What Happens When A Partner Departs?
Does an uptick in lateral partner moves predict an increase in lateral associate moves?
Ed. note: This is the latest installment in a series of posts from Lateral Link’s team of expert contributors. Michael Allen is Managing Principal at Lateral Link, focusing exclusively on partner placements with Am Law 200 clients and placements for in-house attorneys.
Does an uptick in lateral partner moves predict an increase in lateral associate moves?
As with most statistical answers, the data somewhat equivocates, but mostly points to this being true. We’ll dive into this grey area later, but first let’s explore how we came to this conclusion.
The legal market consists of many non-intersecting specialties and sub-specialties of law created in part to facilitate lateral hiring. Corporate practice alone has dozens of unrelated specialties that, though nested under the Corporate parent group, may never intersect in practice. Why is this important? Determining a causal relationship between partner movement and associate movement necessitates that the two are related. This leads to a catch-22. Broader practice groups that lump specialties all under one “corporate practice” have too many unrelated sub-specialties to confidently determine a causal relationship, while smaller practices like Tax or Trusts & Estates have so few lateral moves that one additional partner or associate move becomes disproportionately significant.
I chose the practices of Labor & Employment and Real Estate to analyze because they are both sufficiently large, and their overarching practices narrow enough to suggest a true correlation.
So how does one compare associate and partner movement?
To compare these we pulled the monthly moves of lateral associates and partners in Real Estate and L&E over the previous two years. We then de-trended the series and de-seasonalized the data to remove any variables that might obscure the relationship between partner and associate moves.
How might these affect our analysis? The lateral market is highly seasonal. Movement varies greatly by quarter, largely in part because bonuses are disbursed in the fourth quarter, disincentivizing attorneys from moving. Predictive movement in one quarter may be masked by the augmenting and diminishing effects of the lateral market’s seasonal component. For example, a flurry of partner movement in September may not correlate with associate movement in November because the seasonal component is dampening the activity in the fourth quarter.
De-trending is also vital to this process; since the partner and associate markets can grow at different rates, removing growth helps remove background noise from the analysis.
Using cross-correlation, we analyzed the correlation and any lag between the two series. Surprisingly, the two practices yielded different results. Labor and Employment yielded no significant correlation between partner moves and associate moves, meaning the former was not predictive of the latter. However, for Real Estate, partner moves exhibited a significant correlation with associate moves that lagged around two months, meaning one could reasonably expect increased associate movement to follow two months after increased partner movement.
What Happens When an Associate Departs?
Conversely, are associate moves at all predictive of partner movement? The answer is a resounding no. There was no predictive correlation between associate movement and partner movement. However, they do tend to correlate together in tandem, but this is generally accounted for by partners taking associates with them as a lateral group move.
To test this hypothesis, I offer the following predictions on the lateral market for the next year:
1. The associate market will continue to grow.
When Cravath raised salaries in June, lateral associate activity shot up. However, as we move towards the end of the year, lateral associates moves are behind their predicted pace.
Our clients have echoed a shared sentiment that they wish to wait to see how the bonus market shapes up before committing to another firm. Our ARIMA forecast for the lateral market in Q3 is projected to be the best lateral quarter on record. We still believe it will set that record, but it won’t reach the lofty heights we previously predicted.
Recently, our star associate recruiter made 25 associate placements. We expect around the same if not more activity as the lateral market accelerates once a new salary equilibrium is reached.
2. Banking and Bankruptcy associates will move en masse.
Should our predictive model hold true, the increase in Banking and Bankruptcy partner moves – compared to other practices – will lead to an increase in associates in the respective practice areas. However, this model does not hold true for every practice area, and these two could potentially operate outside the model.
3. There will be a significant rise in associate laterals in Q1 2017.
With firms stretched thin from the new salary raises, we expect some disappointing bonus announcements this coming holiday season to offset the salary increases. In the past, we’ve observed disappointing bonus announcements precede a rash of lateral movement away from the offending firm.
We take pride in understanding the legal market and responding to trends as they occur. If you are curious about your current place in the legal market, we are always happy to provide insight and analysis to help you reach your goals. Since lateral moves are now a requisite for competing in the modern legal market, it is imperative you are equipped with the right information and connections to help you offset any losses later down the line.
Lateral Link is one of the top-rated international legal recruiting firms. With over 14 offices world-wide, Lateral Link specializes in placing attorneys at the most prestigious law firms and companies in the world. Managed by former practicing attorneys from top law schools, Lateral Link has a tradition of hiring lawyers to execute the lateral leaps of practicing attorneys. Click ::here:: to find out more about us.