Monday, March 9, 2015

The Reign of Error in Lateral Recruiting

The legal landscape is littered with lateral partners who didn't meet the hiring firm's expectations. The underwhelming performance of lateral partners includes a range of ways in which laterals can fail to meet the firm's original expectations. The most obvious is a failure to bring their clients to the firm. But lateral partners also frequently struggle to develop new clients or are ineffective in promoting their practice in a new firm. Some leave their new firm too quickly while others simply don't get along well with others.

What were we thinking?

How can law firm's improve the success rate of lateral hires. That's a central question posed in a February 9th, 2015 article in The American Lawyer entitled An Rx For Lateral Heartache, by professors William Henderson and Christopher Zorn. They point out what they believe may be the most prevalent error in the recruiting process, confirmation bias. 

"We believe the biggest source of error in the lateral hiring process involves a form of motivated reasoning, or emotion-based decision making, that works like this: The mind has a tendency to lock into conclusions relatively quickly. We use our mental processes to look for evidence that supports our views, while evidence that would undermine those views is discounted or ignored. Psychologists refer to this phenomenon as confirmation bias."

Henderson and Zorn may be on to something here although I don't think it fully explains why so many laterals pass muster only to disappoint. Certainly the process is more complex than that. There is, more likely, numerous errors being made or cognitive bias' at play in the due diligence process.   
Out of curiosity, I looked up a list of behavioral science theories and cognitive bias' and tried to match them with my own experience observing the interviewing and due diligence process. The number of them which applied were striking. But to make my point, I'll cite a select few with the caveat that these bias' are not unique to the legal profession. First, there's the Halo Effect which is the tendency for a person's positive traits to "spill over" from one personality area to another in others' perceptions of them. "She is very personable. She must also be good at developing client relationships." There's also the In Group Bias, the tendency for people to give preferential treatment to others they perceive as similar to them "They come from a really good firm. They will fit in well here." Or, how about the Self Serving Bias, a tendency for people to evaluate ambiguous information in a way that is beneficial to their interests. "I'm not sure why they would leave such a good firm. We must offer a much better opportunity for them."

Besides the cognitive bias' that can plague individuals in the interviewing process, I have additional theories about why firm's who rely on their own partners' to interview candidates may not produce a clear understanding of the candidate's potential. For one, these interviews may not to be broad enough in scope. That is, interviews may be limited to the technical abilities of the attorney and the attorney's likability or personality fit with the partners. In my experience, interviews do not attempt to gauge the candidate's managerial and work style, their personal and professional attributes and, most importantly, the strength of the relationships with their clients and referrers.

A second theory, is that lawyers don't ask the tough questions of their potential future partners, especially regarding the strength of client relationships. Most likely this is because pointed questions might be perceived as adversarial or even challenging of the candidate's integrity. Or, they may be perceived as 'intelligence gathering' on the candidate's clients, which at that point in the recruiting process, could be off putting to the candidate. As a result, the critical intelligence needed to determine whether the candidate truly has a portable book, information that forms the basis of the 'deal', goes uncollected.

Similarly, I suspect motivations are rarely questioned. For instance, the question of why a partner is leaving the partnership is an area deserving of thorough exploration. The most common explanations rarely face scrutiny because they are the expected explanations (another form of confirmation bias). If the move is upstream to a larger platform, inevitably the reason is that the former firm doesn't offer the breadth of practices the client requires. If the candidate is moving downstream, the clients are resisting the bigger firm's rates. Or maybe the reason is conflicts but I suspect the steps the candidate took to alleviate the conflicts is typically not fully understood. There are other reasons, of course, but the point is that the rigorous due diligence that one would undertake in, say, buying a business is nothing near the rigor of the process typical of lateral partner recruiting in U.S. law firms.  

In Henderson and Zorn's article, they re-iterate a solution which I originally presented in my August 11th, 2014 column in this publication, entitled UK Style Lateral Due Diligence. Both publications propose the use of independent consultants to conduct assessments of the lateral's client base and portability, their business development skills and managerial style. As I pointed out then, the practice is common among U.K. and other European country law firms. And as Professors Henderson and Zorn point out, independent due diligence is also the standard practice in the U.S. private equity industry as well as many others. Bad hires are costly in revenue and reputation and can hamper future recruiting efforts. U.S. law firms should consider the proven techniques of their U.K. peers and add independent lateral due diligence to their lateral recruiting process.  Readers interested in learning more about lateral due diligence and client mobility can request GDC's Seven Predictors of Client Mobility by sending a request to:

This article won the BigLaw Pick of the Week award. The editors of BigLaw, a free weekly email newsletter for those who work in midsize and large law firms, give this award to one article every week that they feel is a must-read for this audience.

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