Partners divided over value of lateral hires

After a year of turbulence for partnerships at many leading law firms, City partners have mixed feelings about the benefits that lateral hires - in particular from the magic circle - can bring. Claire Ruckin reports

The City is split over whether lateral partner hires deliver real benefits to law firms, with those firms opting to bring in partners from the magic circle felt to face the greatest challenges.

The results of the latest Legal Week Big Question survey show that just less than half of partners (47%) believe lateral partner recruitment has a 50/50 chance of delivering substantive commercial results, with a further 20% arguing such hires ‘rarely' work out. Only 32% of respondents think lateral hiring ‘often' or ‘nearly always' delivers results.

The findings, which come in a year that has seen a significant amount of lateral recruitment activity driven in part by restructurings at leading City law firms, show that those in the City hoping to gain through magic circle partner hires are likely to fare even worse.

In these circumstances, 62% of partners said the challenge of transferring magic circle partners and institutional clients meant there was ‘rarely' much value in bringing in those from the top firms, with a further 10% going further to state there was ‘never' any value in hiring service partners. Only around 28% of respondents believed magic circle hiring ‘often' added value.

Eversheds chief executive Bryan Hughes said: "When you recruit from one of the top firms the clients usually remain with the firm rather than the individual and you have to accept that you are recruiting talent rather than securing a client base."

Taylor Wessing's former managing partner, Michael Frawley, added: "The main problem with hiring from magic circle firms is that the clients are embedded with the firm as opposed to the partner."

Only around a quarter (27%) of partners questioned said major commercial firms generally show good judgement when making senior partner appointments, with 35% claiming firms do ‘OK' and 37% saying firms ‘could use better' judgement.

Graham White, executive partner at Slaughter and May, commented: "Lateral partner hiring as a strategy works in the right circumstances but it is difficult. There needs to be a lot of care and thought in the planning and execution to make it successful."

Hughes said: "When making a lateral partner hire, you are required to make a judgement call on the facts before you at the time, and to an extent it is a leap of faith. It is unreasonable to expect 100% of your lateral hires to be successful but if 50% are, then we would see that as a reasonable return."

Frawley said firms do not carry out enough due diligence on partner hires: "Firms don't look into whether or not partners will bring clients with them and if they have skeletons in the closet. The magic circle are generally better at due diligence but I think the mid-market and other firms are catching up, especially in light of the number of CVs on the market."

In general US firms were seen to be making worse decisions when it came to building their London practices through partner recruitment, with more than half claiming US firms' decisions generally were either ‘very poor' or ‘could be better'. Only 16% thought US firms were doing a good job, even though nearly two-thirds (61%) said it was, to an extent, credible for law firms to build their practice primarily through lateral partner recruitment.

The survey also highlighted the difficulties firms face reconciling heavy lateral recruitment with keeping their existing partnership happy. More than 30% of respondents said it could be either ‘damaging' or ‘very damaging' to staff development, with a further 38% having mixed feelings.

White commented: "The problem is obtaining cohesion and cultural alignment, although there are some good examples of firms that have made some fantastic and successful lateral hires."

Frawley added: "If you make too many lateral hires you may dilute your culture or give the impression that lateral hires do better than the homegrown fee earners."

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