Timing is everything, as the saying goes — and it certainly holds true when it comes to assessing the risk of lateral partner candidates.
Indeed, Decipher Investigative Intelligence analysis reveals a significant trend: candidates courted during the lateral hiring “off season” are 22 percent more likely to have red flags such as questionable legal skills, overstated books of business, challenging personalities, significant tax liens, undisclosed outside business interests, bankruptcies, conflicts, unethical behavior and more.
What’s behind this discrepancy, and what should law firms do to address it? Let’s dive in.
To Everything There is a Season…
To be sure, every firm is different, and firms that use fiscal years that deviate from the calendar year will have slightly modified schedules.
For most firms, partner financials follow a similar and predictable pattern:
- Q1: After the year-end financial close, partners receive memos that outline compensation for the year ahead along with their bonus checks for the prior year.
- Q2 and Q3: This is a period of relative calm as firms focus on “business as usual” and “catch their breath” after the frenzy of Q1.
- Q4: As year-end approaches, firms (and their partners) start to feel increased pressure to maximize revenue through billing and collections.
This financial cycle directly influences the typical timeline for lateral partner recruitment.
Most strategic and successful candidates will start planning their moves in Q2 and Q3. At this point, they have collected their bonus, and are planning a post-bonus move in January with relatively low disruption to client relationships and ongoing legal matters. For the average lateral, this is a purposeful process; according to a Major, Lindsey & Africa survey:
- 60 percent of laterals will take longer than four months;
- Two-thirds of laterals will consider two or more firms, with 9 percent shopping around at seven or more.
Meanwhile, Q1 candidates are often making reactionary moves based on compensation; this can signal a book of business in decline or other performance issues. Q4 candidates can be more concerning, as they may be willing to forego their bonuses for a hasty departure.
What the Data Shows
Again, off-cycle laterals — those who are screened in Q1 and Q4 — are significantly riskier than those who follow the typical rhythm.
Consider the data.
These laterals are 22 percent more likely to incur a red flag during the due diligence process. Diving deeper, the problem is only exacerbated: Off-cycle laterals are 28 percent more likely to carry major red flags, issues that often result in total disqualification from hiring consideration.
For example, off-cycle laterals have a 48 percent higher incidence of business development or client relationship issues, and a 35 percent higher incidence of personality or cultural fit issues.
Putting it simply, one in four candidates hired during a typical hiring cycle will have a significant red flag. However, for those hired off-cycle, this jumps to one in three — a notable increase in the risk to your firm’s finances, culture and reputation.
What You Should Do
Does this mean you should disqualify every off-cycle lateral or close shop in Q1 and Q4? Certainly not; while one in three may prompt major red flags, two will not.
However, given the heightened risk, law firms should take action in two ways:
- Pre-hire due diligence. Thorough and complete due diligence should be part of your standard operating procedure for every lateral, but it’s especially important for off-cycle candidates. Insist on a complete Lateral Partner Questionnaire, and collect detailed intel that goes beyond the standard background check to validate technical skills, client relationships, cultural fit, business development abilities and more. Above all, don’t be afraid to ask the tough questions — Why do you need to move now? — and don’t feel pressured to match the candidate’s sense of urgency.
- Proactive talent strategy. Top-performing law firms are limiting their vulnerability to the pop-up lateral (or the too-good-to-be-true Q4 candidate) by shifting their approach to a purposeful and proactive one. This starts by identifying priority markets, then analyzing the best available talent to pursue. From there, firms can approach, interview and onboard the best-fit lawyers, candidates with both lower risk and greater impact on the firm’s overall strategic goals.
