September 30, 2016
Tell me about the hiring cycle for law firm partners. How has it evolved?
Unlike the in house sector, lateral partner hiring activity is more cyclical…and is primarily driven by the candidates as opposed to the employers – as the need for high quality partners with strong practices is constant.
In the legal profession of old, loyalty was a dominant force in the law firms. And partners rarely departed for greener pastures. So “cyclical hiring” in the lateral partner world was a foreign concept. Lawyers joined law firms as associates and methodically worked their way up through the ranks. Partnership was the golden ticket to prestige, prosperity…and security. So partners stayed put because there was simply no reason to leave.
Fast forward to the 21st century: Law firms are under fire. The rise of the in house legal department has meant less work, less client loyalty, rate pressure and an exodus of top law firm talent at all levels. This evolution has forced every firm, even the most prestigious, to adapt…or die. As a result, law firms adopted a harder bottom-line mentality and made drastic changes to absorb these new blows. They laid off and gently nudged out non productive partners, strictly enforced retirement policies, reduced compensation for lower productivity years and created star systems to keep top performers. The days of the gold watch were over. And partners knew it. The disappearance of firm loyalty and newly created uncertainty opened the floodgates for lateral partner defections. And defect they did.
Today, lateral partner mobility is at an all time high – and the musical chairs will continue for the foreseeable future. Generally speaking, the majority of partners making moves will pull the trigger in the first quarter of the year (Q1). Why? Two reasons: (1) Many firms distribute their “year-end” bonuses (which can be significant) in Q1 and partners want to wait until they receive these bonuses before moving; and (2) For some partners, disappointing news regarding a bonus, base compensation or title elevation serves as a catalyst to start looking for a new home. Given these factors, there are two prime time windows lateral partners start their searches. The first “golden window” of activity occurs between September and November (which tees up a January move). The second is in mid/late January to March (for a March/April move). Activity slows down considerably between May and August for economic reasons. Partners feel like they will be leaving too much money on the table if they leave their firms during this period. So they elect to wait until bonus time the following year to make their move.
With this said, not every move is made within these cycles. Other dynamics can facilitate moves at different times of the year. They include: A new conflict with an important client/s, the closing or implosion of a firm or office, the forming of a new firm, an increase in work where leverage is high in the market, anticipated loss of work; or knowledge that a year-end bonus will be immaterial. In addition, not every firm pays its bonuses as a lump sum in Q1. Partners employed at firms with alternative bonus structures may be willing to give up some bonus money depending on the push and pull factors. Or…the acquiring firm may be willing to make the partner “whole” on the sum from which s/he is walking away in exchange for an earlier start date.
The evolution of the law firm and it struggle for existence has created anxiety for many partners, associates and law students alike. The disappearance of loyalty and security has shifted the mentality of partners and created a more mobile constituency. Compensation strongly influences defection cycles, but other factors are creeping into the mix to drive moves outside the typical time windows. It remains to be seen whether these cycles will materially change. But one thing’s for certain: the dynamic aspects of the lateral partner market are here to stay.