In my practice, I frequently help client firms vet potential laterals. I am also contacted directly by attorneys considering whether a move is right for them. I am always amazed by the uniqueness of each situation and the need for creativity to make these transactions work.
As someone who enjoys firm building, I always wonder what happens that causes good people to leave. What makes a good situation go bad? While each situation is different, a number of factors are present in almost every lateral transaction. Here are the top 5 in order of occurrence:
The most obvious answer should never be ignored. People who are paid at the market will put up with almost anything. In the markets I serve, a lack of transparency in compensation is an invitation for good people to leave. Objective compensation systems act as a magnet when they allow highly productive attorneys to earn at the market.
Competitive Cost Structure
It is great to have an objective compensation that is applied uniformly, but if the firm is simply not profitable enough, productive lawyers look for better opportunities. Lawyers that practice in a rate and hour environment with tight controls on each, learn very quickly that cost efficiency is essential to maximizing their earning potential.
No Succession Plans
In is not unusual for a firm that was once entrepreneurial to drift into decline. For whatever reason, these firms have failed to develop an adequate succession plan to manage senior partner retirements. As this situation progresses, compensation of the firm's most productive attorneys is negatively impacted. With dwindling optimism about the future of their existing firm and trending a sub-par compensation, mobile partners seek more forward thinking firms.
Conflicts of Interests
Productive attorneys often seek better opportunities when conflicts exist between firm clients. All clients and attorneys and clients realize that occasional conflicts occur, but if it happens too often, clients pull their work. When this happens, the lawyer who loses out is more likely to find a more compatible firm for his or her practice.
As simple as this concept is, a failure on the part of a firm to recognize the efforts of productive partners bears a great risk. Most highly productive partners are very busy and don't have as much time for office politics. Most lawyers a have strong egos and are extremely competitive. Sometimes this competitiveness causes partners to diminish the success of other partners. If partners in management allow their judgment to be overly impacted by their competitiveness, the consequences often include productive people leaving.
Of course, there are other reasons lawyers leave that include a failing firm, a spinoff of other partners that put people into the market that would not otherwise be there, differing visions, aggressive recruiting by competitors and clients, and lawyers with a nomadic gene. However, if a law firm is paying attention to the 5 items mentioned above, much will have be done to inoculate the firm against good people leaving.
Being recruited feels good, and most law firms should accept the reality that their most talented people will be sought after. Most lawyers will even get an offer or two in their careers. If a firm is willing to put itself to an objective test to ensure that it is in a strong competitive position, the risk of losing good people is mitigated. Alternatively, if firm management is in a cocoon and only indulges agreeable influence, opportunities for competitors are created.