Risk Update

Lawyer Lateral Risk (Part 3) — Lateral Due Diligence Done Right & Market Survey Statistics

Having spent some time swimming in lateral stories, I went beyond recent news and with the help of a friendly search engine found this fascinating report on the matter. While this covers more than lateral risk, it’s definitely in there. Earlier this year, from ALM and a sponsor company which appears to be in the business of background checks and advisory services comes data gathered from 50 Am Law 200 firms in: “Risky Business: Rethinking Lateral Hiring” —

  • “Part of the problem is that defining what constitutes a ‘failed’ lateral hire is extremely difficult. No single study is detailed enough to accurately measure the many ways a lateral hire can ‘fail’. Measuring ‘failure rates’ requires understanding the individual components of ‘failure’, which are fragmented across many sources. For instance, one study… found that almost half of all laterals do not even last five years at their new firm. [This present report] found that nearly 70% of hires underperform in bringing their expected book of business. Such low success rates are particularly striking given the sky high costs of hiring laterals. ALM Intelligence estimates hiring a lateral partner in today’s market averages $2.3 million dollars, with the most coveted partners costing well over $5 million. These figures suggest that the return on investment in the lateral markets is low.”

The report includes a section: “Questions All Law Firms Should Be Asking In Their LPQs,” which are excellent:

  • 1. Reputational Risks to the Firm. Are you aware of any facts or circumstances that would result in damage or embarrassment to FIRM or to you if you join FIRM as a partner? (If yes, please elaborate).
  • 2. Malpractice. Have you ever been involved in a matter that resulted in a malpractice claim or allegation against you (whether or not an action was actually filed and whether or not you were individually named as a defendant)? (If yes, please describe and state the status and outcome of each).
  • 3. Sexual Harassment. Have you ever been the subject of a claim of sexual harassment, unlawful discrimination, or other claim or allegation made in the context of the workplace (whether or not any formal action was taken)? (If yes, please describe and state the status and outcome of each).
  • 4. Problems with Past Employers. Have you ever been asked (explicitly or implicitly) to leave a legal employer or partnership?
  • 5. Crimes and Investigations. Are you now, or have you ever been, a party (plaintiff or defendant) in any pending administrative or employment proceedings, arbitrations, or criminal or civil court actions (exclusive of routine, non-alcohol-related or non-drug-related motor vehicle offences)? Have you ever been charged or convicted of a felony or misdemeanor, the penalty for which could be incarceration? (If yes, please describe and state the status and outcome of each).
  • 6. Additional Conflicts. Are you aware of any other matters that may create a conflict with FIRM? (If yes, please describe the matter(s)).
  • 7. Professional Standing. Have you ever been disciplined by any Bar or equivalent professional licensing body, or, to your knowledge, have there ever been any complaints lodged against you with any such body (if yes, please describe and state the status and outcome of each).