I suspected as much all along.
I’m referring to the recent admirably data-intensive study of lateral partner movement in London compiled and written by Mark Brandon of Motive Legal and published in The Lawyer a few days ago. This is must reading for anyone involved in the massively escalating lateral partner hiring minuet—which seems to be nearly all of us. (Altman Weil recently published a survey of managing partners showing that 98.5% of them viewed lateral hiring as a strategic priority. I guess that leaves out Wachtell or maybe Cravath or maybe Slaughters, but everyone else has magically locked on to the same brilliant strategic priority.)
So what did Mr. Brandon find?
A third of partners hired in London don’t stick—and the finger of suspicion points at the hiring system itself
Does your firm give much thought to how long it expects lateral hire partners to stick around, or is the emphasis on getting them to profitability as quickly as possible?
The results of the third year of my research into lateral partner hiring in the London market show that failure rates remain persistently high. It also shows markedly different success rates depending on the specialism of the recruited partner, and also where they come from and the environment they go into.
Here’s the (impressive) dataset:
The research examined 2,763 partner hires in the London market between 2005 and 2012. It found that nearly a third (32 per cent) of these have already failed; that is to say the partner has already left the firm or has been removed since joining.
Now, in examining any data like this, across a variety of firms, practice areas, timeframes, and economic environments—never mind the vagaries of nearly 3,000 Type A individuals—an analyst has to make various assumptions, some of which will be arguable in the eyes of various onlookers. This is no different, but I ask you to suppress your natural impulse to cavil with this that or the other and focus on the overall message, because I think the power and consistent thrust of the research are inarguable.
Quote: “You don’t pay your partners with revenue, you pay them with profits, and every firm that’s ever failed has been collecting respectable levels of revenue up until the day the lights went out and even beyond.”
Old phone chatter, revisited: “In MLB, you can do stuff because it has TV and a league. Imagine running teams (firms) without that…”
Quote: “If luck determined outcomes, there would be NO VARIATIONS across practice areas or reflecting the “nationality” of the arrival and destination firms (US or UK, and US or UK, producing the four permutations).” [emphasis mine]
I’m not sure this is an accurate statement. For example, if it is a pure coin flip (i.e. pure luck with a 50% success rate for any individual hire), then you certainly wouldn’t expect every subset to have a 50% success rate, you would only expect the most common success rates to be near 50% and success rates deviating from 50% to be ever less common the more they deviated.
If you won’t offer a guarantee, then doesn’t the lateral assume all the risk of a failure in portability, and doesn’t that make the lateral more vulnerable to a general downturn – easier to throw out the last guy in if you’ve got no financial commitment to him? Laterals also, it seems to me, have less connection to the existing “insiders,” so they’re also more vulnerable to any subjective component to an existing compensation system.