The fourth quarter presents law firm leaders with a critical period for addressing strategic planning, financial management, and compensation adjustments. However, firms that extend their focus beyond immediate financial concerns and prioritize strategic talent management will be best equipped for success in 2025.
Talent acquisition and retention remain top considerations for law firms representing both a significant competitive advantage and a substantial expense. While the intensity of the “war for talent” has calmed, its impact is still felt across the legal landscape. Looking ahead to 2025, managing partners believe “talent availability” will be their No. 1 growth challenge, surpassing concerns about market competition and unfair economic conditions.
To thrive in the coming year, law firms must adopt a deliberate and data-driven approach to talent management. This strategic approach should prioritize long-term goals and avoid reactive “random acts of hiring” that contribute to high lateral failure rates (approximately 55% in 2024).
What can law firms do now to ensure a smart start to the new year?
Learn from 2024. The average turnover for AmLaw 200 firms is 26.3 percent: How did your firm compare in 2024, and why? Review the list of lawyers who both arrived and departed, and analyze whether turnover worked for or against you over the past year. Paying careful attention to your departures – and identifying the reasons behind them – can serve as an important culture check and shine a light on any toxic supervisors, untenable client situations, and more.
Draft (or update) your formal talent strategy. Identify exactly the types of laterals the firm wants to pursue. A written plan will keep all of the stakeholders in your lateral recruitment process – from recruiters to referring partners to Talent staff – focused on the hires that will advance the firm’s strategic plan. Consider:
- Geography: What markets do you want to enter or grow? Make sure to review regional data for a true understanding of the market; advanced analysis of lateral moves data can provide essential insights into client portability rates, compensation benchmarks and more. (For example, partners in Boston have a 36 percent higher portability rate than partners in Washington DC.)
- Practice Needs: What service areas need bench depth now? What service areas don’t? Again, rely on the data to ensure you are budgeting appropriately. In 2024, trust and estates, antitrust, and banking and finance laterals were among the most actively recruited partners; law firms were likely to pay more for this talent than lawyers in less active practices. Refer to data to see who has the hot hand in compensation negotiations.
- Target Clients: Seeking to grow your market share in a specific segment? RFPs are uncertain, and organic brand-building can take years – but lateral partners bring 35 to 57 percent of their claimed book of business. The most direct route to bring on a specific client is often to recruit the lawyers doing their work.
Bring everyone to the table. Your talent strategy should include perspectives beyond the Recruiting Committee. While Finance and practice group leadership have important input, consider that the Business Development team is spending the fourth quarter compiling practice, industry and office plans – plans that can and should be incorporated into the talent strategy. Beyond the draft of the talent strategy, seek to incorporate your Business Development leaders into lateral interviews, screening and more.
Provide direction to your search firms. Now that you have a talent strategy, share your wish list with preferred recruiters who source your lateral partner candidates. (It’s also a good time to narrow your list of search firms to a smaller group of preferred providers who can effectively answer our 10 Game-Changing Questions.)
Double-check your data sources. You need quantitative and qualitative intelligence to inform your talent decisions, but you must make sure it’s accurate and reliable. Unrefined lateral moves data can be inconsistent, inaccurate or incomplete – leading well-meaning law firms to target the wrong candidates or misread the market. (Trying a do-it-yourself data program? Be very, very careful.)
Review your LPQ – and raise your standards. The Lateral Partner Questionnaire should be the first line of defense for screening lateral partner candidates, but too many firms operate with basic forms that do not collect adequate detail. (For instance, 25 percent do not ask or require recent billable hours; 55 percent do not ask or require billing history beyond the current year.) First, make sure your LPQ is comprehensive; refer to Decipher Investigative Intelligence’s sample here. From there, insist that all candidates fill it out completely; roughly 30 percent of LPQs reviewed by Decipher are incomplete. This slows the due diligence process – and makes the firm vulnerable to bad surprises.
Create your lateral hire due diligence program. Lateral candidates who are appropriately vetted are nearly four times more likely to succeed at their law firms. Moreover, the cost of a failed lateral partner can range from $715,500 to more than $4 million…not to mention the hits to a firm’s reputation and morale from an unsavory hire. Pre-hire due diligence identifies red flags early, so your resources and energy can be saved for right-fit candidates.
Pursue Q4 candidates with caution. On the subject of due diligence, remember that off-cycle laterals – those who are screened in Q4 and Q1 – are considerably more likely to carry major red flags, issues that often result in total disqualification from hiring consideration. For example, these candidates have a 48 percent higher incidence of business development or client relationship issues, and a 35 percent higher incidence of personality or cultural fit issues.
Don’t forget to screen your summer associates, too. Your on-campus interviewing may be wrapped, but before next year’s summer class arrives, make sure you understand who you are bringing on board. Law students may not have decades’ worth of representations to review, but they carry real risks to law firms, from inflammatory social media content to questionable side hustles. Mitigate this risk with due diligence designed for the summer class.
Maximizing talent ROI in 2025 can be a resolution, or it can be a reality. It takes actions like the above, to be sure – but it also takes data and strategy tailored to your firm’s specific context.
Contact Decipher today to learn about the custom talent playbooks, due diligence and bespoke analytics that can make your hiring more strategic, more reliable and more successful long-term.
