Thanks to the dissolution of Dewey & LeBoeuf, lateral hiring had a record year—both in the United States and in U.S.-based London firms. Am Law Daily reports that 2012 lateral hiring hit a three-year high with 2,691 moves, a 9.7 percent increase over 2011. In London, U.S.-based firms fueled an almost 40 percent increase in senior lateral recruitment over the last year. But is lateral hiring good for business? Perhaps, perhaps not.
By one measure, aggressive lateral hiring doesn’t work. The authors find no statistically significant relationship between an aggressive lateral strategy and profits per partner. In fact, the most profitable firms tend to have the lowest rates of lateral hiring. But on a different level, [William] Henderson and [Christopher] Zorn say, lateral hiring works because it can bolster a law firm’s ability to survive.
An ALM LexisNexis survey cited in the American Lawyer article found that “96 percent of managing partners said they expected to grow through lateral partner hiring over the next two years, yet only 28 percent reported that lateral hiring had been a highly effective strategy in the past.”
And it’s inefficient and expensive, or so reports Am Law Daily:
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?
The Am Law Daily article further urges firms to look closer to home, asking:
[W]hat 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)?
Lateral hiring, however, remains the fastest way to grow a firm, increase its ability to serve the market and, therefore, to bring in more business and profits. And “large, profitable firms are least likely to fail since they are better able to weather a loss of a large group of lawyers,” the ABA Journal article states. “These big firms may also be better positioned to pitch for work requiring a global reach.”