When a Lateral Move Is a Package Deal

Sergio met the partners from what became his new firm quite by accident. But it quickly became evident that the combination would be a strong marriage. A flurry of interviews, negotiations, due diligence and plans ensued. Everyone involved on both sides of the transaction wanted Sergio and his team to make the move.

Except one.

Ties That Bind

Sergio explained it to me this way. “The man I have admired my whole career, the man who taught me the most important aspects of this business, feels he is too old to make the move. I thought when he learned the name of the [new] firm, he would change his mind. He didn't. The rest of the team wants to move. But I cannot make the move without him.”

The older attorney had been Sergio's mentor. And Sergio could not leave without him any more than a mother could flee a burning house without her child. The whole team stood to make a lot more money. So loyalty to this one man did not fully explain missing this opportunity for the whole group. I couldn't help but wonder whether something more was going on here.

I tried every possible angle to change Sergio's mind. After several discussions, I came to the conclusion that Sergio intuitively recognized something few others do: The value of his team was not just in their collective clients, but in each other. Intuitively, he understood that the team was more valuable than any one of its parts, including himself. A true “one plus one equals three” situation. Even the loss of just one team member would cause irreparable damage to the team. That's counterintuitive in an industry that believes rainmakers need only their Rolodex to be successful. Keeping the team together was Sergio's priority. The deal was dead.

Strength of the Team

Sergio was smart. The team often contributes more to the success of an individual than the individual's own knowledge and capabilities contribute. It turns out there's evidence to suggest that the presence of the team significantly improves that individual's chance of success in a new platform, a lesson to which law firms negotiating the volatile lateral partner recruiting market may want to pay particular attention.

Research studying cardiac surgery performed by the same doctor at different hospitals showed that familiarity with a team was the single highest determinant in avoiding mistakes during surgery. The doctors were equally knowledgeable in how to operate on a heart. But it was the doctors' familiarity with the nurses and staff that reduced surgical mistakes. And research into the portability of investment managers' investment skills also showed a direct correlation with the familiarity with their peers and support people in how well they duplicated the success in a new firm. The investment advisers brought their clients, knowledge and skills over to a new firm, but only maintained the same portfolio success rate as they had in their previous firm, when they ported over the previous firm's team as well. Comparisons with the legal industry are hard to avoid.

Clients First

Attorneys are obligated to keep their clients' best interests foremost in mind. The decision to move to a particular firm is made, theoretically at least, through an analysis of the benefits that the new firm will have for the attorney's clients. Combining these benefits with the continuity in service delivery achieved by bringing the familiar resources and institutional knowledge of the team to the new firm greatly increases the likelihood a client would move its work with the lateral.

Conversely, splitting a team forces a tough decision and a hardship on clients. Faced with training a new attorney but keeping a familiar team versus keeping an attorney and retraining a team, clients are more apt to substitute the attorney with one from the incumbent firm in many cases. It may not be the position the lateral intended to put his client in. But that's the choice forced upon clients when the team is left behind. If that lateral doesn't have unique institutional knowledge of the client, isn't doing strategically important work for that client, or lacks a deep personal relationship with the client, the decision to move becomes much more difficult for the client. And many choose the easier path and stay put.

Conclusion

Recruiting the team of a top rainmaker is certainly more expensive and fraught with professional ethics issues for the candidate. But when the due diligence indicates the institutional ties reach into the rainmaker's support team and his clients will truly benefit, that extra cost may be the better investment.

Eric Dewey is managing principal of Group Dewey Consulting, focusing his practice on business development coaching and lateral acquisition support services. He writes the Lawyer Up! blog. He can be reached at [email protected]. This article also appeared in The Recorder, an ALM sister publication of this newsletter.

Research indicates that a lateral partner's team may contribute more to the success of the rainmaker's move to a new firm than most realize. A surprising turn of events recently brought the issue into view. The names have been changed to protect confidentiality.

Sergio Martinez was an exceptional international tax practitioner. He was not only a brilliant lawyer, but he had developed a personal following and book of regular business that totaled several million dollars and stretched to the far corners of the U.S. and Latin America. His clients were some of the wealthiest people in the world and they loved and trusted Sergio. But Sergio didn't love and trust his firm.

Sergio and his team had become disgruntled with their firm's leadership. Among other issues, the firm had set upon a new strategic direction that did not include a personal wealth practice. Sergio wanted a better, more sustainable platform for himself and his team of attorneys and staff. They weren't being kicked out, but Sergio saw the writing on the wall.

Sergio met the partners from what became his new firm quite by accident. But it quickly became evident that the combination would be a strong marriage. A flurry of interviews, negotiations, due diligence and plans ensued. Everyone involved on both sides of the transaction wanted Sergio and his team to make the move.

Except one.

Ties That Bind

Sergio explained it to me this way. “The man I have admired my whole career, the man who taught me the most important aspects of this business, feels he is too old to make the move. I thought when he learned the name of the [new] firm, he would change his mind. He didn't. The rest of the team wants to move. But I cannot make the move without him.”

The older attorney had been Sergio's mentor. And Sergio could not leave without him any more than a mother could flee a burning house without her child. The whole team stood to make a lot more money. So loyalty to this one man did not fully explain missing this opportunity for the whole group. I couldn't help but wonder whether something more was going on here.

I tried every possible angle to change Sergio's mind. After several discussions, I came to the conclusion that Sergio intuitively recognized something few others do: The value of his team was not just in their collective clients, but in each other. Intuitively, he understood that the team was more valuable than any one of its parts, including himself. A true “one plus one equals three” situation. Even the loss of just one team member would cause irreparable damage to the team. That's counterintuitive in an industry that believes rainmakers need only their Rolodex to be successful. Keeping the team together was Sergio's priority. The deal was dead.

Strength of the Team

Sergio was smart. The team often contributes more to the success of an individual than the individual's own knowledge and capabilities contribute. It turns out there's evidence to suggest that the presence of the team significantly improves that individual's chance of success in a new platform, a lesson to which law firms negotiating the volatile lateral partner recruiting market may want to pay particular attention.

Research studying cardiac surgery performed by the same doctor at different hospitals showed that familiarity with a team was the single highest determinant in avoiding mistakes during surgery. The doctors were equally knowledgeable in how to operate on a heart. But it was the doctors' familiarity with the nurses and staff that reduced surgical mistakes. And research into the portability of investment managers' investment skills also showed a direct correlation with the familiarity with their peers and support people in how well they duplicated the success in a new firm. The investment advisers brought their clients, knowledge and skills over to a new firm, but only maintained the same portfolio success rate as they had in their previous firm, when they ported over the previous firm's team as well. Comparisons with the legal industry are hard to avoid.

Clients First

Attorneys are obligated to keep their clients' best interests foremost in mind. The decision to move to a particular firm is made, theoretically at least, through an analysis of the benefits that the new firm will have for the attorney's clients. Combining these benefits with the continuity in service delivery achieved by bringing the familiar resources and institutional knowledge of the team to the new firm greatly increases the likelihood a client would move its work with the lateral.

Conversely, splitting a team forces a tough decision and a hardship on clients. Faced with training a new attorney but keeping a familiar team versus keeping an attorney and retraining a team, clients are more apt to substitute the attorney with one from the incumbent firm in many cases. It may not be the position the lateral intended to put his client in. But that's the choice forced upon clients when the team is left behind. If that lateral doesn't have unique institutional knowledge of the client, isn't doing strategically important work for that client, or lacks a deep personal relationship with the client, the decision to move becomes much more difficult for the client. And many choose the easier path and stay put.

Conclusion

Recruiting the team of a top rainmaker is certainly more expensive and fraught with professional ethics issues for the candidate. But when the due diligence indicates the institutional ties reach into the rainmaker's support team and his clients will truly benefit, that extra cost may be the better investment.

Eric Dewey is managing principal of Group Dewey Consulting, focusing his practice on business development coaching and lateral acquisition support services. He writes the Lawyer Up! blog. He can be reached at [email protected]. This article also appeared in The Recorder, an ALM sister publication of this newsletter.