Edward Poll, The Daily Record Newswire
These continue to be boom times for law firm lateral hiring as a normal recruiting process. Typically and unfortunately, this decision too often is made on the basis of general expectations about the new skills and business a lateral hire can supposedly bring without doing a precise business calculus about the bottom-line impact that lateral hires can and should have.
This is particularly problematic when management or recruiting committees, or practice group heads, feel that time is of the essence to make a quick offer for fear that another firm will snatch a “hot prospect” from the open market. Buyer’s remorse is too often the result.
To avoid it and keep emotions in check, firms should develop a lateral hiring checklist to cover the key items for a business assessment of the hiring decision. Here are some significant issues to include.
Financial forecasting
A checklist should include mutual agreement on the nature of the ready-made book business that firms expect will come with the lateral hire. A financial and marketing assessment of the new hire’s client base and hourly rate can help ensure realistic expectations for the lateral’s book of business.
Not every lateral hire advises major clients, and not every major client follows the lateral hire. Making sure the firm is not forecasting revenue that never materializes is essential.
Client relations
What pitfalls can keep new business from materializing? Although clients can request copies of their own files, the departing lawyer cannot do so with the explicit intent to use them for taking clients from the firm.
In some instances, even if work product was personally created by the lawyer, the copyright protection on client files may attach to the documents and reside with the law firm. Client permission is needed to move a file, and a lateral hire checklist should document whether such permission has been secured by the new lawyer.
Another concern is how well the lateral hire has communicated with existing clients, particularly with regard to their opportunities to go with the departing lawyer or stay with the existing firm.
Without clear communication and a definite agreement to move their representation, clients may easily engage different legal representation while their lawyer moves to a new home. The lateral hire checklist should document the current status of client files, what client communication was made and what was the result.
Receivables
When partners go to new firms and clients follow them, they generally take their books of “unfinished business.” But clients of course have a right to seek their own choice of lawyer.
They may choose to stay with the lateral hire’s previous firm, or they may use the transition opportunity to seek new counsel entirely. And the lawyer’s former firm can argue that unrealized receivables belong to the originating firm itself and refuse (to the point of commencing litigation) to relinquish control. In light of such difficulties, a lateral hire checklist should document what is the status of the new hire’s receivables.
These considerations do not diminish the attractiveness of lateral hiring. When it is done properly, there is a win-win situation for firm and lawyer. But from the firm’s standpoint, a lateral hire is ultimately a business decision. Making sure the business details are considered and documented is a legitimate requirement — even if time is of the essence.
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Edward Poll, J.D., M.B.A., CMC, is a law practice management thought leader and contributor to this publication. His website is at www.lawbiz.com.
