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Lateral shift
Law Society Gazette – 19 March 2004

A partner cloaks his move to another firm in secrecy. But culture clashes may sour the experience. Mark Smulian examines how due diligence can prevent such problems

'I shall be carrying a copy of Great Expectations and wearing a fedora'.

When a partner gets itchy feet and wants to join another firm, the process has to be kept strictly confidential to avoid embarrassment through premature disclosure.

And while lateral hiring may not get quite to the stage of passwords and disguises, it is, says Clio Demetriades, director of recruitment consultancy Legal Opportunities, 'rather cloak and dagger'.

Lateral hiring really took off during the recession of the early 1990s, according to head-hunter Greg Abrahams, when 'some firms fared better than others and partners' loyalty ebbed away'.

It can be indulged in by everything from magic circle City firms through to, say, a three-partner practice that has decided it would benefit from a fourth partner.

The firm that is recruiting generally hopes for some or all of new areas of expertise, reinforcement in existing markets, and an impressive client list in tow.

But, as with recruitment of any kind, there are pitfalls. The claims that a partner made about his ability to bring clients with him may have been exaggerated, or there may have been something to hide.

Lateral hiring can also fail when no one has done anything improper but the newly-joining partner cannot fit in what proves to be a different internal culture.

Berwin Leighton Paisner has been an active lateral hirer, with around 12 appointments made in the past year. Managing partner Neville Eisenberg says: 'Lateral hiring is part of a planned strategy, although it can sometimes be opportunist too. It tends to vary as to what we are looking for.

'In finance, we are looking both to grow core areas and to take on people with sector specialisms. For example, we have taken on two with expertise in power, it is a mixture of stepping up what we do and bolting on new things.'

Berwin Leighton Paisner uses a mixture of recruitment consultants and personal contact to find prospective joiners. Mr Eisenberg says: 'We are looking for people with an existing market reputation, strong technical abilities and good client skills.'

The firm's due diligence is a combination of accessing information that is in the public domain, thorough interviews and taking up references. However, it may move faster to seize an opportunity and 'sometimes it is a question of timing and it can be difficult to follow the processes you've got', says Mr Eisenberg.

He says Berwin Leighton Paisner has avoided culture clashes between new and existing partners. 'The trick is to sort this in advance,' he says.

'We try to deal with it by having candidates meet other partners informally, perhaps over a drink at an early stage, and we can usually tell if they will fit in with us.'

Bristol-based TLT has grown fast, in part through using lateral hiring to fill gaps at senior levels, says managing partner David Pester. The firm has an 18 million turnover and 39 partners and is 'going into the market to get people to join us at senior levels', he says.

'We look at work we do in two sectors and see if we might with other skills be able to make a third. For example, we did a lot in leisure and banking, which led us into construction.'

TLT will also look at whether it could offer additional skills to established major clients and 'whether it is worth expense of recruiting to do that'.

Mr Pester explains that a client following is welcome but not essential. 'The first criterion is that we want excellent people and that there is mutual benefit in the move,' he says.

TLT also uses a combination of recruitment firms and personal contact, including through clients who have other legal advisers.

'One gets to know who is well thought of, or our people will know of people who work in the same fields.'

He says the most important element for a firm to understand about lateral hiring is the large amount of time required. 'One of the things you have to rely on is how meetings between yourselves and the candidates have gone and make sure that they understand the firm,' he says.

'There is no hard and fast way of doing due diligence. Usually someone will be able to offer support from their clients, but really you just have to work in the framework of interviews and discussions with the individual.'

One attraction offered to prospective partners is where TLT is prepared to invest in their specialism as a new practice area.

Mr Pester says he has heard of other firm's internal cultures 'being disrupted by a large influx of new people, which may be a good or bad thing depending on whether they wanted to change'.

TLT tries to avoid this by taking 'the best from both sides when someone joins', he says.

Mr Abrahams, director of Abrahams Russell, says he has moved 'well over 100 partners around the city in the past five years'.

He predicts there will be many more lateral moves as firms look for talented extra partners. 'One factor is the arrival in London of American firms, which started poaching partners including from magic circle firms,' he says.

But culture clashes can be a real problem, in particular between British and US firms, says Mr Abrahams. 'One noticeable feature has been UK lawyers joining US firms and finding they are in a different business world and then rejoining a UK firm. Often the US firm in London is a branch office, under a head office elsewhere, and there tends to be a focus on billings and hours worked, with partners less able to delegate work than they would in a UK firm.'

Ms Demetriades is convinced that lateral hire will be increasingly used to grow a practice 'in a quasi-organic way that is easier to swallow than a merger'.

Much of the recruitment is confidential, bordering on covert, and is done among partners who knew each other at university or law school or who work in the same field, she says.

'It is all rather cloak and dagger and firms are quite good about confidentiality because it is what makes the world go round.'

Her firm is sometimes asked to search for a specific type of partner, while other firms have a 'semi-permanent request to introduce people with clients to bring to the business'.

Smaller firms that are vulnerable through their inability to offer some particular expertise to clients are often in the market. 'Cultural differences are absolutely a problem,' says Ms Demetriades. 'There is a lot of potential for friction and a lot of jostling for position. There may also be disputes about how work is divided.'

Another fertile source of disputes is how profits are divided in a small firm that has a new partner. In larger firms, problems may arise if a partner is not used to the typical systems operated by a large, perhaps bureaucratic, firm.

What is the best way for a partner looking for move to search out opportunities? Mr Eisenberg's advice is to remember that firms will use head-hunters, recruitment agents and word of mouth, and that partners should have all three potential routes covered because one is not necessarily better than another.

He says: 'I think the most important thing is to identify a firm where you think you can really make a difference. It is all about creating added value to the mix of what a practice does. It would not be very sensible to apply to a firm that is very similar to the one where you work at present where you could not do that.'

Mark Smulian is a freelance journalist