Law firms use data to judge lateral hires' potential success

As it pertains to lateral partner hiring, it's clear an arms race is going on. Lateral hiring has been booming throughout the last a long period, according to The American Lawyer (sub. req.), and 2015 saw the largest partner migration because of the Great Recession. Moreover, practically all law firm leaders think increased lateral hiring is here to remain, and they'd pursue laterals as an effective way to grow their firms, according to law firm consultancy Altman Weil.

 But does the weaponry all work? ALM, an information, and intelligence company released a 2016 study that found that many lateral partner hires don't meet expectations, and a majority generate less business than they promised.

“All firms will fail at lateral hiring at some point,” says report author Steve Kovalan, a senior industry analyst in ALM's intelligence division, in a statement. “Unfortunately, they're extremely costly failures, impacting firm finances, and cultural stability, brand and client relationships.”

Yet firms will continue steadily to hire lateral partners. Consequently, many are embracing statistics and performance analytics to simply help them determine which of the laterals are delivering and which are not.

One of many more trusted business intelligence tools originates from legal software company Adherent. Based on Derek Schultz, product manager of business intelligence at Adherent, more than 100 law firm clients use the company's analytics programs—not only to gauge lateral partners but to analyze the entire firm. Adherent’s program allows firms to track a selection of metrics, including profitability, revenue, expenses, hours and billings. Employing a firm's data, Adherent can determine how much time certain forms of cases and clients are worth, who did the work and just how long all of it took.

“Probably the most crucial aspect is that firms can see what they excel and what they don't really,” Schultz says. “That offers firms an idea of what they need to give attention to for future matters.”

BETTER GRASP

That keen sense of understanding is what many firms lack, Schultz, says, and having a better grasp of it might assist with the lateral recruitment process.

“Most laterals don't meet their short-term goals, and it's more an issue of expectations than whatever else,” Schultz says. “Lots of firms don't know what their goals are, what they prosper and where they want to go. There should be reasons for bringing in someone from outside, like ‘We want to grow this area,' or ‘They have work we want.' ”

Employment and labor law firm Littler Mendelsohn decided to go in an alternative direction and create unique software. In regards to lateral partners, Litter’s Big Data Initiative tracks data from a variety of sources to predict the firm's likely return on investment and whether laterals will remain with the firm or leave for other opportunities.

“The goal for the work we do is to recognize data sources that people can use to help improve decision-making with the use of prediction modeling,” says Zev Eigen, a data scientist with a Ph.D. from the Massachusetts Institute of Technology and Litter’s global director of data analytics.

Eigen notes that it can be difficult to apply blanket rules to lateral hiring because many unique factors are in play. He highlights that data science can't quite predict how much business somebody will come in with. Nevertheless, firms can set up a type in which they assume the best- and worst-case scenarios and determine the cheapest number that a partner can walk in with and be profitable for the firm.

Eigen is especially interested in considering relational data as an effective way to predict how likely an attorney is to fit in with Litter’s culture. “ONA [organizational network analysis] and SNA [social network analysis] are good ways to determine whether someone will work well with others within a firm,” Eigen says.

Ultimately, Eigen says, firms will be able to utilize this data to weed through the vast pool of potential laterals and focus on the people more likely to integrate successfully into the firm.

But legal recruiter Karen Kaplowitz, president of the New Ellis Group, a business development consulting firm, worries that firms might rely an excessive amount of on the numbers and forget that it often takes a while for laterals to ramp up and become profitable.

“My impression is all the big law firms look cautiously at metrics to evaluate almost all their lawyers,” Kaplowitz says. “For laterals, the information can be more damaging since they're on a much shorter leash.”

She says most firms have an 18- to 24- month contract with lateral partners that offers the firm the proper to cut ties if the partner doesn't perform to certain standards.

If somebody is back on the market within two years of a prior move, there exists a good chance that the firm chose to part ways with the partner. “It can become a downward spiral,” she says.

Instead, Kaplowitz argues that law firms should focus more on successful integration. She says often it really boils down to higher communication.

“There can be a business plan in a position where the firm promises to introduce the lateral to existing clients as a method of growing the lateral's business,” Kaplowitz says. “Frequently that doesn't happen, and the firm doesn't follow-up to be sure it happens.”