Lateral Acquisition: The Trouble with Networking

This article appeared in as Relying On Your Networks for Lateral Referrals is a Losing Proposition on August 23.

By Michael Ellenhorn, Decipher Investigative Intelligence

It’s a common scenario: A law firm wants to grow a specific practice area by acquiring a lateral partner (or team) with a solid reputation and a portable book of business.

And it’s often followed by a common mistake: a recruiting effort based on the personal networks of the firm’s lawyers, recruiters, or both.

This is problematic for three primary reasons, all constraints of human nature:

One: Your networks are (really) limited.

You may have thousands of LinkedIn connections, but when it comes to meaningful relationships, human beings max out at 150, according to Scientific American and the work of University of Oxford evolutionary psychologist Robin Dunbar. Most of us have about five intimate friends and 15 close friends.

That leaves about 130 spots for your general circle. Once you have accounted for your family, your clients, your colleagues, and your other everyday contacts – the other parents at dance class, your personal trainer – how much space do you have for meaningful relationships at other law firms? Specifically, for rainmaking partners, in exactly the right practice group, with no conflicts, with portable business, who are open to a move?

Two: Your networks overlap.

Your partners’ networks are likely Venn diagrams, with shared contacts from law school, places of worship, neighborhoods and other social settings. For instance, we looked at the project finance partners from one AmLaw 100 law firm. Twenty percent attended Columbia Law School. Within this particular law firm, four particular law schools were prevalent; partners were nearly twice as likely to have attended one of these four than any other option.

When you consider that science says all partners’ networks are limited, then consider the large number of potential duplicates inherent in these networks, your list of potentially friendly candidates gets even shorter.

Three: Your networks are saddled with implicit bias.

On average, “Americans’ social networks are primarily comprised of people from the same racial or ethnic background,” according to research cited by the American Psychological Association’s journal, Cultural Diversity and Ethnic Minority Psychology. Indeed, among white Americans, 91 percent of the people in their social networks are white. The percentage of same-race friends for Black Americans was 83 percent; for Hispanic Americans, 64 percent.

If you are recruiting through networking, you are likely to limit your search not only to people you know – but also to people who look like you. At best, this stalls law firms’ efforts toward diversity and inclusion; at worst, it perpetuates the good-old-boy systems of inequity.

Moreover, you run the risk of a second bias: self-selection. Why limit your efforts to partners who are effectively introduced to the firm as “Sure, I’m up for a move”? Such eagerness may be benign – or it may hint at troubles that would just migrate from the current firm to yours.

The Solution: Data-Driven Talent Acquisition

It’s time for the legal profession to acknowledge the foibles of the Rolodex method (or its electronic equivalents) and bring a data-driven approach  – and in doing so, to take an unbiased look at the market as a whole.

Consider, again, the New York finance market.

Research by Decipher Investigative Intelligence shows that there are 302 law firms that work in this area, with 2,357 active partners (yes, you read that correctly).

It is mathematically impossible for any one law firm to maintain this level of connectivity within the legal hiring market.

Moreover, the beauty of data-driven reporting is that it removes any bias – no more “I know a guy” recruiting – and empowers firms to apply meaningful criteria to their lateral searches.

Continuing with the hypothetical above: We started with 2,357 active partners, so let’s narrow it down: we want to consider partners with 15 to 35 years of experience in project finance.

That brings us to 498 potential candidates.

We can further apply other key criteria, such as specific specialty within the practice of project finance, the representation of specific clients, compatible rate structures, industry sector specialization, or racial and gender diversity.

On a higher level, the market can be analyzed to note candidates who would be most likely to move, including those at firms with lower profits per partner; firms with less active project finance groups; firms that have suffered recent exits; or firms that put in place pandemic cost constraints that hampered partner compensation. This enables law firms to concentrate their firepower (and time and money) on candidates who will be more receptive to recruitment.

Once a specific “short list” is in place, firms can apply pre-hire due diligence to ensure that a lateral’s book of business is legitimate – and free of the “bad client surprise” – and that the lateral does not have hidden red flags, such as questionable legal skills, challenging personality traits, financial irregularities, or unethical behavior.

The Results of Data-Driven Talent Acquisition

As opposed to the old method, data-driven talent acquisition ensures:

  • A strategic and proactive approach, because it forces firms to think about quantifiable firm needs, including specialties and capabilities, experience levels, client focus, portable book, and more.
  • A true look at the marketplace, because it is based on a comprehensive picture of the lateral inventory as a whole – not partners’ limited networks (and memories) of those who are “looking for a move.”
  • An objective set of candidates, because the data is not limited by humans’ implicit bias.
  • Lower risk to the firm, because potential hires are vetted for potential hazards and red flags as well as their ability to deliver.

All told, data-driven talent acquisition delivers peace of mind that the law firm gets the best possible candidates through a sound, strategic and defensible process with lower risk and dramatically lower cost.

The traditional “Six Degrees of Kevin Bacon” approach? Not so much. (…sorry Kevin. We loved you in Footloose!)

Michael Ellenhorn is the CEO of Decipher Investigative Intelligence, which deploys deep-dive due diligence to create safe, healthy and high-performing workplaces.

Skip to content