Partner Group Hiring: A Common Alternative To Traditional Expansion Strategies

2022 was a difficult year for major law firms, with considerably reduced opportunity to drive profit growth as compared to 2021. It's no surprise, then, that the more challenging environment is influencing firms' strategies for expanding their partnerships. With reduced margin for error, firms are mindful of the risks inherent in the traditional methods of hiring individual lateral partners or of merging with another firm. According to our clients and many of the law firm leaders with whom we work closely, hiring groups of partners has emerged as a sweet-spot alternative.

Hiring partner groups is less risky than individual lateral hiring

Hiring partners in groups can mitigate many of the risks associated with traditional lateral hiring. Take cultural fit, for example. A lateral partner hire who turns out to be a poor cultural match can do real damage to the cohesion of a firm and, in the final analysis, undermines the very purpose behind their hire. A 2021 survey by ALM Intelligence and Decipher Investigative Intelligence found that 29% of firms have had a lateral partner leave due to cultural fit issues with other partners. Rather than take the risk of integrating a single new lateral partner, firms often prefer to bring on a group of partners with a proven ability to work together, expecting that the group will replicate its existing equilibrium in the new firm and, thereby, contribute as efficiently as possible to the bottom line.

Group hiring also arguably offers greater security that claimed portable books of business are real. Nearly half of respondents to the ALM/Decipher survey reported that the majority of their firm's partner laterals underperformed in relation to their stated book of business. The survey found that more than two-thirds of law firms have had a lateral partner leave for this reason.

Group moves improve these outcomes significantly. When a group moves together, clients are more likely to move with them and there are several additional indicators that portables will be solid. These range from such soft indicators as the trust shown by associates, counsels, and service partners moving alongside their rainmaking colleagues to harder indicators available when cross-referencing the business case provided by each partner in their lateral questionnaires.

Lastly, group hiring is also more efficient, offering more bang for the buck and swifter growth than a piecemeal approach - saving both time and money.

Group hiring is more targeted -- and certain -- than pursuing a merger

In theory, the greatest bang for the buck expansion strategy is a merger; but although we have seen some merger activity this year among smaller firms, and some attempts among larger ones, too, the specter of failure often looms large and a firm may invest significant energy in the process, only to walk away with nothing (take, for example, the recent merger attempts between Shearman Sterling and Hogan Lovells or O'Melveny and Allen & Overy). Worse yet, failed mergers often attract unwanted attention from competing firms looking to take advantage of any resulting turmoil by siphoning off spooked talent - the opposite of growth! Group hiring is less complex than conducting merger talks and a deal is more likely to be reached. In addition, the hiring firm can be more selective about the partners it takes on. Underperformers are less likely to be admitted through a group hire than through a larger-scale merger.

Partner group hiring is ideal for secondary market expansion

As we have previously discussed, we are in the midst of accelerated Biglaw expansion into new or smaller markets across the country. Consider the options available to a firm committed to opening a new office in Miami or Austin or Salt Lake City, with no prior presence in those markets. While they may, in the past, have hired two or three individual lateral partners from local firms and transferred some of the firm's current partners to the new office in the hope it all jells successfully, firms are now more inclined to hire a group of local partners and use that group as the anchor for the new office, to be supplemented by some internal transfers.

Mintz Levin's entry into the Toronto market is one example. This week, we learned that the firm's new office will be anchored by a group of three partners from leading Canadian firm Torys. Mintz has also hired a Toronto-based Dentons partner who was previously at Torys.

Expansion into a new market is a high-stakes move, with considerable reputational risk. A group with existing local client relationships that already work together productively provides a strong initial platform. Firms' desire to maximize their likelihood of success in new markets is a key driver of the partner group hiring trend.

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If you are interested in learning more about firms' partner hiring strategies, please contact me.