Lateral hiring - value for money?
American Lawyer has published an article investigating the outcomes of aggressive lateral hiring, in light of the increased rate of partner churn among large law firms.
Indiana University law professor William Henderson and Pennsylvania State University affiliate law professor Christopher Zorn point out that there is no statistically significant relationship between an aggressive lateral strategy and profits per partner. In fact, the most profitable firms tend to have the lowest rates of lateral hiring. But lateral hiring may nevertheless be crucial to a firm’s survival, say the article’s authors, because larger firms are better able to survive the loss of a large group of lawyers, so larger cohorts are safer in uncertain times.
“Success may be simply avoiding the fate of more than a dozen Am Law 200 firms that have collapsed in recent years as partners lost faith in the enterprise and headed for the exits. Since we can’t win, we play not to lose.”