Smart moves that law firms make in their partner lateral hiring

“No two law firms are ever the same”, as the saying goes. If you talk to any hiring-partner of a law firm in any part of the world, chances are that the metric they use to set themselves apart from other law firms relate to their practice groups, sector-focuses and specialisms, or their deals or cases that they handle.  

From my personal experience of having had a 10+ year legal career in private practice and now as long a period in legal recruitment, however, I can see that this is just the tip of the iceberg.

Other senior partners might say, “it’s our people,” as to the reason for their firm’s success.  Indeed, that would be moving in the right direction. But I would go one step further and revise that phrase to, “it’s in the recruitment and investment in the right people for all our stakeholders” that helps set those law firms apart.

Having worked with and spoken with many senior partners, COOs and Administrators of international law firms in Asia, I have noticed there are some firms who truly excel in their lateral recruitment of partners, and here are the key factors that I have observed since I co-founded Star Anise.

1. They have a strategy

It may be hard to believe, but in this age of big data, client-needs surveys and the increasing use of statistics, financial forecasts and in-depth analyses, there are still law firms that hire partners ‘on a hunch’. By that, I mean, “let’s see what comes along and see if that fits in with what we are trying to do in Asia”, without identifying or knowing with specific and quantifiable metrics as to what they actually want to do in Asia. Something as simple as increasing headcount/profit/revenue or some other measure by [x] percent in [y] years may not have even been thought out.  Immediately, the vision of the character Baldrick in the classic British TV comedy drama Blackadder springs to mind when he would say in each episode, "I have a cunning plan!". For the uninitiated, Baldrick's plan was anything but cunning!    

The law firms I know who are particularly successful on their recruiting strategy have a game-plan laid out clearly and communicated to all key stakeholders involved in the recruiting process (fellow partners, Administrators, COOs, CFOs and human resources). They in turn communicate this message clearly and consistently to external stakeholders including recruiters, partner candidates, even clients. Some firms will follow the global practice group specialisms which they wish to replicate regionally, some will have a focus on particular areas according to the local or regional business needs.   

For sure, there may be some requirements on which hiring law firms can be flexible and ultimately there must be ‘a meeting of minds’ on business strategy, vision, as well as rapport between the parties. In any event, from the outset they will be focused on what type of profile or attributes they need to hire as a strategic lateral fit, and set out objective markers against their overall business strategy.

2. They get the bulk of internal processes out of the way, early.

Whether an international law firm works on centralised or regional P&L finances, ultimately, approval needs to be sought from head office.  And for international law firms with Asia offices, the decision-making body will invariably will be on a continent far, far away.  Indeed, some of the hiring needs are directed ‘from the top-down’, whilst other hiring initiatives are driven locally and approval is then sought from the Executive Committee overseas. 

In both cases, it is prudent to seek preliminary approval on both the hiring strategy for your local or regional office (with time frames, budgets and other key metrics), and identify the profile and specialisms of the lateral hire. I have seen several instances where the Asia-based office have a target in mind and struggle to obtain  timely approval from HQ to go ahead with a hire after having gone through multiple rounds of meetings with partner candidates, much to the frustration of the partner applicants and the locally-based Managing Partner. In many cases, “he/she who holds the purse strings doesn’t like to be surprised,” and quite often is the case that getting the committee members to meet is a major task in itself. 

So even getting tacit approval from the Executive Committee of senior management will give the regional office confidence to proceed with its candidate search and use their time more efficiently and productively.   

3. They take claims of ‘portable business’  with a pinch of salt

I liken the hire of partners to the disclaimer you typically see in marketing materials for financial investment products, in that, “performance can go up as well as down” and, “past performance is not a guarantee of future results”. 

In the case of partners, replace ‘performance’ above with ‘level of business generated’. Whilst the amount of business generated or billed will be an indicator of success, it is not the only criteria by which to assess the suitability of a partner. “You’re only as good as your last year’s performance,” and if a candidate is still championing a golden year from 5 years ago, the law firm will have a legitimate cause for concern as to whether the income generation capabilities of that partner are realistic or sustainable over multiple years. 

4. They are realistic on whom they can attract

For many law firms, there are no fixed rates on partner remuneration, so it can be difficult to fix a remuneration budget on a partner hire, as you can with support staff or associates. However, the law firms who ensure they are reviewing the right type of profiles will be clear at least on what range of remuneration they are willing to pay, bearing in mind the remuneration range currently paid to existing partners of their own law firm, and in many cases, in the context of the revenues that the partner candidate can generate. 

In addition, the hiring law firm must properly assess whether there is a synergy in their clients and the candidate partner's own. That analysis is often a complete afterthought, when some due diligence early on would at least ensure a lot of time and effort is not wasted if it turns out that there is little in common between both parties. Simply equating an IPO partner as suitable for a law firm with an IPO practice is not sufficient. Does the partner work on GEM board listings or full listings? Do they work for mainly sponsors or issuers? What type of intermediaries do they work with? 

In many cases, a small-sized office of an international law firm is unlikely to attract a high profile rainmaker from a top tier law firm, unless there were special or specific circumstances where both parties are willing to invest their time and assets in the other. 

"the hiring law firm must properly assess whether there is a synergy in their clients and the candidate partner's own."

This is not just because the pay scale of the rainmaker would be 'out of sync' with the rest of the partnership, but moreover the likelihood is that the client-type (institutional vs SME) means that the smaller firm may not even be able to service the rainmaker’s clients at all or be able to convince the partner’s clients to add them to their panel of preferred suppliers.   

5. They take great interest in the strengths and type of relationships developed by the partner

A partner candidate can make grand claims as to the types of deals or cases that he or she has led or been involved in and their ability to generate business from their personal contacts. However, a casual meeting with a prospect client at a cocktail event and the ability to receive instructions regularly from a client will yield different results in each scenario when developing business in the future.

As part of the hiring firm’s own due diligence process, the Managing Partner will dig deeper into these claims, and rigorously test the strength of the partner's business intermediaries and client network and in what business development initiatives the candidate is involved on a regular basis.

6. They assess hunger and potential 

Some partner candidates will have had one or two spectacular years of revenue generation, and a feeling of complacency sets in.  Some of that complacency will be more obvious, in the sense that the partner in question lays out their success story at the interview and then expects the hiring firm to react with awe. 

A partner applicant lacking hunger, creativity (in business development) and potential doesn’t show interest in your firm, your history and evolvement in the market, your strategy, or your existing partners. They don’t ask probing questions as to where you want to take your firm or what they can do to add value to that firm. Nor does he or she suggest ideas on how there can be synergies between their practice and the hiring law firm’s business. By the same token, a partner candidate will be assessing a prospect new firm's hunger and potential, and whether those ambitions match theirs.

7. They’re not afraid to show their feelings...

One of the primary objectives of the interview process, for both sides, is to see if there is the rapport required to get the relationship off to a great start. After that meeting, there may be myriad of reasons as to why the law firm feels that the fit is not as good as it initially appeared. A law firm with a sound approach to recruiting will convey those thoughts constructively back to the partner applicant in question. 

Not only does this help the partner understand the thought processes involved but it also leads to the candidate partner feeling that the interviewing process wasn’t a wasted effort, and indeed is more likely to speak highly of your firm to their peers (and inadvertently act a positive ambassador). Little or no feedback from the hiring-partner to the candidate-partner can be perceived as arrogance or rudeness. 

Perhaps this might be down to the fact that the hiring Managing Partner will have been with the same firm for many years and have simply forgotten to feel what it is like to be a candidate themselves. Nevertheless, such impressions (of arrogance) may permeate into the market, ultimately having an adverse effect on the hiring firm's brand (myth breaker: lawyers do gossip about their peers, a lot). 

"Little or no feedback from the hiring-partner to the candidate-partner can be perceived as arrogance or rudeness."

In addition, a law firm which is successful in its recruitment drive will not only ask probing questions, but also explain to the partner in question why they are asking those questions. They are not there 'to catch the applicant out' in order to ‘score brownie points’. They are genuinely concerned that the partner joining would result in 'the sum being greater than the parts', and that the partner in question will add genuine long term value to their business.   If they like the partner and feel that he or she would be a great fit for their business, they will also say so explicitly.  And making the partner feel wanted could mean the difference between the partner joining that firm, and either staying where they are or joining a different law firm. 

8. They make time to drive the process forward, hard.

Let’s take a corporate M&A deal as an analogy.  Once a corporate lawyer is brought into the deal, they know that, more often than not, the client has been discussing the deal with the other party/parties for several months, and in that time a considerable amount of time has been spent on financial due diligence. Once commercial terms are agreed and financial due diligence has been carried out to the satisfaction of the buyer or investor, the two parties (buyer and seller) just ‘want to get on with it and close the deal’ which means that clients often push hard and fast to complete the legal aspects of the deal in as short a space of time as possible. 

Notwithstanding that many aspects of a legal due diligence exercise takes time and outside forces could delay the deal (land search results and environmental reports), the corporate lawyer will throw as much resource available in his/her team to ensure that deadlines are met, at least from their standpoint as a professional adviser. That way, they can minimise the chances of being accused of ‘holding up the deal’.

Likewise, those law firms who have been particularly successful with their lateral hiring process will recognise that internal approvals can take time and delay the process, hence obtaining the necessary support early will pave the way for the hiring-Managing Partner to focus on getting to know the partner applicant more, and moving swiftly and flexibly in the negotiation process. Invariably this will enhance the applicant’s experience of the interview process, and lays a great foundation for their start with their new employing firm. 

9. They have patience and give active support 

Before all parties have signed the partnership agreement, it’s imperative to agree goals for the incoming partner, whether it be financial, recruitment, rainmaking, or otherwise, and the time frames by which such goals are achieved.  Generally, US firms place more emphasis upon time being of the essence (given that generally, their levels of remuneration will be considerably higher than their non-US international law firm counterparts), and new partners are expected to ‘hit the ground running’ and start generating substantial fees almost immediately.   

UK law firms, by and large, are far more forgiving, and will accept that not all clients of the incoming partner are willing to come across immediately (and contractually, may not, as the partner could be tied to restrictive covenants in their previous firm). Whilst they may not match many of the top tier US law firms in compensation, they will certainly invest as much, if not more, because of the length and depth of support offered (both financial and business support), thereby allowing the partner a far longer lead time to generate the returns.  

Indeed, partners from several UK law firms who have set up an office in Hong Kong in the late 2000s and 2010s have expressed the idea that reaching profitability for the whole office in Hong Kong from a standing start position could take approximately 8 years, even with the recruitment of partners from other firms who have practiced in Hong Kong for many years. That is because there are major challenges to overcome, not least from a branding perspective, and convincing large companies to use a law firm that is unknown in the market for legal services. You might hire one of the biggest rainmakers in they city, but their clients still need to be convinced to follow them across or seek internal approvals to add your firm onto their panel. As any commercial law firm knows, obtaining preferred supplier panel status doesn’t happen overnight. 

"reaching profitability for the whole office [of a law firm] in Hong Kong from a standing start position could take approximately 8 years"

Whilst established law firms won’t have the same challenges that a start-up operation would have here, it is still as important to give the partner time to develop their client base, as well as provide cross-selling, operational, and business development support, all within clearly defined KPIs (and not merely financial ones). Moreover, it would be folly to cut them loose after 6-8 months if they weren’t generating their business as quickly as expected, given the time, process and levels of investment required to get them to that point in the first place.  

Further, many partners/senior lawyers feel safer operating in an environment where they have other partners who can offer cross-business development and moral support, ideas to bounce off, and a firm that can show they are actively growing with more partners (and indeed do so) is far likely to have content and motivated partners who are less likely to want to move on.   

And for international law firms whose headquarters are outside of Asia, your head office is a long, long way away. In such cases, extra effort needs to be put in to make the Asia office feel they are truly part of that firm, and not simply a barren outpost for home jurisdiction partners to use for their meetings. Sending partners on secondment or permanently moving partners from more established offices to Asia could help shape the firms's Asia office culture more in tune with the head office.  

10. They can adapt to crises and economic downturns

With so many external forces in play (US-China trade war and the Hong Kong civil unrest in 2019, the Coronavirus in 2020, the general global economic downturn, climate change) that could damage a partner’s potential business, law firms investing in partners need to look at the long term game and factor in such risks when hiring them. Otherwise, they’re setting themselves (and the hired partner) up for a major disappointment.  It’s not just having deep pockets and a robust business continuity plan that will ensure the firm is still ‘open for business’, it’s being able to adapt, and having partners who are able to adapt also, to the changing demands of clients.  Some firms will have a siege mentality and go into lock down, bracing for a downward economy, whilst others see great opportunities to enhance and grow their business in the counter cyclical phase of the market. 
 

Conclusion 

It would be foolhardy and potentially fatal for international law firms to assume that the strength of their business and brand in their home territory, combined with 'throwing money at' partner recruits will translate to great success in a different market. Setting up a new office in Asia is akin to setting up a start-up business. And if you are able to get past the start-up phase to become an established law firm in Hong Kong or Singapore, you have to build up the momentum and continue to invest to both maximise margins and to lower the risk of appearing stale.

Partners looking to switch firms will want to see there is a vision clearly laid out by the hiring law firm. The chances of them joining (as well as staying) increase if they can buy in to that vision, but that vision also needs to be backed up by continued financial and human capital investment (in the right people) to ensure its long term success in their chosen market.  

Of course, it's not a one-sided affair. Partners need to show hiring law firms that they have the characteristics to take full ownership of their own patch, have the self-discipline and drive to achieve financial and other tangible targets, as well as have the commercial application to build their network and client following.

 

This article was updated on 19 February 2020.