Planning to recruit laterals in 2021? Consider this:

The failure to transition (or manifest) a book of business is among the primary reasons less than 10 percent of lateral hires currently recoup their cost of acquisition.

Data from 2020 shows this is likely to get worse in the COVID-19 era, and it’s imperative that law firm leaders heighten their scrutiny in 2021.

Indeed, analysis of candidates screened by Decipher shows that fewer laterals were on the market after the pandemic hit – but those that were could be riskier bets.

During the eight months immediately preceding COVID-19 (August 2019 to March 2020), candidates screened by Decipher had a 24 percent “red flag rate.” As the coronavirus took hold, that jumped to 33 percent – an increase of 38 percent. In other words, one in three potential lateral hires carried significant potential risk: questionable legal skills, lackluster books of business, challenging personalities, high tax liens, or bankruptcies, conflicts or unethical behavior, among others.

Moreover, among the candidates screened by Decipher during COVID, there was a 95 percent increase in the alleged book of portable business. Before the coronavirus, the average partner candidate’s purported book of business was $1,209,000; during the pandemic, this leapt to $2,357,000. While it’s possible that only major rainmakers were moving during 2021, it’s far more probable antsy candidates overstated their potential revenue. 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.

Pandemic notwithstanding, why do lateral books so often fail to appear?

A very small percentage of laterals are charlatans.

A very small percentage of laterals are delusional – they believe because they’ve worked for a client, it’s their client.

Some laterals fall victim to savvy counterattacks from the firm they are leaving – from discounted rates and value-adds to a masterclass in how cumbersome it can be to change law firms mid-matter (have you thought about switching banks lately?)

Far more often, it’s simple exaggeration. Because compensation is tied to the lawyers’ portable business, they are incentivized to paint the most optimistic portrait possible. Almost every candidate screened by Decipher has inflated some client section of the Lateral Partner Questionnaire.

We have seen lists of potential work that were actually law school alumni rosters. We have seen junior partners promising to bring over a major corporation – when the senior partner they work for serves on its board of directors. We have seen serial movers prepare a jump every time a guaranteed comp deal comes to an end.

While uncertainty abounds, 2021 looks to be a promising year for many law firms, and many practice areas are poised for growth and rapid lateral movement. Learn more about potential areas for growth in our special report here.

For the 96 percent of law firms that will look to laterals to fuel their growth strategies, it’s critical to review and revamp the hiring process. Ensure your Lateral Partner Questionnaire is thorough. Evaluate the vulnerabilities of your compensation structures. Invest time and effort in lateral integration programs to thwart “lone wolf” challenges.

Savvy firms will avoid the phantom business bogeymen altogether. Sophisticated due diligence can scout the charlatans and the deluded, and provide real forecasts on what you can reasonably expect from the exaggerators and the optimists.

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.