The Real Cost of Lateral Hires for Law Firms
Not every lateral hire will turn out to be a Jeffrey Wertkin.
Akin Gump hired Wertkin away from the U.S. Justice Department because of his trial experience and knowledge about whistleblower cases. He was supposed to be a partner that would boost firm business, especially in the health care industry.
It turned out to be more than a Wertkin process when a year later he was arrested for trying to sell confidential court records for $310,000. It cost him and the firm much more, a calculation that law firms are assessing more than ever in lateral hiring.
The American Lawyer, reporting on Wertkin and other lateral hires gone wrong, says the problem goes deeper than criminal conduct. The real problem is that law firms don't do decent vetting.
"Fifty percent of all laterals will fail within five years. And that pretty much shows up across the board in every study that's been done," said Michael Ellenhorn, co-founder and general counsel of Decipher, a human resources and market intelligence business.
Ellenhorn said that law firms often pay recruiters and offer guaranteed compensation to new hires. But when that new partner leaves after only a few years, he said, it can cost as much as 200-400 percent of that lawyer's actual compensation.
The cost escalates with recruiting replacements, higher insurance and often lost business. A solid background check before hiring is a lot less expensive.
Look Before You Leap
It is a delicate dance between a prospective partner and hiring partners. Sometimes, a new partner will come to a firm on little more than a handshake and a forecast of rain.
But law firms should look closely before engaging. Above the Law editor David Lat says a bad lateral hire can cost more than the group-think.
"We've previously warned lawyers considering lateral moves to look before they leap," he said. "The same advice applies to law firms as well."
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