Lawyer Monthly Magazine - April 2019 Edition

APR 2019 35 MacLean Legal Search www. lawyer-monthly .com lateral hiring and retention. They must have learnt from their own mistakes and/or from others. They must have adopted more modern and newly developed techniques to help improve their knowledge and understanding of who they are about to hire. However, recent reports I have read about lateral partner hiring in the US, albeit sponsored by due diligence companies promoting their wares, suggest that retention rates over five years for lateral hires amongst the AmLaw200 Firms is poor and remains an expensive problem for law firms. The revolving door image must be one of the most used by the legal press. Methodology One of the long-standing comparative metrics of partner success is how much you are contributing to the partnership by way of total billable hours recovered. This is clearly a function of the number of years spent at any one firm. Any partner leaving within three years of joining a law firm generally results in a financial loss for that firm and it isn’t too much of a stretch, therefore, to call them failed lateral hires. Other commentators have argued that many partners leaving within five years make very little profit contribution and that between 20% and 45% of all lateral hires fall into this category. However, I have edged on the side of caution. There are also large opportunity and sunk costs to consider as a significant amount of time and resources are usually spent delivering these hires. I have analysed over 150 partner lateral hires in London by the Top 50 UK and US law firms last year by revenue (so 100 Firms in total) since 2013, which fall into this category. If you’re interested in a more complete picture about some of these firms, you should also read my recently published articles on Partner Churn and Retention at US Law Firms in London and US Law Firm London Profits: A Reality Check. I have also summarised the most common reasons why lateral hires end sooner than intended. I have only considered partners who continue to work full-time after their departures. I have tried to exclude exits from law firms a year before or after a major merger withanother firm(of which there have been several during this period) or a year before a firm collapses (principally KWM which accounted for close to 100 lateral partner hires between 2016 and 2017). Findings Of the 100 firms analysed, at least 70% have experienced a failed hire over the past five years. As with partner churn, losing partners before time is unavoidable and part of the natural business cycle. It’s when these issues become too frequent or numerous that alarm bells should start ringing. Of the 30 firms that appear not to have experienced failed hires, as you would expect the Magic Circle plus Macfarlanes and Travers Smith are included, as well as US heavyweights like Debevoise, Simpson Thacher, Skadden Arps and Sullivan & Cromwell. Of course, these firms make very few lateral partner hires for any given year compared to their competitors. Whether these Firms are better at or take more time over lateral hiring is a subject for another day. This is not a surprise, to me at least, even though there are a much smaller number of lawyers working here for the Top 50 US firms compared to their UK equivalents. As you will read below, several US firms in London experience cultural and organisational issues, such as satellite office syndrome, which do not apply to UK firms. US firms have also been more aggressive over billing targets and quicker to remove partners that are underperforming. The Swiss Verein firms are very large, seemingly amorphous, organisations which struggle to create a common culture and identity. They’re also far less profitable than many of their competitors, which can mean that their highest billers or most promising talent are vulnerable to being bought out. Dentons is unique in that it seems to be in a constant state of growth via merger and acquisition. For example, it was founded in 2013 by the merger of SNR Denton (itself a result of a merger between a UK Firm and US Firm in 2010), Fraser Milner Casgrain and Salans. Following its merger with another US firm and Chinese law firm, Dacheng, in 2015, Dentons became the largest law firm in the world by a number of lawyers. Based on my own criteria for failed hires, most of their partner exits since 2013 should not technically be included in my analysis. However, most lawyers joining them over the past five years should have been well aware of what type of organisation they were joining. See the sections below. Corporate and Finance (and their subsets) are the two largest transactional product areas at most of the leading firms. They account for the most fee earners and the most lateral hires, so it makes sense that they produce the largest number of failed hires. Real Estate and Litigation have traditionally been regarded as cyclical product areas, so again it makes sense to see their numbers higher than other product areas. Leading UK and US Firms with four or more failed London partner hires: • Ashurst (4) - Shaun Lascelles, Darren Rogers, Patrick Williams and James Wood. • Chadbourne & Parke (4) (merged with Norton Rose Fulbright in June 2017) - Ben Donovan, Kevin Atkins, Partha Pal and Irina Tymczyszyn. • DWF (7) - Tim Barr, Richard Brittain, Howard Cartlidge, Chong Cao, Timothy Leeson, Rehman Noormohamed and Alan Owens. • Dentons (8) - Sylvain Dhennin, Carolyn Jones, David Moore, Tracey Sheehan, Anju Suneja, Mark Tempest, Roger Tynan and Wendy Wilks. • DLA (5) - Tom Calnan, Richard Hopkinson-Woolley, Patrick Somers, Justin Conway and David Farmer. • K&L Gates (4) - Paul Feldberg, Jacob Ghanty, John Gilbert and Mike Stewart. • Mayer Brown (5) - Tom Eldridge, Matthew Kidwell, Stefan Martin, Richard Todd and Guy Wilkes. Over six out of 10 (64%) failed hires were made by US Law Firms (54%) and Swiss Verein Firms (10%), principally Dentons and DLA Piper Just over one in 10 (11%) failed hires moved to a better law firm Over six out of 10 failed hires were in the product areas of Corporate & Finance (40%), Real Estate and Disputes/Litigation (22%)