Taking the Measure of a Storied Lateral Hire
“Are Laterals Killing Your Firm?” is the provocative title of The American Lawyer‘s February cover story. The centerpiece of the package is a thoughtful article, “ Of Partners and Peacocks,” by William Henderson, professor at Indiana University Maurer School of Law and Director of the Center on the Global Legal Profession, and Christopher Zorn, professor of political science, sociology, crime, law and justice at Penn State University.
Henderson and Zorn conclude that “for most law firms there is no statistically significant relationship between more lateral partner hiring and higher profits.” As I observed in last week’s post, most big law managing partners have conceded as much in anonymous surveys.
Even so, the drumbeat of lateral hiring to achieve top-line revenue growth persists, even in the face of dubious bottom-line results.
A Timely Topic
The outcome of one particularly prominent lateral hire took a fascinating turn this week. On the way out of the top spot at DLA Piper is global cochair Tony Angel, whom you might remember from one of my earlier articles, “The Ultimate Lateral Hire.”
The American Lawyer's 2012 Lateral Report identified Angel as one of the top lateral hires of the year—“a typically bold and iconoclastic play by DLA. For a firm to bring in a former managing partner from another firm is rare,” American Lawyer reporter Chris Johnson wrote in March 2012. According to the article, the 59-year-old Angel was to receive $3 million a year for a three-year term.
With great fanfare, DLA touted its coup. “He’s got great values, and he believes in what we’re trying to do, and he shares our view of what’s going on in the world,” boasted then-cochair Frank Burch.
The press release that the firm issued at the time was equally effusive: “Tony will work with the senior leadership on the refinement and execution of DLA Piper’s global strategy with a principal focus on improving financial performance and developing capability in key markets.”
Predictably, law firm management consultants also praised the move: “It’s hard to get a guy that talented. There just aren’t that many people out there who have done what he has done,” said Peter Zeughauser. Legal headhunter Jack Zaremski called it a “brave move” that “might very well pay off.”
On Second Thought …
The current publicity surrounding Angel’s transition is decidedly more subdued. According to a recent Am Law Daily article, Angel and his fellow outgoing global cochair, Lee Miller, “will remain with the firm in a senior advisory capacity, the details of which will be worked out later this year.”
Two years, plus another 10 months as a lame duck, is a remarkably short period to occupy the top spot of any big firm. Only those who work at DLA Piper can say whether Angel’s brief reign was a success (and why it’s over so soon). Not all of them are likely to provide the same answer.
Separating Winners From Losers
In 2008, more than three years before Angel’s arrival, DLA Piper's nonequity partners found themselves on the receiving end of requests for capital contributions. According to U.K. publication Legal Week, “275 nonequity partners contributed up to $150,000 each to join the equity.” The move was “intended to motivate partners by granting them a direct share of the firm’s profits, as well as an equal vote in the firm’s decisions.” But it also helped “DLA reduce its bank debt.”
That equitization trend continued during Angel’s tenure. In 2012, the firm’s non–U.S. business reportedly added capital totaling 30 million pounds Sterling “as a result of the move to an all-equity partnership structure.” Again according to Legal Week, the firm’s nonequity partners in the U.K., Europe, and Asia Pacific paid on average 61,000 pounds sterling each to join the equity.
Perhaps most new equity partners discovered that their mandatory bets became winners. After all, gross profits and average profits for the DLA Piper verein went up in 2012. Then again, averages don’t mean much when the distribution is skewed. According to a Wall Street Journal article three years ago, the internal top-to-bottom spread within DLA Piper was already 9-to-1.
Anyone looking beyond short-term dollars and willing to consider things that matter in the long run could consult associate satisfaction rankings for cultural clues. In the most recent American Lawyer survey of midlevel associate satisfaction, DLA Piper dropped from No. 53 to No. 77 (out of 134 firms). That’s still above the firm’s No. 99 ranking in 2011.
The More Things Change
Management changes are always about the future. It’s not clear how, if at all, incoming cochair Roger Meltzer’s vision for DLA Piper diverges from Angel’s. Age differences certainly don’t explain the transition; both men are around 60. Likewise, both have business orientations. Meltzer practices corporate and securities law; Angel joined DLA Piper after serving as executive managing director of Standard & Poor’s in London.
Maybe it’s irrelevant, but Meltzer and Angel also have this in common: Both are high-powered lateral hires. Angel parachuted in from Standard & Poor’s in 2011; Meltzer left Cahill Gordon & Reindel to join DLA Piper in 2007. It makes you wonder where these guys—and DLA Piper—will be a few years from now.
Steven J. Harper is an adjunct professor at Northwestern University and author of "The Lawyer Bubble: A Profession in Crisis" (Basic Books, April 2013) and other books. He retired as a partner at Kirkland & Ellis in 2008, after 30 years in private practice. His blog about the legal profession, The Belly of the Beast, can be found at http://thebellyofthebeast.wordpress.com/. A version of the column above was first published on The Belly of the Beast.