II. Don’t imagine you can build a new “greenfield” practice through laterals
No matter how much you might wish to have (say) a strong IP or private equity or project finance group, don’t try to build it through ones and twos here and there.
- Lacking an existing group with critical mass and credible market recognition (this is what by hypothesis you don’t have, remember), the new recruits will find it daunting even to take many of their key clients with them, much less attract new ones.
- Your firm won’t be geared to supporting the nascent practice group, either internally (your partners won’t have the new arrivals, or their presumed capability, top of mind when talking to clients) or externally—clients won’t put your firm in the consideration set for XYZ practice.
- Given the internal and external impediments, attrition among the new recruits is all but certain to nearly equal your rate of intake. You will have created an extremely costly revolving door—whose beneficiaries are the short-term laterals—and never achieve a market reputation and perception for excellence in the new area.
I heard a story recently from a long-time managing partner of a very well-known and widely admired firm that was testament to this. For years he had been trying to develop a valuable practice area essentially from scratch. Year after year he would discuss the desirability of building the new practice area—which other less prestigious and smaller firms with fewer resources had, and which was not inherently exotic or arcane—only to find that essentially every lateral he and his senior team hired in pursuit of that quest underperformed expectations, didn’t seem to be effective at trading (importing or exporting) work and clients with the rest of the firm, and end up leaving, all at tremendous expense both financially and in terms of wasted managerial time and attention.
Then the firm merged. It was actually as close as I know to the mythical “merger of equals,” two similarly sized firms with comparable financials and highly complementary geographic footprints and practice compositions. And time has proven it a successful deal.
But here’s what happened to my friend’s fruitless quest for laterals in the XYZ practice area: All of a sudden, because Firm #2 was very well known in that area, laterals started to stick, work seamlessly with their colleagues, build thriving practices, and stay indefinitely. Problem solved.
Now, anecdotes are not data, but as I reflected on my friend’s story I found myself hard-pressed to come up with counterexamples, while like examples popped into my mind at will.
And you have to admit it makes sense, no matter how unwelcome the message if you’re frantically pursuing practice XYZ.
