In the second year dominated by COVID-19, one major pandemic trend holds true: Fewer lateral lawyers are changing firms, but those who are moving are riskier bets.

 

Indeed, before COVID-19, the “red flag rate” for candidates who received a full screening from Decipher was 34 percent. During the coronavirus crisis, that number jumped to 52 percent in 2020 – an increase of 53 percent.

So far in 2021, 50 percent of our full investigations have surfaced red flags. In short, half of lateral candidates bring cause for concern: questionable legal skills, overstated books of business, challenging personalities, significant tax liens, undisclosed outside business interests, bankruptcies, conflicts, unethical behavior and more.

To be sure, this covers a lot of ground, and many of the issues raised are not necessarily disqualifiers. But all of them point to a lack of transparency that should be alarming when firms are recruiting partners – individuals of whom a fiduciary duty is expected, and individuals who should be bound by the standard of behavior Judge Benjamin Cardozo described in Meinhard v. Salmon: “Not honesty alone, but the punctilio of an honor the most sensitive.”

Punctilios of honor aside, most law firms are neither detecting nor addressing red flags before they hire lateral partners, and this results in high failure rates industrywide:

 

 

These failure rates come at a high price: From compensation to recruiter fees to onboarding, the costs of a failed lateral can range from $715,500 at an AmLaw 151-200 firm to $4,039,200 at an AmLaw 50 firm.

Here are three simple steps law firms can take to lower their risk of a red-flag surprise:

One: Ask for a complete career history on the Lateral Partner Questionnaire.

Your LPQ must be very clear here: Ask for every place of employment, the duration of employment and the reason for leaving. This should not be subject to interpretation. If candidates believe they can list only highlights, they may omit some obvious causes for alarm, such as a four-day stint at a firm (ahem….that actually happened).

Two: Require every candidate to “make a record.”

The LPQ should address every candidate’s complete legal history: whether they have been arrested, whether they have been a party to a criminal or civil case, whether they have been a witness to a criminal or civil case, whether they have been accused of malfeasance or sexual harassment, whether their work has been the subject of a malpractice claim, and so on.

For most candidates, this will be a long list of “no” checkmarks that takes two minutes to complete. But if you are not asking for the record before hiring, you miss the opportunity to make an informed decision. (Moreover, these legal issues are often discovered by malpractice insurers at underwriting; asking early can save you and the candidate that embarrassment.)

Three: Require every candidate to complete the LPQ.

About 30 percent of the LPQs we see are incomplete. While this is often benign, we have seen extreme cases where candidates skip very serious questions, such as whether they have been accused or convicted of sexual assault.

If you see that any questions on your LPQ have been left blank, follow up and insist on an answer.

While these three steps are a smart first line of defense, a comprehensive due diligence program will protect against the full range of red flags, significantly lowering risk and boosting ROI. Case in point: Of more than 250 partners recently vetted by Decipher, only 3 percent have moved again. The market second-mover rate for the same period: 33 percent.

In Case You Missed It

Learn more about the effects of COVID-19 on lateral hiring in our special report here. See who moved, who didn’t – and what questions law firms should ask in 2021.

Decipher reduces law firms’ lateral hire risks and costs by providing deep-dive intelligence about prospective laterals – before they are hired. We help our clients grow safely and more efficiently. To learn more, contact us today.