While lateral partner hiring remains the fastest path to market share, these investments are not without risk; introducing new lawyers to your firm inherently carries the potential for financial, reputational, and cultural harm.
One of the most reliable barometers for assessing the current level of risk: the volume and type of red flags that surface during pre-hire due diligence across the legal sector.
Before we dive into the numbers, it’s important to note that nearly all lateral candidates exhibit some irregularities in background investigations. Many are minor, like missing dates of employment or incomplete references, but a concerning number reveal major red flags, from inflammatory social media content to undisclosed disciplinary actions.
Overall, candidates averaged 2.4 red flags in 2024. While this is 21 percent higher than the preceding three-year average, it’s also 15 percent lower than the average in 2023. This suggests that while candidate risk persists, there may be a positive trend emerging in terms of candidate quality or due diligence effectiveness.
The most common red flags in 2024 were employment verification (affecting 44 percent of candidates); undisclosed personal legal history (28 percent); business development/client relationship issues (26 percent); and cultural fit or personality concerns (24 percent).
The final two bear repeating: Approximately one in four of the candidates in the lateral hiring pool were flagged for either questionable client management skills, client relationship deficiencies, and/or negative personality traits. Any of these red flags substantially raise the “risk” aspect of your risk/reward consideration.
When comparing 2024 to previous years, there is a troubling increase in the incidence of red flags across most categories, including:
- Undisclosed personal legal history: Up 14 percent;
- Employment verification: 9 percent;
- Outside affiliations/community involvement: 9 percent; and
- Business development/client relationships: 5 percent.
This underscores the critical importance of thorough due diligence in the candidate evaluation process. While not all red flags may be grounds for disqualifying a candidate, a comprehensive understanding of potential hires is essential for informed decision-making.
Law firm leaders must understand that risk is not uniform. Indeed, risk varies by location, practice group, and other factors.
In 2024, the locations with the highest percentage of candidates exhibiting at least one red flag were:
- New York: 48 percent
- Los Angeles: 44 percent
- Washington DC: 35 percent
Meanwhile, the practice areas with the most red flags per candidate were:
- Litigation: 5.2
- Corporate/Transactions: 3.4
- Banking/Finance: 3.3
Recall that across the legal sector, the average candidate had 2.4 flags; in 2024, Litigation more than doubled that. If your growth strategy calls for new partners in Litigation – or more dangerously, you’re scouting a surprise “pop-up” candidate – exercise additional caution.
What exactly should firms do in this red-flag-rich environment?
One: Draft and adhere to a talent strategy.
Stop any and all “random acts of hiring” with a written talent strategy that reflects the firm’s strategic plan. This should be specific about the practice areas, locations, industries and potential clients for which you will hire in the year ahead. The more intentional your hiring program, the less exposure you will have to problematic partners looking for a new home (any home).
Two: Take a proactive data-driven approach.
Turn your talent strategy into reality by applying data to build models of ideal candidates and fill your pipeline. Decipher leverages proprietary data sets — spanning investigative, client, business, and candidate information — to build accurate, reliable and relevant playbooks for hiring. The end result: a “short list” of compatible candidates.
Three: Insist on pre-hire due diligence.
With a short list of candidates, firms can apply pre-hire due diligence to ensure that each lateral’s book of business is legitimate and free of major red flags like the “bad client surprise.”
The lack of a disciplined, systematic approach is precisely why, across the legal profession, nearly half of lateral partners leave their firms within five years. (And 62 percent fail to bring their promised book of business, the reason you hired them in the first place.)
Depending on the size of the firm, each failed lateral can cost $715,500 to more than $4 million. This year, resolve to protect your lateral hiring ROI with a purposeful approach that spares your firm risk – and bolsters it with green-flag hires that advance your business objectives.
