Rainmakers drive revenue, build reputation and can help define the future of a law firm. However, too often firms struggle to unleash the full potential of the laterals they hire. So how can firms better identify, hire and integrate rainmakers to drive sustainable growth?
A recent webinar co-sponsored by Totum Partners and Deacon Search explored this topic. Hosted by leadership coach, ex-lawyer and founder of Riviera Wellbeing Gavin Sharpe, the event opened with some startling statistics.
According to research by Decipher Investigative Intelligence, 96% of law firms say that lateral partner hiring is their most effective growth strategy. However, 75% of those hires fail, with 90% unable to generate promised revenue targets, 48% leaving within five years, and just under 50% of those who do stay failing to break even within five years.
“The depressing truth is that a law firm’s top growth tactic is also the one most likely to fail. It’s the riskiest option,” said Sharpe.
Mitigating this risk is about rethinking your approach to hiring lateral partners, argued Sharpe. To do this, he invited attendees to consider two key questions.
“When you’re considering bringing onboard a lateral hire, what do you focus on? Do you focus more on the book of business, or the person behind the book? Secondly, when you approach a lateral, are you looking to buy revenue, or to align strategy? The answers to these two questions are fundamental in the success of lateral hires,” he said.
For Sharpe, firms focus too strongly on the book of business when hiring laterals. Instead, deeper attention needs to be paid to the personality traits, cultural fit and strategic aims of new laterals and teams. Do they focus on their own book and personal success, or are they invested in helping others rise with them?
We’ve already seen statistics that show that laterals often fail to bring promised business with them. However, a good lateral hire will also amplify and multiply your existing book, working with others to onboard new clients, revenue streams and cross-selling.
In the webinar, Sharpe detailed four key drivers that can help firms understand whether a rainmaker has the personality, potential and desire to multiply business.
Strategic alignment
“The number one reason laterals leave firms is because they don’t believe in the firm’s strategy. There is a misalignment between their practice, their strategy and the firm they are working in,” said Sharpe.
“Ask yourself whether you are buying revenue or aligning strategy. If the focus is so much on revenue, that rainmaker is going to leave your firm for the exact same reason they leave their current firm,” he warned.
Sharpe then shared a test he uses to help firms check for strategic alignment.
“I got called into a law firm recently that was trying to assess a partner who was struggling after being at the firm for seven months. I asked the partner three things: what is your pitch, why did you join this firm, and how do you pitch that to existing clients, prospective clients and referral partners within the firm. If the lateral doesn’t have a coherent answer, to me, the strategies aren’t aligned,” he said.
Personality
The second area to consider is the personality of the lawyer. Psychologist and former lawyer Dr Larry Richard has spent 20 years researching the personality profile of lawyers. Using the caliper profile, he measured 21 different personality traits, finding that lawyers are complete outliers in 11 of them. Lawyers have very high scepticism, urgency, abstract reasoning and strong autonomy. Conversely, they struggle with sociability and empathy, can be very defensive and often don’t do well with feedback.
What Sharpe concluded from Dr Richard’s research is that the very skills that make lawyers great lawyers are the same ones that make them poor business developers. For most, rainmaking is not a natural skill.
“During a hiring process, I’m looking at whether a lateral has the potential to collaborate, influence others, build trust and be adaptable – things they typically don’t score well on. I want to find partners who get this and have the empathy and emotional intelligence to overcome this,” said Sharpe.
Integration
If a lack of strategic alignment and poor leadership is the number one reason laterals leave their old firms, then it’s the quality of integration into your firm that determines whether they thrive, survive or walk out the door.
“The best integration processes start early, before the person joins. Pre-arrival communication should be about getting that partner in front of key clients. How are you going to help that partner bridge their current practice into your firm?” asked Sharpe.
One tactic could be to have a single individual as the partner’s integration sponsor. Ideally, this person should be someone with skin in the game, who will be rewarded if the lateral succeeds. Another is to ensure your lateral success metrics measure the full picture of integration, not just the financials.
“Firms are great at measuring numbers – revenue, utilisation, origination. What we don’t tend to do once partners are onboard is measure everything,” said Sharpe.
“One firm sent me their lateral success scoreboard. They have things like financial metrics – revenue contribution, profitability, new clients added – but also integration metrics like cross-selling and referrals to other practices. Then there were cultural metrics, such as participation in firm initiatives, engagement in culture and collaboration scores. It was excellent,” he said.
Cultural fit
Assessing a lateral’s strategic alignment, personality and ability to integrate will allow a firm to understand whether they will fit your existing culture. Does their personality show the ability to be resilient and to collaborate? Are they focused on the firm’s or their personal/team’s success?
“Two enlightening questions a firm can ask during the hiring process are ‘what would make this move successful?’ and ‘what might get in the way of making this happen?’. At this point, the partner is going to spill the beans and say everything they are afraid of. They’re giving you clues as to how this might go wrong,” said Sharpe.
Ultimately, lateral hires fail because either the clients they promised don’t follow, because there is poor cultural integration, a lack of internal collaboration, or unrealistic revenue expectations.
“Remember my two key questions. When you bring a lateral partner onboard, are you spending more time judging the book of business, or the person? Are you buying revenue, or aligning strategies?” said Sharpe.
“Law firms, recruiters and lateral partners get it. They are highly-skilled at filling out LPQs. A large percentage of clients don’t come across, but if you hire people whose strategy aligns with yours, who have the right personality and skillset, then they will multiply their existing clients – and your clients,” he added.
Post-webinar Q&A
After Sharpe concluded his presentation, he took questions from the audience alongside Paul Deacon, founder of Deacon Search and an expert in the legal recruitment field. Questions were moderated by Tim Skipper, Totum’s founding director.
Q: How important is it for firms to do formal due diligence on potential lateral hires?
Paul Deacon: A lot of firms pay £15-20k to do independent due diligence. However, if you have a trusted recruiter, they have more due diligence at their fingertips than a due diligence report. Of course, such reports serve a purpose, but they do come with a time burden. When a rainmaker comes on the market, firms have to act quickly. Due diligence can delay things by several weeks, so it’s a balance.
Q: Even with a strategic focus, there are always existing partners who seek to bring in laterals that are neither a cultural fit nor aligned with strategy. How does one go about persuading leadership to stick to the plan?
Paul Deacon: This often happens in US firms where there is a UK Managing Partner and they have little say in the recruitment process as it’s all done in the States. It can be very difficult but it comes down to having a good lateral hiring process.
When a rainmaker comes on the market, we want a client who gets the process. Those existing partners need to be incorporated into that process, as they might spot something that others don’t.
Finally, if you rely on consensus partnership to bring a lateral in, you’ll always get a mixed bag of opinions. You have to have strong decisive leadership, but don’t leave it to one person. A steering committee of 3-4 is ideal.
Q: If you have a risk averse partner hiring a risk averse lateral, how can we get both parties to be more comfortable with the risk inherent in any move?
Gavin Sharpe: It comes down to how you determine success. Lawyers don’t like change, they like certainty. However, the current climate has no certainty. So, how do you bring onboard partners who get that?
Paul Deacon: I think that risk averse firms are failing. I also think that lawyers are no longer risk averse. We move people in their 50s and 60s. We move people who have been with a firm for 20 years. We’re also moving a lot of tax and pensions lawyers, who are the most risk averse of all.
Q: With many lateral partner hires failing, is team lateral partner hires the way forward?
Paul Deacon: It is very effective to hire teams. In fact, some firms only hire teams, not individuals. If you look at hiring a partner who claims to have a £10m book and they don’t want to bring anyone with them, that’s a massive red flag.
Gavin Sharpe: The cultural danger of hiring a team is that you get teams within teams. You have a complete mix of cultures. You need to make sure that these new clients are the firm’s clients, and that culturally, you have a new way of doing things.
Q: The statistic about 75% of laterals failing doesn’t stack up at our firm. We find that 18 months down the line, laterals are outperforming in-house.
Gavin Sharpe: I think that statistic was based on generic research. Obviously, some firms will have the opposite outcome. There are always outliers and some firms are very successful at keeping laterals.
Paul Deacon: I can’t think of a successful firm that doesn’t hire laterally. The Magic Circle are among the most active in lateral hires. In this business, you need momentum. Laterals bring new ideas.
Q: Are you aware of any firms that invest in their non-equity tier to build homegrown rainmakers, rather than laterals?
Gavin Sharpe: More firms are investing earlier on. It’s expensive, but firms are doing it. Matt Dixon has written a fascinating book called The Activator Advantage on how we give the next generation the skillset to be business developers.
Personally, I’d be doing both – hiring laterals but also investing in talent from senior associate level.
