Stat Of The Week: How Much Can A Bad Lateral Hire Cost A Firm?

It's more than you might think, and more than the partner's annual compensation.

It’s no secret that a bad lateral hire can cost a firm a pretty penny. But how much are we talking about exactly?

Here’s an estimate, contained in an interesting article on lateral hiring misfires, by Scott Flaherty for Law.com:

“Fifty percent of all laterals will fail within five years. And that pretty much shows up across the board in every study that’s been done,” said Michael Ellenhorn, co-founder and general counsel of Decipher, a human resources and market intelligence business.

Missteps can be costly for law firms, which often shell out money for recruiters and may offer guaranteed compensation deals to their hires, especially in their first year at the firm. In all, Ellenhorn said, the cost of a failed lateral partner can be as much as 200-400 percent of that lawyer’s actual compensation, including the costs of replacing the lawyer after a departure.

We’ve previously warned lawyers considering lateral moves to look before they leap. The same advice applies to law firms as well.

Hiring Misfires Show Need for Tougher Law Firm Vetting [Law.com]


DBL square headshotDavid Lat is the founder and managing editor of Above the Law and the author of Supreme Ambitions: A Novel. He previously worked as a federal prosecutor in Newark, New Jersey; a litigation associate at Wachtell, Lipton, Rosen & Katz; and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@abovethelaw.com.

Sponsored