wildman: 13.3 percent
- Shearman & Sterling: 10.0 percent
- LeClairRyan: 9.8 percent
If you’re planning to lateral this year, now you know which firms could be hurting for new partners. But there’s got to be a reason why everyone’s flying the coop at these firms, so don’t say we didn’t warn you.
Do you think lateral hires are killing your firm? If so, you only have the partners to blame, and they won’t be changing their ways any time soon. Maybe you should consider getting out while you still can.
Cover Story: The 2014 Lateral Report [American Lawyer]
Constant Churn: The 2014 Lateral Report [American Lawyer]
Is Reliance on Lateral Hiring Destabilizing Firms? [American Lawyer]