Tag Archives: Legal Headhunter

International Lateral Moves

You might expect Biglaw firms to be reluctant to hire associates from one country for roles in a different country. Cross-border moves are inherently more complicated than hiring an associate from across the street. There are visa considerations, bar admission hurdles, even cultural challenges.

But in fact, despite the possible obstacles, the market for cross-border hiring is booming. In particular, Biglaw offices in the United States are increasingly open to bringing on foreign candidates. And lawyers from other common law countries are realizing the advantages of gaining experience in the American market. Building a professional network while working on the highest-value, most complex deals in the world pays dividends throughout one’s career, whether the lawyer stays in the United States permanently or moves back home. Lucrative American Biglaw salaries are also a plus (though you’ll need to tolerate high hours expectations in exchange).

If you are a well-credentialed attorney working in Canada, Australia, London, Asia, or the United States, now is a great time to consider an overseas move. And Lateral Link can help.

Growing demand for cross-border hires

International lateral hiring is not a new phenomenon. We have previously written about it in the context of moves between Canada and the United States. But relative to prior years, the level of interest among firms in hiring from overseas has escalated dramatically in 2021. Firms that have made these hires in the past are looking to bring in candidates in larger numbers. And firms that previously ruled out such hires are suddenly embracing the overseas model.

What explains firms’ growing openness to foreign lawyers? The biggest factor is that local candidates are in short supply. Many firms instituted hiring freezes or layoffs last spring, only to see unexpectedly strong demand for their services in the second half of 2020. All at once, firms have found themselves playing catch-up in a highly competitive market.

The talent squeeze is especially acute in the most expensive cities, such as New York and San Francisco. As with professionals more generally, the pandemic has caused many lawyers to reevaluate their circumstances and in some cases make major life changes. One of the most common has been to move away from high-priced urban centers. That has left firms with slots to fill in the largest markets facing a reduced talent pool. As a result, many are exploring creative solutions like hiring from abroad.

Another important factor is that cross-border hiring is working well for the early adopters. Firms have seen their peers succeed with this model, and that has given them confidence to jump on the bandwagon. The trend is catching on broadly: Lateral Link has worked with dozens of firms this year on international lateral searches.

There are some caveats to keep in mind. First, even in this tight market, firms still expect solid academic credentials, as well as strong and relevant substantive experience. Second, visa restrictions can be an obstacle. On the visa front, Canadians and Australians looking to move to the United States have an advantage. Canadians are eligible for the automatic 3-year TN visa issued at the port of entry; Australians can obtain an automatic E-3 visa prior to traveling to the United States. Candidates moving to the United States from other countries require employer sponsorship, which can be more challenging.

But for candidates who can surmount those hurdles, opportunities abound. There is demand for lawyers at various seniority levels, ranging from second-year associates up to senior associates and counsel. Firms are especially eager to hire in transactional practices such as M&A and finance. Capital markets demand is also growing. Tax and litigation opportunities are more limited, as these practices don’t cross borders as easily. Local bar admission is not necessarily a prerequisite, though of course candidates who already have it are especially desirable.

Lateral Link has specialized capabilities for cross-border lateral moves

If the prospect of a cross-border move is intriguing to you, please note that Lateral Link has a team of experienced recruiters specializing in international lateral hiring. Our primary markets are Canada, Australia, London, Asia and the United States. We work with candidates moving between any of these geographies. Firms specifically reach out to Lateral Link asking for candidates from these markets because they know our team has local expertise. We are constantly sitting down with partners to learn more about their hiring needs.

I lead our international group and bring particular knowledge of the Canadian and Australian markets. I have specialized in international moves for the past six years, and as a result, I’ve gained a strong understanding of which firms and practice groups are open to foreign candidates. I strongly advise candidates considering an international move to seek out recruiters who understand both the origin and destination markets. Real knowledge of both markets is critical to finding the right fit and ensuring a smooth transition. Lateral Link brings the necessary depth of expertise to navigate these moves successfully.

Canada

Firms considering a hire from the Canadian market frequently call me even if I am not working with the candidate because they trust my assessment of Canadian legal backgrounds. Lateral Link primarily places Canadians into the United States or London. We also place American associates into the Canadian market. Candidates interested in moving to or from Canada should contact me or my colleagues, Elizabeth Soderberg or Andrew Clyne.

Australia

As with Canada, we mainly place Australians into the United States or London. We also assist Australians with moves to Asian markets such as Hong Kong and Singapore. Australian candidates should contact me or Zach Sandberg.

London

In the London market, we mainly assist U.S.-qualified associates with moves to London and UK-qualified associates with moves to Asia. We sometimes place UK nationals into the United States, but this is more challenging due to the need for visa sponsorship. Our experts on the London market are Abby Gordon and Andrew Clyne.

Asia

The majority of our Asia work involves placements of Americans into Hong Kong or Singapore. One notable feature of Asian markets is that lateral opportunities are available for litigators who have local language skills. For transactional associates, language skills are highly valued, but they are not an absolute requirement. As with London, placements of Asian nationals into the United States are less common, due to visa requirements. Candidates interested in Asia moves should contact Justin Flowers or Andrew Ng.

Biglaw Partners Should Think Like Franchise Owners

It’s a common refrain even from highly successful lawyers: “I wish I were on the business side.”

There can be more than one motivation underlying that sentiment. The chance to earn more money tends to be part of the appeal, particularly if the lawyer is treating an especially successful client as the reference point. But beyond money, attorneys who yearn for a business role are often drawn to the notion of managing a P&L. In other words, they like the idea of being in charge of a business and controlling their destiny.

The thing is, if you are a Biglaw partner, you’re already running a business: your practice. It might not feel that way. Maybe you view your firm’s managing partner as the person who is running the business, and relative to that leader, you feel like you don’t have much management autonomy. If that is your view, it may be worth considering that most of the clients on the “business side” are constrained by decisions made higher up the pyramid. Not all of them are CEOs. Many are leaders of divisions within a broader corporate structure, managing a P&L that is just one component of a larger whole.

But the best analogy for law firm partners isn’t to a corporate division. It’s to a franchise. A law firm partner is effectively a franchise owner. At first glance, running a capital markets practice looks vastly different from running a fast food restaurant. But if you set aside the surface differences, there are some fundamental similarities.

In a franchise model, the franchisor determines many details of the franchisee’s operation. The franchisor defines the brand in the public imagination through marketing campaigns. It controls the menu of products sold at the franchises. It supervises the design and construction of stores to maintain a common look and feel across the brand’s outlets. And it provides instructions and training to ensure a consistent customer experience.

But although the broad strategic and design choices are primarily the domain of the franchisor, the franchisee controls the actual operation of the business and ultimately determines whether it succeeds. The franchisee’s responsibilities include hiring employees and supervising their work, building the reputation of the franchise in the community it serves, and carefully tracking the performance of the franchise relative to industry benchmarks to identify opportunities for improvement.

A law firm’s management, like a franchisor, is the primary steward of the brand under which the firm’s partners offer their services. The managing partner or management committee determines which practice areas the firm will compete in, selects the partners who will lead service delivery in those practice areas, and sets the broad policies and cultural norms by which the firm operates.

To be sure, those are all important decisions. But the success of the firm’s business is ultimately contingent on client satisfaction, and that depends on the management skills of the individual partners. As a partner, your job is to bring in matters and execute on them such that the client’s expectations are met or exceeded.

Like a franchise owner, you are responsible for your practice, and it will grow primarily through your direct efforts. It’s on you to get out there and interact with influential members of the community, and it’s on you to ensure that the team of associates working under your direction is motivated and equipped to deliver on your promises to clients. Like a diligent franchise owner, you should be monitoring the performance of your practice relative to others, taking stock of its relative strengths and weaknesses, and gleaning insights that can be leveraged to drive continuous improvement. You don’t need to shift to the “business side.” You’re already on it.


Biglaw Partners: Are You Capturing A Fair Share Of Your Revenue?

If you are a Biglaw partner, you may have heard this compensation rule of thumb: you should be taking home a third of the revenue you generate for the firm. The 33% rule has the advantage of being simple, and it makes for a reasonable starting point. But to really know whether you are capturing a fair share of the value you create, it’s important to consider some other factors.

Your hours vs. your team’s hours

The first distinction you’ll want to make is between the hours you bill and those billed by the people working for you, such as associates and service partners. The 33% rule is supposed to apply to all revenue for which you are responsible. But we can make things more precise by breaking that revenue into two segments.

As a general rule, you should make about 40% of revenue from hours you billed personally. As for the hours billed by members of your team, it depends how profitable those lawyers are for the firm. Associates at some firms are substantially more profitable than others. The more profitable your associates, and the more leverage your book has, the greater the share of your team’s revenue you can expect to take home.

RPL and leverage are the key metrics

To understand what share of team revenue should accrue to you, consider how your firm stacks up on two key metrics: revenue per lawyer (RPL) and leverage.

RPL is critical because it is so poorly correlated with associate salaries. You could imagine a different compensation model in which firms paid associates a standard share of the revenue they generated, either individually or on average across the firm. But as we know, that isn’t how this industry works. Instead, all top-tier firms pay associates more or less the same salaries based on class year. As a result, partners at firms with relatively high RPL get to divide a much larger profit pool than partners at “top” firms with low RPL.

Within the Am Law 100, the spread between high and low RPL is striking. Firms at the low end have RPL of around $500,000. For example, Lewis Brisbois is the lowest of the Am Law 100, at $434,000. Firms at the high end have RPL close to 4X that of the low-end firms. Sullivan & Cromwell, for example, clocks in above $1.9 million. (Wachtell is in a league of its own, with RPL in excess of $3.6 million.) Granted, a Sullivan & Cromwell associate earns higher total compensation than a Lewis Brisbois lawyer in the same class year, but that multiple is nowhere near 4X.

Now, RPL isn’t everything. We also have to consider leverage. If a partner’s book can feed a relatively large number of associates, the proportion of the team’s revenue that should accrue to the rainmaking partner will be higher. And to be fair to Lewis Brisbois, their partnership is doing well on that dimension, with leverage of 9.99 (second-highest among the Am Law 100).

How does your practice compare to the firm average?

Your firm’s overall RPL and leverage are important considerations, but unless the partnership has a pure lockstep compensation model, the performance of your practice relative to the firm average is also critical. A good starting point for thinking about this dimension is to compare the firm’s profit margin to the share of your revenue that you are taking home. For example, let’s say your firm’s profit margin is 45%. Are you being paid 45% of the revenue you are generating?

If not, consider how your practice may differ from others in the firm. Does it have lower leverage than the firm average? Are you personally billing fewer hours than your peers in the partnership? If the answer to both of these questions is no, then your compensation should reflect the firm profit margin. If it doesn’t, you are likely underpaid, and you may want to consider your options.

Why Leave Biglaw To Form A Boutique?

If law practice were a normal business, this would make little sense. In theory, larger firms should be more profitable per partner than smaller firms because a large firm can spread its fixed costs of operation over a larger pool of lawyers, lowering per-lawyer cost. The move to form boutiques seems to violate the basic principle of economies of scale.

But law is not a normal business. As we have previously explored, the legal profession is remarkably fragmented relative to other professional services fields. It is clear that standard economies of scale logic does not explain law firm industry structure.

We see four central factors driving the boutique boom: founder autonomy to chart strategy, avoidance of client conflicts, the opportunity to limit overhead investment, and freedom from ongoing obligations to retired partners.

Strategic autonomy

Boutique founders value the ability to chart their own strategy and run the show. A rainmaker in a typical Biglaw firm can be expected to have a more influential voice than the average partner, but the fact remains that major decisions require some degree of consensus, and the status quo tends to prevail.

Take alternative fee arrangements, for example. Boutiques generally have embraced flat-fee or other alternative structures much more readily than their Biglaw peers. That shift is a lot easier to execute when a firm is controlled by a small group of partners who work in the same practice area and are operating on a relatively long time horizon.

Boutiques can also more easily limit themselves to competing only for higher-margin work. When you make no pretense of being a full-service firm, and you have no legacy low-margin practices encumbering you, there is little reason to bring on equity partners whose revenue contribution would reduce the average.

Conflict avoidance

In their public statements, boutique founders tend to highlight the appeal of escaping the conflicts entanglements of Biglaw. It sounds more noble than “I’m expecting to make way more money.” But in all seriousness, freedom from conflicts can be important. It is a frustrating experience to be in line to represent a client in a significant matter, only to find out that your firm has a conflict that seems entirely tangential but nevertheless requires you to decline the work.

No bloated overhead

If law firms were managed to maximize profits, overhead considerations would counsel against forming a boutique. All law firms must incur some level of fixed cost in order to operate. Consider IT costs. Properly managed, the amount spent on IT per lawyer should be materially smaller at a 1000-lawyer Biglaw firm than at a 10-lawyer boutique. Similar economies of scale should exist for real estate expenses.

And yet, boutique founders routinely cite reduced overhead as an advantage of the boutique model. This is an indictment of large firms’ spending decisions. Historically, there has been a cultural assumption among the Biglaw elite that fancy offices on the highest floors of the most prestigious towers are a necessary expense, both as a status symbol for clients and as a recruiting tool for attorney talent. Boutiques have illustrated that there is reason to doubt this assumption. Even before the pandemic made every law firm question its real estate needs, boutique founders realized that they could operate successfully with a considerably smaller office footprint.

Here we again see the value of the autonomy discussed above. It is easier for a small group of founding partners to agree to dispense with some of the traditional trappings of Biglaw office space than to drive consensus among a large partnership to make substantial cost cuts.

No retirement payments

The final factor is likely the least intuitive, especially for lawyers who are not yet partners: the burden of payments to a firm’s retired partnership. Biglaw firms vary in the generosity of annuities offered to retirees, but it is common for a retired partner to be paid in perpetuity something like one-third of the partner’s average compensation in the final five years of service.

As life expectancy has increased, these generous payouts have become an ever-growing drag on Biglaw profits. Imagine you are a relatively young and successful partner. You could spend the next two decades dutifully contributing to the pockets of your retired forebears and hoping that you will receive a similar deal in your old age. Or you could leave now, found your own boutique, and keep that portion of your billings for yourself. In a world in which even partners who stay in Biglaw are likely to make multiple lateral moves over the course of their careers, it is increasingly difficult to convince current partners that bearing the costs of retirement payments is a worthy investment.

Conclusion: Biglaw must reform its cost structure

Unless Biglaw firms take seriously the signals that the boutique boom is sending, they can expect escalating losses of their most productive partner talent. There is of course a limit to the reforms that Biglaw firms can undertake: the autonomy and conflicts factors are particularly hard to counter. But on cost control, the ball is in Biglaw’s court. And in the wake of the pandemic, the largest firms have a golden opportunity to reimagine their business models in fundamental ways.

Biglaw firms need to take a hard look at all elements of their cost structure, with real estate and retired partner compensation at the top of the list. To that end, now would be a great time to shift to more professional administration by trained management professionals, rather than untrained lawyers engaging in administration as a part-time, supplemental duty.

Biglaw firms have advantages that boutiques cannot easily match, including strong brands and the ability to cross-sell work among multiple practices. But without significant reform on the cost side, Biglaw will continue to lose ground to boutiques.