The Lateral Report

Building a Better Lateral

Firms have spent years perfecting their lateral hiring processes. But why are the results so disappointing?

, The American Lawyer


Firms have spent years perfecting their lateral hiring processes. But why are the results so disappointing?

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What's being said

  • Mike O'Horo

    Am I the only one who finds business development conspicuously absent from these stories, and from the underlying hiring processes? There was a time when firms hired laterals to fill gaps in their expertise. That's probably still a factor, but I'll argue that it's now a minor one.

    The clear expectation in these lateral investments is that the incoming partner will bring a lot of business with him or her, or will generate it after arrival. Yet, vetting the portability of their business book, or their BD capability, doesn't seem to rate a mention anywhere.

    So, let's see. They'll spend $1 million or more in guaranteed compensation, plus the 30% benefits/operating overhead load, another $200-300k in headhunter fees based on that, relocation costs, etc. Add in some incidentals and you're creeping into the $2 million dollar range. If you're spending $2m, and your gross profit is 40% or so, that lawyer has to bring in $5m/yr to break even.

    To protect that, they budget nothing for business development training or coaching. The annual cost to hire a top-tier sales coach to help the lateral maximize his or her revenue-generating value is less than 1%, which is just barely a rounding error in this equation.

    And they wonder why the lateral failure rate is so high.

    Here's a heads-up: The days when business flowed to anyone willing to get outside his/her office a little bit each week are over. Finito. Now, lawyers are in the same competitive environment that their clients have dealt with forever. And how do those clients deal with that level of competition? They take marketing and sales seriously, and invest a percentage of gross revenue that would cause law partners to gag.

    There's no way around it. Marketing and sales are mission-critical business functions. They don't work without a serious commitment of time, money and management attention. Sorry, but that's the way the real world works. And lawyers are entering the real world for the first time ever.

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