Over half of law firms view lateral hiring as a key growth strategy. Yet roughly a third of lateral partner hires leave within five years. Despite this uncomfortable reality, firms still measure their lateral success by “revenue brought in,” which is like grading a marriage on the quality of the wedding reception.
For the record, the other big revenue strategy is “just raise rates!” — a tried and true method that, historically, ends with clients grumbling and then forking over more money anyway. But those days might be numbered. A new report from Passle, a legal marketing technology platform, surveyed 100 managing partners and business development leads at the top 200 U.S. firms and the top 100 in the UK, and found that while 58 percent of firms list rate increases as their primary revenue strategy, 54 percent list rate increases as the main reason they lose clients to competitors.
Maybe that $10,000 billable hour is further off than some people think.
If rate hikes lose their efficacy, firms will have to lean harder into poaching lateral talent. Which means finding a solution to the costly defection rate.
The Passle report cites research from Decipher Investigative Intelligence that 30-38 percent of lateral partners leave within five years, while 90 percent of firms report business development challenges with laterals. A failed lateral partner can cost a firm 200 to 400% of that lawyer’s annual compensation once you factor in recruiter fees, guarantees, and replacement costs. And think of the rash of Biglaw mergers as lateral hiring on steroids — both in revenue and cost. “Mega-mergers involving firms with more than $1B in combined revenue typically cost between 5% and 8% of total revenue, according to Altman Weil.” No matter how the laterals arrive, firms are spending a lot of money, so they need to find a way to make those deals work.
Another nugget from Decipher’s research into the “business development challenges” with laterals is that 100 percent of those firms it surveyed report struggling “to transfer the book of business from an incoming lateral.”
Perhaps that — right there — is the whole problem. Firms need to stop treating laterals as resources to milk dry.
Interestingly, the survey found that firms that report being satisfied with their revenue growth are more likely to recognize the leading indicators of lateral success. Among firms who report being satisfied with their growth, the top selected indicator of effective lateral integration (61%) was “They are engaged in internal/external networking”.
In other words, the fastest-growing firms understand that meaningful networking and trusted referrals always come first. Sustainable revenue naturally follows.
The line may be fuzzy, but it’s significant. I knew a partner who declined an Am Law 100 offer because the firm’s rhetoric implicitly framed its long-term goal as offloading the partner’s personal book of business to the firm generally. Throughout the process, she felt like the firm viewed her book as an asset and just hoped to hang onto as much of it as possible before driving the human out the door. That’s a firm approaching its recruiting process by planning for failure. The purpose of hiring a lateral is to bring the business they already built themselves under the firm’s roof — trust those relationships.
If firms approach a new lateral as an opportunity to wrest business away, that’s a lateral who will definitely find a way to leave within five years. The opportunity to multiply the value of one book of business is in cross-promotion. That’s why the firms most satisfied with laterals cite networking as the key.
Unfortunately, firms aren’t necessarily good at facilitating collaboration:
Passle locks onto this “visibility gap” among partners. Only 41 percent of partners think their colleagues understand what they do. And it cuts both ways, with a mere 52 percent reporting that they think they understand expertise of the rest of the firm.
But that’s a problem firms need to fix. The Heidi Gardner research the report leans on is genuinely striking: a client relationship that spans five practice groups generates almost 18 times the revenue of a single-practice engagement. But you only get there if the lateral feels comfortable enough at the new firm to vouch for their colleagues — which means trusting that those colleagues won’t poach the client, undercut the relationship, or treat the lateral as a stepping stone to direct access.
For Passle’s part, they sell a product called CrossPitch AI that endeavors to give firms more visibility on this front. The tool uses artificial intelligence — obviously — to “match highly relevant thought leadership with the right lawyers” inside a firm.
CrossPitch AI’s cross-selling intelligence map provides a live view of how colleagues are collaborating in real time, surfacing connections and patterns that would otherwise go unseen. This creates an early indicator of whether laterals are embedding effectively within the firm, enabling leadership to identify gaps, strengthen relationships and intervene where needed before opportunities are missed.
Improving cross-selling visibility and uncovering new business opportunities doesn’t mean firms will address the financial and cultural roadblocks to effective cross-selling, but it gives business development professionals a stronger hand in pushing for change.
Leading a horse to water may not make it drink, but the odds are a better than just leaving it in the stable.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
The post A Third Of Lateral Partners Are Gone In 5 Years And Biglaw Keeps Failing To Understand Why appeared first on Above the Law.
Over half of law firms view lateral hiring as a key growth strategy. Yet roughly a third of lateral partner hires leave within five years. Despite this uncomfortable reality, firms still measure their lateral success by “revenue brought in,” which is like grading a marriage on the quality of the wedding reception.
For the record, the other big revenue strategy is “just raise rates!” — a tried and true method that, historically, ends with clients grumbling and then forking over more money anyway. But those days might be numbered. A new report from Passle, a legal marketing technology platform, surveyed 100 managing partners and business development leads at the top 200 U.S. firms and the top 100 in the UK, and found that while 58 percent of firms list rate increases as their primary revenue strategy, 54 percent list rate increases as the main reason they lose clients to competitors.
Maybe that $10,000 billable hour is further off than some people think.
If rate hikes lose their efficacy, firms will have to lean harder into poaching lateral talent. Which means finding a solution to the costly defection rate.
The Passle report cites research from Decipher Investigative Intelligence that 30-38 percent of lateral partners leave within five years, while 90 percent of firms report business development challenges with laterals. A failed lateral partner can cost a firm 200 to 400% of that lawyer’s annual compensation once you factor in recruiter fees, guarantees, and replacement costs. And think of the rash of Biglaw mergers as lateral hiring on steroids — both in revenue and cost. “Mega-mergers involving firms with more than $1B in combined revenue typically cost between 5% and 8% of total revenue, according to Altman Weil.” No matter how the laterals arrive, firms are spending a lot of money, so they need to find a way to make those deals work.
Another nugget from Decipher’s research into the “business development challenges” with laterals is that 100 percent of those firms it surveyed report struggling “to transfer the book of business from an incoming lateral.”
Perhaps that — right there — is the whole problem. Firms need to stop treating laterals as resources to milk dry.
Interestingly, the survey found that firms that report being satisfied with their revenue growth are more likely to recognize the leading indicators of lateral success. Among firms who report being satisfied with their growth, the top selected indicator of effective lateral integration (61%) was “They are engaged in internal/external networking”.
In other words, the fastest-growing firms understand that meaningful networking and trusted referrals always come first. Sustainable revenue naturally follows.
The line may be fuzzy, but it’s significant. I knew a partner who declined an Am Law 100 offer because the firm’s rhetoric implicitly framed its long-term goal as offloading the partner’s personal book of business to the firm generally. Throughout the process, she felt like the firm viewed her book as an asset and just hoped to hang onto as much of it as possible before driving the human out the door. That’s a firm approaching its recruiting process by planning for failure. The purpose of hiring a lateral is to bring the business they already built themselves under the firm’s roof — trust those relationships.
If firms approach a new lateral as an opportunity to wrest business away, that’s a lateral who will definitely find a way to leave within five years. The opportunity to multiply the value of one book of business is in cross-promotion. That’s why the firms most satisfied with laterals cite networking as the key.
Unfortunately, firms aren’t necessarily good at facilitating collaboration:
Passle locks onto this “visibility gap” among partners. Only 41 percent of partners think their colleagues understand what they do. And it cuts both ways, with a mere 52 percent reporting that they think they understand expertise of the rest of the firm.
But that’s a problem firms need to fix. The Heidi Gardner research the report leans on is genuinely striking: a client relationship that spans five practice groups generates almost 18 times the revenue of a single-practice engagement. But you only get there if the lateral feels comfortable enough at the new firm to vouch for their colleagues — which means trusting that those colleagues won’t poach the client, undercut the relationship, or treat the lateral as a stepping stone to direct access.
For Passle’s part, they sell a product called CrossPitch AI that endeavors to give firms more visibility on this front. The tool uses artificial intelligence — obviously — to “match highly relevant thought leadership with the right lawyers” inside a firm.
CrossPitch AI’s cross-selling intelligence map provides a live view of how colleagues are collaborating in real time, surfacing connections and patterns that would otherwise go unseen. This creates an early indicator of whether laterals are embedding effectively within the firm, enabling leadership to identify gaps, strengthen relationships and intervene where needed before opportunities are missed.
Improving cross-selling visibility and uncovering new business opportunities doesn’t mean firms will address the financial and cultural roadblocks to effective cross-selling, but it gives business development professionals a stronger hand in pushing for change.
Leading a horse to water may not make it drink, but the odds are a better than just leaving it in the stable.
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
