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The Art of Retaining LateralsThe latest Lateral Report helps explain why some top firms manage to keep their lateral partners aboard -- and others don't
Firms that retain lateral partners seem to excel at three things: understanding a lateral candidate's practice during the recruiting process; providing professional staff to ease the partner's move; and tracking the new partner's progress through mentoring and productivity analysis. The American Lawyer tracked 2,423 moves in and out of The Am Law 200. Read more about the star laterals, the firms with the top gains and biggest losses, and firms' techniques for keeping their lateral partners on board.
The American Lawyer2008-02-01 12:00:00 AM
The day Walfrido Martinez joined Hunton & Williams to open the firm's Miami office in 1999, all he had to do was show up and start working. The firm had in place a receptionist, a head of office services and secretaries ready for him and the four colleagues who moved with him from Holland & Knight. A group of associates had already been flown in from other Hunton offices to work on their matters. The prep work paid off. In his first month Martinez billed 200 hours. "You can't do that if you don't have the resources in line," says Martinez.
He hasn't forgotten that early lesson. Now Hunton's firmwide managing partner, Martinez has tried to continue -- and extend -- Hunton's lateral integration program. So far, it seems to be working. Of the 28 lateral partners the firm hired in 2005, 25 are still there.
Like so much of law firm management, lateral integration sounds easy and, dare we say, obvious. As the pace of lateral activity has remained feverish, firms have discovered that getting new partners in the door is only the first step -- getting them to stay is the real trick. "I think a lot of firms are more sophisticated than they were five years ago," says Howard Flack, the managing partner of lateral hiring at Hogan & Hartson, which has held on to 140 of the 167 lateral partners recruited to the firm since 2002.
But sophistication doesn't always equal success. To determine which firms are hiring partners who stick around, The American Lawyer reviewed the record of the 27 firms that recruited the most laterals -- all brought in 18 or more partners -- between October 2004 and September 2005 ["Lateral Report," February 2006]. Of the 867 laterals those firms hired, we found that 142, or 16 percent, have already moved again. That isn't integration; it's more akin to a binge and purge.
There was uneven distribution of departed laterals among the 27 firms. Two firms -- Jones Day and LeBoeuf, Lamb, Greene & MacRae (now known as Dewey & LeBoeuf) -- retained every lateral we tracked from the class of 2005. In contrast, Squire, Sanders & Dempsey has seen 12 of its 39 recruits leave the firm, a loss rate of 31 percent. (Many of those departures were onetime Steel Hector & Davis partners who left after the 2005 merger with Squire Sanders.) Firm Chairman R. Thomas Stanton challenges the accuracy of the figures but declined to comment further on the record.
A full third of McDermott Will & Emery's 2005 recruits -- nine of 27 -- have since departed the firm. Donald Goldman, the partner in charge of professional development and recruiting at McDermott since 2003, says that four of the nine left because of a client conflict, and another took a general counsel position within a month of arrival. "You do as good due diligence as you can going in, but sometimes you make a mistake," Goldman says. McDermott, he adds, works at integrating laterals. Local practice leaders develop transition plans for their lateral partners' clients and are expected to involve laterals in ongoing matters. Department heads oversee the process. "Some firms just rely on the fact that [integration] will happen, without having someone be responsible," Goldman says. "[Here] it is something that [department heads] are expected to do. If it doesn't go well, you hear about it."
To paraphrase Tolstoy, every happy lateral story is similar. Firms that retain lateral partners all seem to be good at three things: understanding a lateral candidate's practice during the recruiting process; providing professional staff to ease the partner's move; and tracking the new partner's progress through some combination of mentoring and productivity analysis.
Success begins with discipline in recruiting. Goodwin Procter, for instance, targeted six core practices for growth in its 2001 strategic plan: private equity, technology and life sciences, real estate capital markets, financial services, intellectual property and complex class action litigation. Practice leaders also wanted the Boston stalwart to gain a West Coast foothold. So according to Goodwin Chair Regina Pisa, each practice group put together a plan to identify the types of lawyers they needed.
With that plan in place, she says, "when the right person shows up, we can move pretty quickly." In some instances that has meant lateral courtships that last weeks instead of months. The results: In two years, Goodwin opened five California offices, making 28 lateral hires along the way. Of the 34 partners Goodwin hired in 2005, the firm retained 33.
Dechert had an identical retention record. Chairman Barton Winokur says that's because no partner joins the firm without the whole practice group agreeing on his or her value. "The issue isn't 'integration,'" he says. "I think that's a garbage word people use that implies there is some kind of orientation school you go to. What it is all about is people becoming part of what you are doing."
Winokur points to a group of seven intellectual property partners who joined Dechert from Dewey Ballantine in February 2006. Within weeks of their arrival, other of Dechert's IP lawyers identified about 25 opportunities to market their new partners' services to firm clients. "That provided lots of integration," Winokur says. "You are immediately working together. That's a hell of a lot more important than telling people what you are like."
Lizanne Thomas, firmwide administrative partner at Jones Day, says she looks for talented lawyers who can take advantage of the firm's size and geographic spread rather than looking for books of business to buy. "What [our laterals] want is a longer runway," she says. As an example, Thomas cites partner E. Kendrick Smith, who moved to Jones Day from Atlanta's Smith, Gambrell & Russell in July 2005. Since then he's expanded his state tax litigation practice beyond Georgia's borders to Florida, Texas, and Alaska. Similarly, G. Graham Holden closed up his solo environmental shop to join Jones Day in October 2004. He says his whole client base changed as he refocused his practice on the Clean Air Act and began to bring in clients he couldn't have attracted on his own.
When lateral moves didn't work out, it was often due to a mismatch of the partner's practice and the firm's, according to discussions with 10 laterals who have already left the firms they joined two years ago. Former Sonnenschein Nath & Rosenthal lateral Matt Kirmayer says he was happy at the firm. Still, Kirmayer says he left for Mintz, Levin, Cohn, Ferris, Glovsky and Popeo because his new firm has longtime links to the Silicon Valley entrepreneurs who make up his corporate client base. Lateral Russell Frandsen left Reed Smith to go solo, handling financial services work for clients in the tech sector. "My clientele is much more middle-market, and Reed Smith had its sights set on much larger companies," says Frandsen, noting that he and Reed Smith partners still refer work to each other. Another former Reed Smith lateral says he expected his group to expand when he joined the firm, but found the process slower and more difficult than he imagined.
At firms with strong lateral retention records, problems like these are usually addressed at the interview stage, in a process that has started to look a lot more like an extended business planning session than a casual meet-and-greet. "Recruitment has turned much more into a combination of integration and recruitment," says Hogan's Flack, who has headed up lateral retention efforts at the firm since 2001.
Flack says that during recruiting, Hogan works with an incoming partner to create an integration strategy -- a step-by-step plan for how that partner's practice will be incorporated into the firm's activities. The plan serves as a to-do list during the transition period. It can include marketing the firm to a client the lateral already represents, or meetings between the lateral and incumbent partners, who must become comfortable with a lateral's skills, Flack says, for internal referrals to begin.
Partners at Orrick, Herrington & Sutcliffe try to give lateral candidates a lot of exposure within the firm even before they're hired. In a process that Orrick partners call "the fishbowl," prospective hires can meet about 100 partners in two days.
The fishbowl takes place near the end of recruitment. According to partner Peter Bicks, who heads recruiting efforts in New York, what comes before it is exhaustive. After initial interviews with a lateral candidate, several partners prepare a memo of at least five single-spaced pages, which is shown to both the candidate and to all Orrick partners. The memo covers the candidate's personal background, client relationships, compensation and billings history, and time spent on nonclient matters. It also includes proposed compensation at Orrick and two to three years of economic projections. (If the move is consummated, the memo serves as a business plan.)
With memos in hand, Orrick partners on both coasts attend fishbowl meetings with the candidate. In person and by videoconference, they can discuss their practices and potential cross-marketing possibilities with the new prospect. And the candidate sees, through the sheer number of partners taking part, how seriously Orrick takes lateral hiring. "Making a lateral move is a big deal," Bicks says. "People want to feel comfortable and know you're paying attention to them."
After a lateral is successfully recruited, someone has to make sure that the starry-eyed courtship doesn't become an unhappy marriage. Since 2000, Lynn Carroll has been that person for Bingham McCutchen. That's when she joined the firm as director of lateral recruiting to help streamline Bingham's lateral hiring process. (She has since become the firm's chief human resources officer.)
To ease a transition, Carroll says, a firm's business development department needs to plan how to market the firm to a lateral's clients before the new partner joins. And once the partner is aboard, the firm's staff needs to get that lateral up and running immediately on basic systems like billings, the internal Web site, and newsletters. "If you don't get that right out of the box, you are creating difficulties for the new partners," she says.
Having professional staff to smooth the administrative waters isn't a panacea, of course. During the period of time we analyzed, Bingham had above-average lateral turnover, losing six of 23 hires. But according to three Bingham laterals, one of whom has since left the firm, the TLC provided by Carroll's team was a big help. Richard Welch, the managing partner of Bingham's Los Angeles office who came to the firm through the merger with Riordan & McKinzie in July 2003, marvels at Bingham's attention to detail. "If there is a pile of papers at a 60-degree angle in front of your desk [at the old firm], it will be there in the new office," Welch says. "That means you come in and are able think about how to serve clients, not 'How do I get an e-mail out today?'" Welch says that because he didn't have to worry about the small stuff, within weeks of arriving at Bingham he was able to pull together a team to work with a Boston partner on the acquisition of the Los Angeles Dodgers by real estate developer Frank McCourt and his wife, Jamie.
Sonnenschein's Mark Larvo, the firm's network support guru in San Francisco, pays particular attention to helping laterals with IT. Tech support personnel interview all incoming lateral partners to learn about their technological habits and what, if any, purchases need to be made before they arrive. "Our goal is to have them working [within] the first five minutes they're in the door with us," Larvo says. Making simple mistakes like giving a right-handed mouse to a lefty, he adds, can cut into productivity.
At Greenberg Traurig, director of integration Sandy Grossman holds executive-level decision-making authority. "The reason we have such a senior person as Sandy doing this is that she can get anything done across the firm," says Greenberg CEO Cesar Alvarez. "[A phone call from Sandy] is equivalent to me calling and saying we have to get this done." (Of the firms we analyzed, Greenberg had the most lateral pickups two years ago, with 87. Seventy-five of them are still with the firm -- a retention rate of 86 percent, just above the overall average.) Grossman essentially acts as an advocate for incoming laterals. "My job is to get them up and running as quickly as possible," she says. That can involve finding several associates to help get a deal done, getting a new file opened in the firm's billing system, signing a lateral up for benefits, or simply ordering new business cards.
G. Allan Van Fleet, who joined Greenberg in January 2006, gives Grossman high marks. "At first, [Grossman] would call two [or] three times a week just to see how things [were] going," says Van Fleet, who previously spent 28 years at Vinson & Elkins. "She is so effective, I thought she had decided I was special and taken me under her wing. It's a bit of a come-down to realize she does that for everyone."
How do firms gauge a lateral partner's success? Many elect to monitor newcomers' performance -- hours billed, pitches made and revenue generated -- more intensely than that of other partners. At Reed Smith, in-house recruiters who have worked with lateral partners throughout the interview process continue to track their progress once they arrive at the firm. They check in with laterals up to five times in the first six months, using a questionnaire to assess whether new partners are getting all the support they need, from administrative assistance to cross-selling opportunities. The answers are made available online to practice group leaders, who have their own regular, less formal check-ins with the laterals. At Bingham McCutchen, says human resources head Carroll, the firm benchmarks lateral performance at six months and a year by looking at origination, billings, collections, pitches, proposals, and hours. The extra attention may continue for up to two years.
One way firms say they know a move is going well is if the lateral is rising in firm leadership. Greenberg's Van Fleet, for example, now heads litigation and recruiting efforts in Houston. Dechert's Winokur points to two partners who were elected to Dechert's six-person management committee just a year after their arrival from Swidler Berlin.
But laterals who become managers remain a small minority. Goodwin's Pisa sums up her definition of lateral success this way: "If two years from the time they get to the firm, no one remembers they were a lateral hire and they are working with institutional clients and going out pitching business collaboratively with members of the firm, then we've succeeded." That sounds like the start of a beautiful relationship.
Additional reporting was conducted by Elizabeth Goldberg.
Related charts:On the Move
Almost 2,500 Am Law 200 partners changed firms last year. Here's who gained (and lost) the most.