Lateral Partner Recruiting Effective Use Of Search Professionals

A simple contingency arrangement provides no upfront or nonrefundable payments to a recruiting firm. No placement; no fee. That's the deal. However, that's not the end of the story. A decision also needs to be made as to whether or not to engage a recruitment firm on an exclusive or non-exclusive basis.

Nonexclusive Contingency Search

While a non-exclusive contingency arrangement can act as a disincentive to a recruitment firm to focus and spend much time on a search in certain situations, there are other circumstances where both the recruitment firm and law firm will find it most appropriate. Let's take a fairly common example. A law firm with a general commercial practice is in the midst of a downturn. It has lost its position in the marketplace. It may have no strategic vision or strong management. The financials at the firm may be slowly eroding. They would love to bring on some dynamic partners as white knights to save the day.

A non-exclusive contingency fee arrangement makes most sense in this context. The search firm would understand the difficulty of such a search. The probability of near term success would be low. It may be more a function of luck and changes in the marketplace that might bring a lateral partner to this law firm. As we have often explained to law firms that don't “sizzle” in the marketplace, outside events may dictate when some lateral candidates may be pried loose from the market to show some serious interest. These candidates may be shaken loose when a real estate lease on their law firm's office comes up for expiration. It may be a downturn in the economy when a partner's compensation gets squeezed and the partner has an incentive to move on.

Law firms in these situations would be better served by engaging a number of search firms on a non-exclusive basis with the understanding that you want a number of market sources to be aware of the need. It will be a rare candidate who might be attracted to the opportunity, and you need to cast a wider net to reach such a person.

Exclusive Contingent Search

Exclusive contingent searches make more sense where the law firm has a more compelling story and an effective search firm can more persuasively “sell” the story to prospective lateral partner candidates.

Consider the example of an established but small branch office (30 lawyers) of an out-of-state law firm in Boston seeking to expand its footprint. The firm's strategy ' though not necessarily one we would encourage ' may be to simply add as many $1 million-plus billers as possible in many practice areas. The goal may be to achieve a certain critical mass in the Boston market to make it a more effective player in reaching other more specific goals. The firm may understand that a 60-lawyer office in that market is a more powerful platform than 30 lawyers. The branch office may be competing with 20 other branch offices, and may not have a publicly apparent distinction in the market even though it may have distinctive characteristics that could be attractive if properly presented to targeted candidates.

In this example, an exclusive partnering arrangement with a search firm makes most sense. A search firm needs significant detail from the law firm about its practice, economics, management, clients and culture. In an exclusive arrangement, the law firm will be able to justify devoting more time in providing such information to one search firm. An exclusive search makes the search firm feel more vested in the relationship and justifies its allocation of resources to the single competitor in a crowded market.

Yet, the example above might be contrasted with a situation where this same branch office has a specific target in mind – a biotechnology patent partner, for example. In that situation, a retained search may make more sense.

Hybrid Arrangements

Firms should also consider some hybrid arrangements as well. A law firm may wish to sweeten the incentive to a recruitment firm and offer a modest retainer amount in an exclusive, contingent search arrangement. Law firms may, of course, be hesitant to engage in an exclusive relationship because they are concerned that the search firm may fail to find appropriate lateral partner candidates. That concern is often addressed by limiting the period of exclusivity.

The best recruitment firms don't want to create unrealistic expectations with their law firm clients. It's bad for long-term business, and the best recruitment firms are more concerned with long-term relationships than with making a quick placement or a poor initial impression. A recruitment firm should have an honest dialogue with a law firm about the firm's position in the marketplace and the difficulties of recruiting attractive lateral partners to the firm. But it is a two-way street, and the law firm must listen to the recruitment firm and understand that the recruitment firm's honest assessment doesn't mean the search firm won't be trying hard to sell the law firm to prospective candidates.

For their part, law firms must have realistic expectations ' simply because they have engaged a recruiter and explained their needs is no guarantee of quick success in attracting candidates. All too many firms disappointed in the inability to recruit superior lateral partner candidates are those who either have inflated expectations about a search firm's capabilities or the market dynamics, or were not candid with themselves in understanding market conditions or facing the weaknesses of their own law firms.

It is this honest dialogue and understanding of the market dynamics that should dictate how a law firm engages a search firm.

Retained Partner Search

More and more law firms are considering retained search to compete effectively for top partner talent. Demand for this service has increased consistently over the past 5 years. Yet, many firms have invested in retained searches without a successful outcome. Just as a positive result is a win/win for search firms and law firms, an unsuccessful search is expensive and frustrating for the law firm, and usually unprofitable for the search firm. Why is retained search of interest to so many firms? When should law firms consider the retained search route?

Why Retain A Search Firm?

The key benefit of a retained search is access to potential candidates who are not actively looking around. Carefully cultivated relationships with recruiters ensure most law firms access to interested partners seeking a change. Often, the candidates are represented in an agent model by a recruiter who introduces them to multiple opportunities.

A retained recruiter proactively contacts desirable partners the recruiter and you have identified, and will only discuss your firm and the opportunity it offers. These partners are almost always successful, well compensated, and essentially happy. However, a committed recruiter can learn enough to assess whether the opportunity warrants their consideration. Often, “happy” partners have a list of sore spots. Billing rates, access to strong associate talent, ability to matriculate star associates into the partnership, compensation, strength in complementary practice areas or locations, disagreements over management style, and ability to cross sell legal services can all be points of consideration.

For example, after talking with a sought-after patent prosecution partner who was “perfectly happy,” it became clear that with a stronger patent litigation practice he could refer substantial additional work from his existing clients. Few things are more compelling than quickly increasing a partner's practice without increasing the hours. He moved to the client firm and his practice grew significantly over the next couple of years. He made more money, the law firm was thrilled, his integration was eased by the synergies of the practices, and the conversation began with his clear lack of interest.

When?

A retained partner search is most effective in two scenarios: opening an office in a new market, and seeking a specific skill set to fit into a well-articulated strategic plan. How can a Boston firm open in highly competitive San Diego? Or a Palo Alto firm open in the incredibly profitable New York market? To be successful a firm needs several things: deep local knowledge of the market, a clear commitment to the project, and a dedicated professional with the skills and incentive to be successful.

All of these elements are manifested in hiring the right firm to conduct a retained search. The recruiter supplies market knowledge, allowing the firm to go after the right people with the right practices. Market knowledge is crucial to success. Because a new office usually involves recruiting multiple partners, it is important to understand each professional history and how that impacts the structure of the group. A recruiter who doesn't know the market may pursue three terrific candidates with large books of business who wouldn't work together under any circumstances. Discovering this after the memos go to the executive committee is expensive and frustrating for everyone.

A law firm's rationale and commitment to opening a new office is often tested in the process of approving a retained fee. Internal conflicts that may hinder the search can get addressed during the contracting process. Management's commitment to the new office is one of the most important issues for the candidate pool. The most common objection: “How serious are they?” A powerful answer: “They are conducting a full retained search,” preferably followed by: “they have existing clients in the region and being here is a key component to their business strategy.”

Finally, a skilled recruiter is sales, marketing and operations support all in one. He or she should be wise enough to know who to call, credible enough to get a call back, smart enough to establish the true selling points, and capable of avoiding pitfalls such as client conflicts, discrepancies in billing rates, and cultural mismatches. Most firms opening in new cities are somewhat unknown, and your retained recruiter should stay on message and pre-sell your entrance to the market.

Hiring lateral partners as part of a clear strategic vision is another ideal scenario for retained partner search. Most profitable firms seek strong corporate partners with business. These “rock stars” are barraged with calls from recruiters. One more recruiting call about a typical corporate partner need probably won't change their decision to stay put.

However, if a law firm has identified a specific business opportunity, that message might rise above the noise. For example, a firm is expanding its M&A practice to serve clients that used to be emerging companies, but have now grown to require a sophisticated M&A capability.

Getting the word out requires a concerted and proactive effort. A retained search ensures the message is delivered correctly to the right people. It also allows the client to receive market feedback about the initiative. For example, a firm decides to build a patent practice geared toward high-end strategic counseling work. With the client's permission the retained recruiter contacts venture capitalists to identify the top players in IP portfolio valuations for early stage companies. As this is a due diligence point for a VC considering a financing, it is a chance for the law firm to get involved right from the beginning. Contacting the investment community has the added benefit of pre-marketing the new practice to potential clients. But more importantly, it identifies and vets the best candidates with a critical constituency: existing and potential clients. Such a tactic requires the kind of dedication and commitment established in a retained partner search.

As law firms continue to evolve into well-managed global businesses it is appropriate that they rely on the most knowledgeable and successful recruiting professionals. Both contingent and retained search services are essential to competing for talent. Knowing when to wield each of these tools is part of being a sophisticated consumer of professional recruiting services.

Cravath, Swaine & Moore, one of New York's elite law firms, recently hired its first lateral partner in over 60 years. While an exception at Cravath, hiring lateral partners has become an indispensable strategy for law firms in achieving important business objectives and in thriving in hotly competitive markets.

Whether it is developing a national practice in mass tort litigation, opening up a branch office in Hong Kong or Beijing, or establishing a biotechnology patent practice, hiring lateral partners is a necessary means to reach those goals. All too often, though, firms fail to meet their lateral hiring objectives because of an inadequately designed hiring program. One critical feature of an effective hiring program at this level is partnering with experienced legal recruitment professionals. The two most important decisions facing a law firm in engaging a search professional are: 1) selecting the right search firm or firms; and 2) deciding whether to engage that search firm on a retained or contingent fee basis. The decision about retained versus contingent search may also influence the selection of a recruiting firm.

Contingent Search

A simple contingency arrangement provides no upfront or nonrefundable payments to a recruiting firm. No placement; no fee. That's the deal. However, that's not the end of the story. A decision also needs to be made as to whether or not to engage a recruitment firm on an exclusive or non-exclusive basis.

Nonexclusive Contingency Search

While a non-exclusive contingency arrangement can act as a disincentive to a recruitment firm to focus and spend much time on a search in certain situations, there are other circumstances where both the recruitment firm and law firm will find it most appropriate. Let's take a fairly common example. A law firm with a general commercial practice is in the midst of a downturn. It has lost its position in the marketplace. It may have no strategic vision or strong management. The financials at the firm may be slowly eroding. They would love to bring on some dynamic partners as white knights to save the day.

A non-exclusive contingency fee arrangement makes most sense in this context. The search firm would understand the difficulty of such a search. The probability of near term success would be low. It may be more a function of luck and changes in the marketplace that might bring a lateral partner to this law firm. As we have often explained to law firms that don't “sizzle” in the marketplace, outside events may dictate when some lateral candidates may be pried loose from the market to show some serious interest. These candidates may be shaken loose when a real estate lease on their law firm's office comes up for expiration. It may be a downturn in the economy when a partner's compensation gets squeezed and the partner has an incentive to move on.

Law firms in these situations would be better served by engaging a number of search firms on a non-exclusive basis with the understanding that you want a number of market sources to be aware of the need. It will be a rare candidate who might be attracted to the opportunity, and you need to cast a wider net to reach such a person.

Exclusive Contingent Search

Exclusive contingent searches make more sense where the law firm has a more compelling story and an effective search firm can more persuasively “sell” the story to prospective lateral partner candidates.

Consider the example of an established but small branch office (30 lawyers) of an out-of-state law firm in Boston seeking to expand its footprint. The firm's strategy ' though not necessarily one we would encourage ' may be to simply add as many $1 million-plus billers as possible in many practice areas. The goal may be to achieve a certain critical mass in the Boston market to make it a more effective player in reaching other more specific goals. The firm may understand that a 60-lawyer office in that market is a more powerful platform than 30 lawyers. The branch office may be competing with 20 other branch offices, and may not have a publicly apparent distinction in the market even though it may have distinctive characteristics that could be attractive if properly presented to targeted candidates.

In this example, an exclusive partnering arrangement with a search firm makes most sense. A search firm needs significant detail from the law firm about its practice, economics, management, clients and culture. In an exclusive arrangement, the law firm will be able to justify devoting more time in providing such information to one search firm. An exclusive search makes the search firm feel more vested in the relationship and justifies its allocation of resources to the single competitor in a crowded market.

Yet, the example above might be contrasted with a situation where this same branch office has a specific target in mind – a biotechnology patent partner, for example. In that situation, a retained search may make more sense.

Hybrid Arrangements

Firms should also consider some hybrid arrangements as well. A law firm may wish to sweeten the incentive to a recruitment firm and offer a modest retainer amount in an exclusive, contingent search arrangement. Law firms may, of course, be hesitant to engage in an exclusive relationship because they are concerned that the search firm may fail to find appropriate lateral partner candidates. That concern is often addressed by limiting the period of exclusivity.

The best recruitment firms don't want to create unrealistic expectations with their law firm clients. It's bad for long-term business, and the best recruitment firms are more concerned with long-term relationships than with making a quick placement or a poor initial impression. A recruitment firm should have an honest dialogue with a law firm about the firm's position in the marketplace and the difficulties of recruiting attractive lateral partners to the firm. But it is a two-way street, and the law firm must listen to the recruitment firm and understand that the recruitment firm's honest assessment doesn't mean the search firm won't be trying hard to sell the law firm to prospective candidates.

For their part, law firms must have realistic expectations ' simply because they have engaged a recruiter and explained their needs is no guarantee of quick success in attracting candidates. All too many firms disappointed in the inability to recruit superior lateral partner candidates are those who either have inflated expectations about a search firm's capabilities or the market dynamics, or were not candid with themselves in understanding market conditions or facing the weaknesses of their own law firms.

It is this honest dialogue and understanding of the market dynamics that should dictate how a law firm engages a search firm.

Retained Partner Search

More and more law firms are considering retained search to compete effectively for top partner talent. Demand for this service has increased consistently over the past 5 years. Yet, many firms have invested in retained searches without a successful outcome. Just as a positive result is a win/win for search firms and law firms, an unsuccessful search is expensive and frustrating for the law firm, and usually unprofitable for the search firm. Why is retained search of interest to so many firms? When should law firms consider the retained search route?

Why Retain A Search Firm?

The key benefit of a retained search is access to potential candidates who are not actively looking around. Carefully cultivated relationships with recruiters ensure most law firms access to interested partners seeking a change. Often, the candidates are represented in an agent model by a recruiter who introduces them to multiple opportunities.

A retained recruiter proactively contacts desirable partners the recruiter and you have identified, and will only discuss your firm and the opportunity it offers. These partners are almost always successful, well compensated, and essentially happy. However, a committed recruiter can learn enough to assess whether the opportunity warrants their consideration. Often, “happy” partners have a list of sore spots. Billing rates, access to strong associate talent, ability to matriculate star associates into the partnership, compensation, strength in complementary practice areas or locations, disagreements over management style, and ability to cross sell legal services can all be points of consideration.

For example, after talking with a sought-after patent prosecution partner who was “perfectly happy,” it became clear that with a stronger patent litigation practice he could refer substantial additional work from his existing clients. Few things are more compelling than quickly increasing a partner's practice without increasing the hours. He moved to the client firm and his practice grew significantly over the next couple of years. He made more money, the law firm was thrilled, his integration was eased by the synergies of the practices, and the conversation began with his clear lack of interest.

When?

A retained partner search is most effective in two scenarios: opening an office in a new market, and seeking a specific skill set to fit into a well-articulated strategic plan. How can a Boston firm open in highly competitive San Diego? Or a Palo Alto firm open in the incredibly profitable New York market? To be successful a firm needs several things: deep local knowledge of the market, a clear commitment to the project, and a dedicated professional with the skills and incentive to be successful.

All of these elements are manifested in hiring the right firm to conduct a retained search. The recruiter supplies market knowledge, allowing the firm to go after the right people with the right practices. Market knowledge is crucial to success. Because a new office usually involves recruiting multiple partners, it is important to understand each professional history and how that impacts the structure of the group. A recruiter who doesn't know the market may pursue three terrific candidates with large books of business who wouldn't work together under any circumstances. Discovering this after the memos go to the executive committee is expensive and frustrating for everyone.

A law firm's rationale and commitment to opening a new office is often tested in the process of approving a retained fee. Internal conflicts that may hinder the search can get addressed during the contracting process. Management's commitment to the new office is one of the most important issues for the candidate pool. The most common objection: “How serious are they?” A powerful answer: “They are conducting a full retained search,” preferably followed by: “they have existing clients in the region and being here is a key component to their business strategy.”

Finally, a skilled recruiter is sales, marketing and operations support all in one. He or she should be wise enough to know who to call, credible enough to get a call back, smart enough to establish the true selling points, and capable of avoiding pitfalls such as client conflicts, discrepancies in billing rates, and cultural mismatches. Most firms opening in new cities are somewhat unknown, and your retained recruiter should stay on message and pre-sell your entrance to the market.

Hiring lateral partners as part of a clear strategic vision is another ideal scenario for retained partner search. Most profitable firms seek strong corporate partners with business. These “rock stars” are barraged with calls from recruiters. One more recruiting call about a typical corporate partner need probably won't change their decision to stay put.

However, if a law firm has identified a specific business opportunity, that message might rise above the noise. For example, a firm is expanding its M&A practice to serve clients that used to be emerging companies, but have now grown to require a sophisticated M&A capability.

Getting the word out requires a concerted and proactive effort. A retained search ensures the message is delivered correctly to the right people. It also allows the client to receive market feedback about the initiative. For example, a firm decides to build a patent practice geared toward high-end strategic counseling work. With the client's permission the retained recruiter contacts venture capitalists to identify the top players in IP portfolio valuations for early stage companies. As this is a due diligence point for a VC considering a financing, it is a chance for the law firm to get involved right from the beginning. Contacting the investment community has the added benefit of pre-marketing the new practice to potential clients. But more importantly, it identifies and vets the best candidates with a critical constituency: existing and potential clients. Such a tactic requires the kind of dedication and commitment established in a retained partner search.

As law firms continue to evolve into well-managed global businesses it is appropriate that they rely on the most knowledgeable and successful recruiting professionals. Both contingent and retained search services are essential to competing for talent. Knowing when to wield each of these tools is part of being a sophisticated consumer of professional recruiting services.