Many of you in the business world will have, at some stage in your career, been contacted by, talked to, met with or heard of a HeadHunter (HH). Often, you will hear or read in the news that a company has instructed one to find a replacement MD or CEO.
The modern day practice of paying a 3rd party either to fill a vacancy or to help a candidate find a new position appears to have started at the start of the 2nd World War when conscription led to job shortages and then subsequently when the soldiers returned seeking alternative employment on civvy street.
Clearly for this market and service to have flourished since then implies that organisations have needed and still need 3rd parties to help them fill their vacancies. This would also imply that these organisations have been unable to carry out the same function themselves.
One of the most lucrative markets for this practice has been and remains the legal sector and in particular private practice recruitment. This piece looks at some of the arguments for and against Law Firms in London, principally US ones, using HHs.
Generally speaking HHs operate at the senior end of the market. The more junior appointments (of which there are far more) are usually handled by the Law Firm directly or by a group of recruiters, often referred to as the agencies. There is some cross-over.
A lateral partner hire will arrive at a Firm through direct approaches (either by the Law Firm or by the candidate), or through a 3rd party (either instructed by the Law Firm or through a “lob-in” by the recruiter).
It matters how a partner arrives at a Firm because the recruitment fee is a large (sometimes very large) additional hiring cost, varying between 20% and 30% of the partners first year’s remuneration, but often capped in the UK for any one hire at c. £150k. Team hires come with their own set of T&Cs.
Some Firms will instruct a single HH (usually on an exclusive basis for a fixed period of time) or a group of recruiters (usually referred to as a preferred suppliers list, “PSL”) to find specific senior lawyers. Different HHs may specialise in certain product areas.
Size of the Market
There is very little data available on this. The last number I saw was published in 2016. According to Duncan Foo at SSQ, there were c. 500 London partner laterals at the largest commercial Law Firms with around a third of these by US Law Firms.
From data that I have collected since 2015, the graph below represents lateral partner hires for the London offices of the Top 50 US Law Firms. It splits the data into groups of 10 Firms. So 1-10 represents the number of hires by the top 10 largest US Firms by revenue. It includes all partner hires by their London offices, including those who are registered as foreign lawyers (mainly US-qualified). In total, there have been 424 partner hires to date.
Notes: I do not include UK Firms, Hogan Lovells, Norton Rose Fulbright or DLA Piper that have merged with US Firms and have kept their Head Offices in London, although they are included in the Am Law 100.
It would be reasonable to suggest that the final total by the end of 2018 will be somewhere between 450 and 500 hires. And that the total for all US Firms in London will be only marginally higher than this. So the average is going to be somewhere between 115 and 130 per annum. The majority of these will be salaried or non-equity, reflecting the partnership structures at most Law Firms.
How many of these hires come with a recruitment fee, we will never know. I think that we can safely assume that the majority of lateral hires come about through planning and requirement as opposed to opportunity. Having said that, if we look at the media comments made by Joe Conroy, the CEO at Cooleys and the collapse of KWM, for example, opportunity knocked and accounted for a sizeable chunk of the total lateral hires for 2015 and 2017, respectively.
As many lawyers that I have spoken to will testify, I have long advised that they shouldn’t rely solely on a recruiter to find them their next position. They shouldn’t wait to be contacted. They should be proactively tapping into their own networks to make direct approaches to companies and/or Law Firms that they are interested in. Some are more inclined to do this than others. And some are better at it than others.
However, the way the market works and has worked means that the some recruiters, who are in regular contact with Firms, will know where the potential opportunities and/or vacancies are. Some will also have developed personal relationships, over many years, with senior members of staff (legal and non-legal) and this fast track route of enquiry is something which a candidate on his/her own can’t usually replicate immediately.
Quite often the most sought after partners are the busiest and it does happen that they lose out on opportunities due to lack of availability or time to commit to the recruitment process. Having your own personal assistant in the shape of a HH can sometimes prevent this from happening.
So for these and other reasons, some partners, who are looking to move to another Law Firm, will allow one or several recruiters to make enquiries on their behalf and set up meetings, amongst other things.
No matter how the candidate’s details arrive at a Law Firm, for most lawyers, confidentiality is imperative. However, the more people that know you are on the market, the more likely confidentiality will be breached.
Frequency & Volume of Lateral Partner Hires
Further to my recent article published in the Lawyer Monthly on partner churn, below are two graphs and a table showing the total London partner hires since 2015 by the Top 20 largest US Firms by revenue.
Most Partner Laterals since 2015
Clearly there are large variances in hiring activity amongst these Firms. Baker & Mckenzie and White & Case have been averaging 6-7 partners hires per annum since 2015, whereas, Paul Weiss, Simpson Thacher and Sullivan & Cromwell have only made 1 partner lateral each over the past 4 years.
The frequency and volume of lateral hires is obviously very relevant to how much HR resource you need, but also as to whether you to use a 3rd party recruiter. The more partners you need the more help you need.
The number of partners processed before an offer is accepted will vary from Firm to Firm and will depend on several factors including their reputation in a product area, the quality of their lawyers (partners and associates) and their financial strength (and flexibility). A Firm might receive up to 20 CVs for any one vacancy and then probably agree to meet with up to 5. For a full service Firm like B&M and W&C, recruiting these sorts of numbers (ignoring the resource also needed to manage partner exits and associate hires) is a huge administrative and logistical exercise.
On the flip side, some of the Firms listed above and a few others besides, who make the occasional partner hire, are 1) in a position that they can wait for as long as it takes to get their target and 2) afford to buy out the candidate by offering a significant uplift on their current package.
Quality of Firm
Following on from the volume theme, the higher the quality the Firm, the more attractive a Firm is or simply the more profitable a Firm, then the less the need for a 3rd party recruiter.
Some of the less attractive and less profitable Firms need more help. Some therefore operate an open door policy and don’t limit or vet the number of recruiters that they work with. They do this to maximise their market coverage, to accelerate the number of candidates that they see and to fill their vacancies as quickly as possible. Further some departmental heads and senior management prefer to see more candidates than fewer.
This may seem a sensible strategy. However it does create a mountain of admin and paperwork, which requires considerable HR resource. It also makes it far more likely that candidates will be contacted repeatedly by different recruiters of varying quality with different selling messages and styles. This approach may put some lawyers off, which does somewhat contradict the reasons for using this approach in the first place.
Rationale for not using a HH
One of the main reasons for instructing a HH has been to tap into their market knowledge and extensive network of contacts (personal and professional), built up over many years. Plus HHs can also be an integral part of the candidate due diligence and vetting process.
However, let’s look at an alternative approach.
Law Firms and lawyers regularly compete against and work opposite each other. They should know at least as much if not more about the lawyers in their markets and product areas than any recruiter. They will have witnessed first-hand a potential candidate’s legal expertise and modus operandi in a time-pressured environment.
They should have access to subscription-based services, like Dealogic and Mergermarket, which many recruiters do not have because of the cost. Their HR teams now employ staff who previously worked as legal recruiters (although not so much at the senior end), but, even so, they will know how to research the market and produce much of the long lists, for example, that HHs produce for their clients once instructed.
I have come across several examples of US Managing Partners being proactively involved in some of their senior lateral hires.
- A recent example in the US was the seven partner Private Equity team hire by Winston & Strawn from Jenner & Block, where Tom Fitzgerald, their Managing Partner, was instrumental in sealing the deal through his long-standing relationship with Mark Harris.
- The KWM collapse must have provided direct hiring opportunities to those Firms which absorbed most of their partners, which I hope they took advantage of.
- Global Chair at Akin Gump, Kim Koopersmith was integral in getting the 21 Bingham London partners team move agreed in 2014 thwarting Morgan Lewis.
I know that some MPs at US Firms here in London have no hesitation in picking up the phone to partners they are interested in hiring.
A Managing Partner, or other senior equity partner, apart from having the gravitas and market reputation to get a potential candidate into a conversation, will know much more about the Firm, its culture, its strategic plans and its compensation system, much of which will not be shared with a 3rd party anyway.
The cost savings could be very large. Hiring one senior equity partner directly could save the Firm between £150k to £250k.
So why don’t Law Firms do more direct partner recruiting?
- Professional pride – a senior partner doesn’t want to make an approach to a peer and competitor and be rebuffed; using a recruiter helps ascertain whether there is genuine interest.
- Arm’s length. If anything goes wrong, then any blame can be passed onto the recruiter. For example, if a lateral hire leaves within a certain time period, then the recruiter is often contractually obliged to help find a replacement at no extra cost.
- Only a small number of Firms and senior partners have the reputation and respect to instantly engage potential candidates directly. Not all of the Firms have charismatic managing or senior partners.
- Allowing all partners to make direct approaches can cause internal administrative and recruitment chaos. HR would not be able to keep a handle on what was going on within the partnership. If Firms were to use a mixture of direct approaches and 3rd party recruiters, then this would require an extraordinary level of coordination, communication and control, which I have rarely seen in my travels, but which Is not impossible to implement
- Time and patience – some lateral hires can take over a year to get signed off. Partners don’t have the time and maybe the patience to regularly court every partner they are interested in hiring over this length of time.
Rationale for using a HH
- For Firms which don’t have the experience, resources or time to manage direct candidate approaches internally
- For Firms that make multiple hires per annum. The more partners that are hired, then generally the more 3rd party help is needed. The reverse also applies.
- For Firms which struggle to attract talent
- For Firms new to the London market
- For Firms, new or established, looking to expand into new product areas
- For partners looking to move to another Firm
The HH can also help the client with:
- Due diligence and vetting of candidates
- Managing client expectations. This is easier said than done, especially when the client who pays your fee is always right. Senior management can often have an unrealistic and over-inflated opinion of their local attractiveness, based on their reputation at home.
Some Managing Partners are better equipped than some HHs to make a direct approach to a candidate of interest. I am sure they will continue to do so and should do.
A small minority of Firms can pretty much pick and choose who they want to hire plus they have the luxury of waiting for the right candidate to become available.
However, the vast majority of Firms continue to use 3rd party recruiters to either fulfil some or all of their partner lateral requirements.