Every February we devote much of the magazine to the comings and goings of the lateral market. In 2012 alone, lateral hiring grew by 9.7 percent. In an environment where it’s difficult to increase revenue, "buying business" through lateral recruitments is one of the few ways that firms can grow fast. (But it’s important to note that the more profitable the Am Law 200 firm, typically the fewer laterals it hires.)
We also have a fascinating analysis of 12 years of our lateral data (2000–11), by William Henderson of Indiana University and Christopher Zorn of Penn State.
Despite all this activity, it’s hard to argue that the big-firm labor market is very efficient. At the same time that many firms are wooing expensive lateral talent, they are also shedding dozens of lawyers at home every year—their associates. Finding, recruiting, and teaching these younger lawyers isn’t cheap. Wouldn’t more careful training and management of associates and junior partners help firms avoid the need for so many lateral recruits in the first place?
Hiring laterals, especially when it comes to big groups, is often about the short term. In part because of the pressures of the marketplace, it’s hard not to take this approach. But what would happen if firms made more of an effort to take the long view? What if they tried to figure out which practice areas and regions of the world will be strong in 10–15 years (even if they aren’t now) and tried to train more associates in those areas? What if they identified companies for the associates to learn about (even if they aren’t yet clients)?
Concurrently, if firms managed the current client succession process more carefully, it might lessen the need to bring in so many lateral partners. As mandatory retirement policies are abandoned, and even firms with formal policies waive them for high-powered partners, client succession becomes more of a concern. The message sent to the client is that only this senior partner can do the work—so we need to keep him on rather than move the work to younger partners. The more firms can actively manage this delicate process—and reduce the risk that the client will leave when that senior partner does retire—the better.
To make this happen, firm leaders will need to have difficult conversations with senior relationship partners about their clients: What are they doing to deepen the rapport between the appropriate younger partner and the client? Has the relationship partner had an honest conversation with the client about how best to transition the work to the junior partner, so that by the time the senior partner does retire, the relationship with the junior partner is as entrenched as it can be?
Taking these steps requires big-picture thinking and a belief in a firm’s long-term vision. This isn’t a mind-set that’s going to produce immediate results; nor is it the right move for every practice area. But the more that firms look at their associates and junior partners as future firm leaders, the more that investing in them—without reflexively bringing on laterals—makes sense.