Using Business Plans in Recruiting Lateral Partners

Your firm is competing for talent and reaching out to the recruiting community for help. Your Silicon Valley (or L.A. or N.Y. or Chicago) office doesn't yet have critical mass in the corporate group, so you'd prefer a partner with a substantial portable book of business. But for the right person at the right stage of career you could make an exception ' if you can make a 'business case' to hire him or her.

How many partner candidates have you met who seemed well-suited to join your firm, but who, after many hours of meetings, didn't get the offer? Often this is the right outcome, since without a strong business case, the hire proves more risky. But how much time was wasted interviewing, wining and dining, filling out and reading lateral forms and questionnaires? And worse, the cost of hiring someone for whom it turns out there really isn't a business case is felt by all the partners in the hiring firm.

An additional hidden cost arises from the lost opportunities of partners who probably should consider alternative platforms, but hesitate because they've witnessed how wasteful ' and sometimes fruitless ' the exercise can be. With the right analysis however, the hire that never should have been and the lateral move that benefits both partner and firm, can be understood for what they are, and avoided or embraced as appropriate.

The Plan

One way to better ensure a good outcome is to collaboratively develop a business plan that lays out the business case for hiring, and for moving. It is an extra step in an already iterative process, often fit in between trials, deals and travel to clients. However, it is generally well worth the time, and can prevent a career misstep with incalculable costs. It can also, in the best case, help uncover the Holy Grail of recruiting partners: synergy. Synergy is an overused term, but it should describe the partner who comes to your firm and triples his or her practice in 5 years. A business plan can help identify that person, and help the partner-candidate analyze the opportunity presented by a potential new firm. Self interest ' and candor ' compel me to add that business plans are best created with the support and professional advice of a recruiter who has a successful track record of placing partners who have thrived after changing firms.

Because the ideal business plan is customized for each firm being considered and includes substantial input from both candidate and law firm, it is best prepared after basic levels of mutual interest have been established. It's best to have an introductory meeting, and possibly a follow up meeting and preliminary conflicts check, before taking on the task of writing a business plan.

The Basics

Once mutual interest, absence of egregious conflicts, and essential culture fit are established, it is time for a thoughtful business analysis. That analysis can start with a brief recital of basic professional data: educational background, work history, publications, contact information, a practice description and a list of representative matters, or deals. Much of this information will already have been supplied to the firm, but having all the data in one place facilitates circulation within the firm and 'pitching' a partner's candidacy more efficiently.

The Numbers

The remainder of the plan should explore the business proposition of joining this particular law firm. It should include the current and historical financial metrics of the practice to illustrate the practice's business trajectory. First, provide the current billing rate, any discounts to that rate, and the 3-year history of the billing rate. The historical component helps establish how resilient the current rate is and can help project client reaction to raising the rate.

Billing rate considerations directly impact the financial viability of a practice, and are often key factors precipitating the need for a partner to consider alternative platforms in the first place. For example, a partner in rate-sensitive practices such as labor and employment may be in a very profitable firm where he or she is asked to raise his or her rate beyond their clients' tolerance. Such a partner might then seek a platform providing more flexibility in the billing rate without marginalizing his or her practice.

Conversely, a partner whose practice has outgrown his or her current platform may need a deeper and more sophisticated cadre of associates to service his or her clients. Such associates may command higher rates at another firm. The combination of providing more sophisticated associate support for clients with the ensuing higher rate structure can make a meaningful difference in the financial measure of the practice. The same hours can add up to a more robust business, often without pushback from the clients, if the platform delivers on its promise.

The business plan is also the place to track current and historical billings, including origination credit, billable time and matter management. Each firm calculates these slightly differently, so a brief explanation of how this partner's firm tracks business development credit (or origination), billable time (usually rate multiplied by billed hours), and matter management (sometimes called 'responsible attorney'), is helpful to the hiring firm. Each of these metrics should be tracked 3 years back in order to help identify the financial trajectory of the practice.

When it comes to origination credit, some firms offer more than 100% credit in order to encourage collaboration between partners. In such a case it is best to disclose this practice. This 'under promise and over deliver' approach is appreciated by hiring firms and allows the partner to join with reasonable expectations.

Similarly, supplying detailed current and historical compensation data saves time and avoids missed expectations. This is the place to list profit distribution cycles that may impact the timing of a move. If one-third of a prospective partner's current compensation will be paid on March 15 of the upcoming year, for example, the recruiting firm must decide whether to wait or whether to negotiate to provide part or all of that compensation. This is also a good place to list pension entitlements and expectations of capital contributions being returned. Finally, some firms fully fund their partners' benefit plans, and that can significantly impact compensation. If this is the case, disclose this early and fully to avoid a misunderstanding about how much a partner earns in the form of benefits.

The Clients

Many hiring firms will ask how much of the practice is portable, or likely to follow the partner that is moving. It cannot be known, short of a potential breach of fiduciary duty, whether any given client is certain to move with a partner. However, it is an important area to explore, to the extent possible. Both the hiring firm and the lateral candidate will be negotiating compensation based on this projection, so it is important to use this exchange of information to help both parties best understand how together they can not only maintain the existing practice, but grow it.

In order to best project the future practice on the hiring firm's platform, several components of the partner's network can be outlined.

First, it is best to list existing client relationships. This list can include the company name, a description of its business, the person(s) at the company with whom the partner has a relationship (with their titles), and the nature and duration of that relationship. This helps establish how solid the ties are, at what point in the hierarchy of the company this partner has a leverage point, and some sense of what work the partner has done for the company.

This current client list can be circulated to relevant partners in ancillary practices at the hiring firm to help establish whether the potential lateral can refer them to his or her existing client base. To the extent that he or she can refer work to other practices within the hiring firm, this new partner is truly adding value. The candidate's ability to refer work in this way is a powerful element of a strong business case for hiring him or her.

The Network

Second, outline a list of relationships that could be sources of future business ' executives and decision makers in companies for which the potential new partner is not currently working. This list might include companies for which he or she is conflicted from working at his or her current firm. Such relationships can make a powerful statement that a different platform could provide opportunities to materially expand the partner's practice.

Third, a list of the hiring firm's existing clients and non-client relationships where more business might be generated with the addition of this new partner is essential to a thorough business plan. For example, the hiring firm might represent NewCo for its intellectual property matters. But, with the addition of a new emerging company corporate lawyer, the firm might capture corporate work as well.

This last section is where the hackneyed term synergy most comes into play. The process of developing this section of the plan sometimes forces the hiring firm and the candidate to get granular about how they will go about winning clients. Often, the development of this list and business strategy can identify other partners in the hiring firm with whom the candidate might work. When this happens, it is useful to make an introduction between the two, and to solicit input on the business plan from that partner.

The Team

This process of expanding the population of potential clients, identifying the partners who as a team will best present the firm's capabilities, and getting the early attention from these partners on your potential lateral partner, supports the best possible outcome for the hiring process. It builds consensus within the firm, it allows the candidate to diligence the partnership in terms of clients and in terms of partners in ancillary practices, and it gets the firm and the candidate working together from the very beginning. Often, the process of developing a business plan establishes the tone of teamwork that will characterize the relationship when the two partners are in the same firm.

Practice group structures, marketing departments, Chief Information Officers, even off-site operations centers ' each of these now commonplace elements of big law firm life is a manifestation of the business focus these firms have adopted. We all see it, with varying degrees of approval. Global law firms now develop and follow business strategies. Slowly, these firms are bringing a similar business focus to their lateral partner recruiting. For partners who think they might switch firms at some point, and for firms doing battle for talent in the lateral market, bringing a business perspective to your analysis can save a lot of time and energy. A properly prepared business plan will prevent the loss of countless (otherwise billable) hours and, more important, help avoid making the wrong move.

The Problem

As a recruiter specializing in law firm partners and practice groups, I've seen the following many times, and my guess is so have you.

Your firm is competing for talent and reaching out to the recruiting community for help. Your Silicon Valley (or L.A. or N.Y. or Chicago) office doesn't yet have critical mass in the corporate group, so you'd prefer a partner with a substantial portable book of business. But for the right person at the right stage of career you could make an exception ' if you can make a 'business case' to hire him or her.

How many partner candidates have you met who seemed well-suited to join your firm, but who, after many hours of meetings, didn't get the offer? Often this is the right outcome, since without a strong business case, the hire proves more risky. But how much time was wasted interviewing, wining and dining, filling out and reading lateral forms and questionnaires? And worse, the cost of hiring someone for whom it turns out there really isn't a business case is felt by all the partners in the hiring firm.

An additional hidden cost arises from the lost opportunities of partners who probably should consider alternative platforms, but hesitate because they've witnessed how wasteful ' and sometimes fruitless ' the exercise can be. With the right analysis however, the hire that never should have been and the lateral move that benefits both partner and firm, can be understood for what they are, and avoided or embraced as appropriate.

The Plan

One way to better ensure a good outcome is to collaboratively develop a business plan that lays out the business case for hiring, and for moving. It is an extra step in an already iterative process, often fit in between trials, deals and travel to clients. However, it is generally well worth the time, and can prevent a career misstep with incalculable costs. It can also, in the best case, help uncover the Holy Grail of recruiting partners: synergy. Synergy is an overused term, but it should describe the partner who comes to your firm and triples his or her practice in 5 years. A business plan can help identify that person, and help the partner-candidate analyze the opportunity presented by a potential new firm. Self interest ' and candor ' compel me to add that business plans are best created with the support and professional advice of a recruiter who has a successful track record of placing partners who have thrived after changing firms.

Because the ideal business plan is customized for each firm being considered and includes substantial input from both candidate and law firm, it is best prepared after basic levels of mutual interest have been established. It's best to have an introductory meeting, and possibly a follow up meeting and preliminary conflicts check, before taking on the task of writing a business plan.

The Basics

Once mutual interest, absence of egregious conflicts, and essential culture fit are established, it is time for a thoughtful business analysis. That analysis can start with a brief recital of basic professional data: educational background, work history, publications, contact information, a practice description and a list of representative matters, or deals. Much of this information will already have been supplied to the firm, but having all the data in one place facilitates circulation within the firm and 'pitching' a partner's candidacy more efficiently.

The Numbers

The remainder of the plan should explore the business proposition of joining this particular law firm. It should include the current and historical financial metrics of the practice to illustrate the practice's business trajectory. First, provide the current billing rate, any discounts to that rate, and the 3-year history of the billing rate. The historical component helps establish how resilient the current rate is and can help project client reaction to raising the rate.

Billing rate considerations directly impact the financial viability of a practice, and are often key factors precipitating the need for a partner to consider alternative platforms in the first place. For example, a partner in rate-sensitive practices such as labor and employment may be in a very profitable firm where he or she is asked to raise his or her rate beyond their clients' tolerance. Such a partner might then seek a platform providing more flexibility in the billing rate without marginalizing his or her practice.

Conversely, a partner whose practice has outgrown his or her current platform may need a deeper and more sophisticated cadre of associates to service his or her clients. Such associates may command higher rates at another firm. The combination of providing more sophisticated associate support for clients with the ensuing higher rate structure can make a meaningful difference in the financial measure of the practice. The same hours can add up to a more robust business, often without pushback from the clients, if the platform delivers on its promise.

The business plan is also the place to track current and historical billings, including origination credit, billable time and matter management. Each firm calculates these slightly differently, so a brief explanation of how this partner's firm tracks business development credit (or origination), billable time (usually rate multiplied by billed hours), and matter management (sometimes called 'responsible attorney'), is helpful to the hiring firm. Each of these metrics should be tracked 3 years back in order to help identify the financial trajectory of the practice.

When it comes to origination credit, some firms offer more than 100% credit in order to encourage collaboration between partners. In such a case it is best to disclose this practice. This 'under promise and over deliver' approach is appreciated by hiring firms and allows the partner to join with reasonable expectations.

Similarly, supplying detailed current and historical compensation data saves time and avoids missed expectations. This is the place to list profit distribution cycles that may impact the timing of a move. If one-third of a prospective partner's current compensation will be paid on March 15 of the upcoming year, for example, the recruiting firm must decide whether to wait or whether to negotiate to provide part or all of that compensation. This is also a good place to list pension entitlements and expectations of capital contributions being returned. Finally, some firms fully fund their partners' benefit plans, and that can significantly impact compensation. If this is the case, disclose this early and fully to avoid a misunderstanding about how much a partner earns in the form of benefits.

The Clients

Many hiring firms will ask how much of the practice is portable, or likely to follow the partner that is moving. It cannot be known, short of a potential breach of fiduciary duty, whether any given client is certain to move with a partner. However, it is an important area to explore, to the extent possible. Both the hiring firm and the lateral candidate will be negotiating compensation based on this projection, so it is important to use this exchange of information to help both parties best understand how together they can not only maintain the existing practice, but grow it.

In order to best project the future practice on the hiring firm's platform, several components of the partner's network can be outlined.

First, it is best to list existing client relationships. This list can include the company name, a description of its business, the person(s) at the company with whom the partner has a relationship (with their titles), and the nature and duration of that relationship. This helps establish how solid the ties are, at what point in the hierarchy of the company this partner has a leverage point, and some sense of what work the partner has done for the company.

This current client list can be circulated to relevant partners in ancillary practices at the hiring firm to help establish whether the potential lateral can refer them to his or her existing client base. To the extent that he or she can refer work to other practices within the hiring firm, this new partner is truly adding value. The candidate's ability to refer work in this way is a powerful element of a strong business case for hiring him or her.

The Network

Second, outline a list of relationships that could be sources of future business ' executives and decision makers in companies for which the potential new partner is not currently working. This list might include companies for which he or she is conflicted from working at his or her current firm. Such relationships can make a powerful statement that a different platform could provide opportunities to materially expand the partner's practice.

Third, a list of the hiring firm's existing clients and non-client relationships where more business might be generated with the addition of this new partner is essential to a thorough business plan. For example, the hiring firm might represent NewCo for its intellectual property matters. But, with the addition of a new emerging company corporate lawyer, the firm might capture corporate work as well.

This last section is where the hackneyed term synergy most comes into play. The process of developing this section of the plan sometimes forces the hiring firm and the candidate to get granular about how they will go about winning clients. Often, the development of this list and business strategy can identify other partners in the hiring firm with whom the candidate might work. When this happens, it is useful to make an introduction between the two, and to solicit input on the business plan from that partner.

The Team

This process of expanding the population of potential clients, identifying the partners who as a team will best present the firm's capabilities, and getting the early attention from these partners on your potential lateral partner, supports the best possible outcome for the hiring process. It builds consensus within the firm, it allows the candidate to diligence the partnership in terms of clients and in terms of partners in ancillary practices, and it gets the firm and the candidate working together from the very beginning. Often, the process of developing a business plan establishes the tone of teamwork that will characterize the relationship when the two partners are in the same firm.