Law Firm Leaders' Moneyball Mistake
Some law firm leaders would rather perfect an error than learn from it
This article was originally published in The American Lawyer on April 1, 2016.
By Steven J. Harper
Two months ago, in “Big Law Leaders Perpetuating Mistakes,” I outlined evidence of failure that most big law firm leaders ignore. Back in December 2011, I’d covered the topic in “Fed to Death.” The recently released paperback edition of my latest book, "The Lawyer Bubble," includes a new afterword that begins, “The more things change…”
The failure is a ubiquitous strategy: aggressive inorganic growth. In response to facts and data, big law firm leaders aren’t stepping back to take a long, hard look at the wisdom of the approach. Instead, they’re tinkering at the margins in the desperate attempt to turn a loser into a winner. To help them, outside consultants—perennial enablers of big law firms’ worst impulses—have developed reassuring and superficially appealing metrics. For anyone who forgot, numbers are the answer to everything.
One measure of failure is empirical. Financially, many lateral partners aren’t delivering on their promises to bring big client billings with them. Even self-reporting managing partners admit that only about half of their lateral hires do better than break even (however they measure it), and the percentage has been dropping steadily. In “How to Hire a Home-Run Lateral? Look at Their Stats,” MP McQueen ofThe American Lawyer writes that the “fix” is underway: More than 20 percent of Am Law 200 firms are now using techniques made famous by the book and movie “Moneyball.”
“Using performance-oriented data, firms try to create profiles of the types of lawyers they need to hire to help boost profits, then search for candidates who fit the profile,” McQueen reports. “They may also use the tools to estimate whether a certain candidate would help the firm’s bottom line.”
There’s an old computer programmer’s maxim: “Garbage in, garbage out.”
Unlike baseball’s immutable data about hits, runs, strikeouts, walks, and errors, assessing attorney talent is far more complicated and far less objective. Ask a prospective lateral partner about his or her billings. Those expecting an honest answer deserve what they get. Ask the partner whether billings actually reflect clients and work that will make the move to a new firm. Even the partner doesn’t know the answer to that one.
Group Dewey Consulting’s Eric Dewey, who is appropriately skeptical about using predictive analytics in this process, notes, “An attorney needs to bring roughly 70 percent of their book of business with them within 12 months just to break even.” He also observes that more than one-third bring with them less than 50 percent.
Of course, there’s nothing wrong with assessing the likely value that a strategically targeted lateral hire might bring to the firm. And there’s nothing wrong with using data to inform decisions. But that’s different from using flawed numerical results to justify growth for the sake of growth.
Becoming What You Eat
Beyond the numbers is an even more important reality. Partners who might contribute to a firm’s short-term bottom line may have a more important long-term cultural impact. It might even be devastating.
Dewey & LeBoeuf—no relation to Group Dewey Consulting—learned that lesson the hard way. During the years prior to its collapse, the firm hired dozens of lateral rainmakers. But as the firm was coming apart in early 2012, chairman Steven Davis was wasting his breath when he told fellow partners that there wasn’t enough cash to pay all of them everything they thought they deserved: “I have the sense that we have lost our focus on our culture and what it means to be a Dewey & LeBoeuf partner.”
Half of the partners he was addressing had been lateral hires over the previous five years. Most of them had joined the firm because it promised them more money. They hadn’t lost their focus on culture. They had redefined it.- Steven J. Harper is an adjunct professor at Northwestern University and author of "The Lawyer Bubble: A Profession in Crisis."