The Lateral Move Issues Facing Big Law

Ben Thomson, LawFuel Big Law editor

We have written much lateral about lateral movements in big law firms and ‘partner poaching’, such as this week’s lateral hire of a key legal team from Lathams and acquired by Sidley Austin, but what happens when these major fee earners leave for a rival firm? What are the challenges and what are the strategic responses that need to be made?

There is increased lateral hire, or ‘partner poaching’ happening with increased competition and changes within the nature of big law in particular.

We have seen major moves like the moves this week involving Sidley and Lathams, but also the moves by Davis Polk on A&O Shearman this week, the various raids by (and upon) Paul Weiss and many more.

When a star partner leaves, it often signals potential instability and can lead to further departures. Firms need to act swiftly to prevent a domino effect.

This may involve flying in management from headquarters to reassure remaining partners and potential flight risks, convincing them to stay despite the allure of following their departed colleague.

The departure of a high-profile partner can disrupt the practice area they led, as these partners typically have deep-rooted client relationships and influence within the firm.

Therefore, firms must demonstrate the value of the remaining team, sometimes requiring adjustments in pay structures or offering bonuses to retain talent.

It also creates significant market share shifting, which can impact the firm significantly.

When a firm successfully recruits lateral partners, particularly those who are “rainmakers” with substantial books of business, it can create a major difference for that firm’s market share.

These moving partners bring with them valuable client relationships and expertise, which can lead to increased revenue and a stronger market position.

Conversely, when a firm loses key partners, it risks losing market share to competitors who gain those partners and their associated clients

Rebuilding the Legal Team

Rebuilding after a significant departure involves recruiting new talent to fill the gaps left by departing partners.

This process is not instantaneous and requires careful planning and execution. There have been moves to make lateral moves less enticing, such as those undertaken by Lathams a short time ago.

Law firms may need to revise their compensation models to attract top talent, potentially introducing mechanisms like super-pointer pay structures to offer competitive salaries.

For instance, Latham & Watkins, after experiencing partner losses, adjusted its pay structure to compete with the high salaries offered by firms like Paul, Weiss, Rifkind, Wharton & Garrison, and Kirkland & Ellis.

Changes in how profits are distributed among partners can create internal challenges as firms balance rewarding new hires with maintaining equity among existing partners and other issues within the partnership – all of which have to be carefully dealt with.

Despite these efforts, rebuilding is a gradual process that involves not only hiring new partners but also integrating them into the firm’s culture and ensuring they can effectively replace the business and client relationships that were lost.

The Broader Context

The movement of partners among major law firms is not only not uncommon but it reflects some key industry changes in the law, such as the fact that partnership is losing its lustre.

Many associates prioritizing work-life balance and exploring alternative career paths outside of the traditional partnership track. 

This shift in priorities has led firms to reconsider how they structure partnerships and compensation to retain talent. 

Moreover, the legal industry is seeing an increase in lateral partner movements, as firms like Kirkland & Ellis, Latham & Watkins, and others experience partner raids and must adapt to maintain their competitive edge.

Law firms facing partner losses must act decisively to stabilize their teams and strategically rebuild. This involves addressing both immediate risks and long-term structural changes to remain competitive in a rapidly evolving legal landscape.

What is unlikely, is any lessening in partner poaching by law firms muscling their way into, or back into their areas of practice using the enticement of key legal talent to retain or secure legal work in lucrative areas. Expect more to come.