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Do Laterals Create or Destroy Value? - Adam Smith, Esq.
Finally, back to integration:  It begins at the very start of your talks with the potential target firm or lateral hires.  And you will need to spend real money on it.  According to the study, over 90% of the acquisitions that added value spent 6% or more of the deal value on integration, while 93% of the value-destroying deals spent less.  (I know it may be hard to draw a comparison to “6% of what, exactly?” but notionally think of it as real money.  A $100-million acquisition, which probably happens across the national economy several times a week, would imply >$6-million spent on integration.)

Finally, do not
laterals  partners  strategy 
4 weeks ago by JordanFurlong
The pay-hours tradeoff in the London market | Legal Evolution (083)
Re Figure 2, notice how virtually all the orange data points (Leading Wall Street / Private Equity firms) are well above market.  Indeed, their appearance is the main reason why all but one of the green data points (Magic Circle firms) are so far below market.  Half a generation ago, the Magic Circle firms set the market. The entry of the U.S. firms into London changed that.
laterals  compensation  purpose  culture 
february 2019 by JordanFurlong
Asia's Lateral Market: More Partners from U.S.-based Firms Jump to Chinese Firms; Fewer Lawyers Moving to U.S. Firms | The American Lawyer
And Fangda is only one of several elite Chinese firms that are on a recruitment tear that targets senior lawyers from global firms. Throughout 2018, nine Chinese law firms hired 22 partners who most recently practiced at global firms, according to an analysis conducted by Law.com’s  The Asian Lawyer of 228 partner-level hires recorded across Asia during the 12 months ended Dec. 31, 2018.
The 22 partners more than tripled the seven moves from international firms to Chinese firms recorded in a 14-month period ended February 2016. And half of the 22 lawyers had already made partner before moving to Chinese firms, whereas in 2015-16, all seven lawyers made the jump to partner by moving from an international firm to a Chinese firm.

The Chinese firms making most of these hires—Fangda, Han Kun Law Offices, Jingtian & Gongcheng and Commerce & Finance (Tongshang)—already have sound reputations in the market and are financially capable of making more ambitious hires. Firms such as Fangda and Haiwen & Partners have traditionally hired lawyers with global firm experience and offer a shorter partnership track. But they are now willing to invest in more senior hires as they grow to compete with global players for more premium work.

Part of that expansion is to develop a viable practice in Hong Kong. Last year, 13 out of the 22 partners Chinese firms recruited from international firms were in Hong Kong. That compares to only two in 2015, both hired by Zhong Lun Law Firm, which at the time was one of the few mainland firms with a sizable Hong Kong office. In 2018, Han Kun, Jingtian and Tongshang, which didn’t have or had just started their Hong Kong offering three years earlier, were among the most active recruiters in Hong Kong as Chinese firms expanded in the city.

Many of these hires have been fueled by a push by Chinese firms for a more prominent role in Hong Kong listings work. Several of last year’s most high-profile moves, such as Shearman & Sterling Asia capital markets head Colin Law’s departure for Fangda, and Mayer Brown Hong Kong senior partner Elaine Lo’s jump to Jingtian & Gongcheng, fell into that category.
china  laterals  global 
february 2019 by JordanFurlong
Junior Lawyers Are Going Extinct And Nobody Knows What To Do About It | Above the Law
Professor John Flood of Griffith University in Queensland, Australia also sees this danger. In a new academic paper titled, “Legal Professionals of the Future: Their Ethos, Role and Skills,” he writes:

The effect of automation here could be dramatic in that if junior associates were to be gradually culled from firms, the entire reproduction of the legal profession could be jeopardised since law firms are structured around associates being promoted to partnership…

Exactly. Sooner rather than later, firms are going to slow their junior hiring and focus on a narrower range of candidates. Unfortunately, the path to building a great lawyer is a pyramid scheme and it’s harder to guarantee good results when there are less bodies in the system getting tested for their professional acumen.

Moreover, screwing up the most basic tasks is a critical part of becoming a well-seasoned attorney. What happens when we lose those tasks to throw at a first-year? What replaces that hands-on education?

Legal Cheek cites a Law Society study that estimates:

Over the longer term, the number of jobs in the legal services sector will be increasingly affected by automation of legal services functions. This could mean that by 2038 total employment in the sector could be 20% less than it would otherwise have been, with a loss of 78,000 jobs — equal to 67,000 full-time equivalent jobs — compared to if productivity growth continued at its current rate.

Gloom and doom over unemployment is usually misplaced. Jobs tend to just get shifted — more firm lawyers become freelance attorneys or join non-traditional legal services companies, for example. But if the training regime for young lawyers isn’t addressed, the population of competent attorneys to fill these new gigs will simply dry up.

Firms and law schools need to start taking this challenge seriously because life comes at you fast, and the profession could face its existential crisis sooner than folks realize.
firms  laterals  training  competence  schools 
january 2019 by JordanFurlong
With Risks Growing, Lateral Hiring Takes a Leap of Faith | The American Lawyer
As it has in years past, the lateral hiring market among the nation’s largest law firms remained robust in 2018. With private equity and corporate practices in the highest demand, some firms have been busy recruiting top legal talent with top paychecks to match.
But as law firms brace for the impending economic downturn, will the lateral strategies they implemented in 2018 lead them down a rabbit hole in the next year that will leave them wishing they’d chosen a different path?

Despite a dip from 2017, lateral activity was still high last year. ALM Intelligence’s Legal Compass, which tracks lateral moves, counted 2,754 partner moves among firms in the Am Law 200 from Oct. 1, 2017, to Sept. 30, 2018. This marked a drop of about 3.5 percent from the previous 12 months, during which there were 2,849 moves. Last year’s report saw a 2.25 percent decline.
Even with the small drop, legal recruiters and consultants contend that the lateral market was as strong as ever. Law firms stared down the barrel of what many economists predict is an inevitable recession in the next few years and kept on hiring.
recession  laterals  partners 
january 2019 by JordanFurlong
The Big Three Annual Reports: Citi/Hildebrandt - Adam Smith, Esq.
In other words:

The “rate growth” group outpaced everyone else by over two percentage points/year over the entire seven year period and still grew demand faster than everyone else; clients were evidently not buying from these firms based on price.
Meanwhile, the “demand growth” crowd beat the daylights out of everyone else in, what, demand (up over 4 percentage points/year for the entire period) while essentially meeting the market dead on in terms of rate growth. They were not “buying” market share with discounts.
In Citi’s apt summary of these findings (emphasis mine):

In our view, brand strength and product focus are among the most highly rewarded traits of a law firm in today’s market. In recent years, much of the demand growth has come from high value work—work that is typically undertaken by firms who enjoy a strong brand, and can command high rates. Firms who have established themselves as the go-to practice in a market—whether that be by industry, practice or region—have been able to increase demand for their services while also charging higher rates.
firms  partners  laterals 
january 2019 by JordanFurlong
Millennials in Big Law: Resistance Is Futile | The American Lawyer
In her seminal series of articles on millennials in Big Law, Lizzy McLellan has noted that “millennials make up the largest generational group among lawyers at large and midsize firms” and that “the numbers starkly illustrate the reality facing law firm leaders: Millennials will soon take over the legal profession in sheer numbers—and soon enough they’ll dominate leadership positions and partnerships, too.”



Like the Boomers, millennials have been vilified by the generations preceding them. Millennials are often described as “self-centered, needy and entitled with unrealistic work expectations,” Jada A. Graves wrote in U.S. News & World Report, in June 2012, and perception has changed little in the ensuing six years. However, “this unsavory list of descriptors is in sharp contrast with how this generation views themselves. … They don’t see themselves as entitled, they see themselves as very hardworking, dedicated and loyal,” she wrote. Like Graves, we believe millennials are no different than their predecessors, and what they really suffer from is a classic communication gap between generations. Moreover, given their unfettered access to information via the internet, millennials are arguably the most well-informed generation. They don’t think they’re lazy—just misunderstood—and they don’t seem to care what their elders think.

The vast majority of millennials are still associates whose main responsibilities are billing hours rather than business development, and the data suggests that the traditional system of leverage, with partners landing major clients and associates putting in the hours to service them, continues to produce favorable financial results. According to McLellan, 61 percent of attorneys at the top 10 law firms by profits per equity partner are millennials, and that percentage decreases as the profitability of firms decreases. However, with the oldest millennials now entering their mid-30s and nearly a decade in practice, firms are looking to elevate them into the partnership vacancies left by the significant number of Boomer retirements expected in the coming years. Given millennials’ priorities (which differ significantly from their predecessors) and the significant post-recession shifts in the way law is practiced, it seems obvious that Big Law will need to get creative in how to accommodate, retain and elevate its largest and arguably most leverageable group of attorneys.
millennials  demographics  generations  firms  laterals  partners 
january 2019 by JordanFurlong
Cleary Launches New Feedback App for Associates | Legaltech News
As law firms work to develop new systems to coach and mentor their junior talent, Cleary Gottlieb Steen & Hamilton has launched an app that puts its associates in the driver’s seat and allows them to push for feedback when they want it.
ClearyLoop is a tech-based platform that allows associates to request an informal feedback session with senior lawyers from an app located on their desk site. The app, which was launched earlier this month in its New York office, then blocks out time for these sessions on the lawyers’ respective calendars.

The idea for ClearyLoop, which will be launched on a wider scale across the firm in 2019, was actually first developed by a team of associates earlier this year as a part of a hackathon sponsored by the firm.
“[We wanted] to get groups of associates to think about solving a problem or something that we all wanted to see improvement on at the firm,” said litigation partner Carmine Boccuzzi Jr., who chairs the firm’s associate committee.

“And we focused on the issue [of] how to improve the delive
laterals  retention  mentoring  innovation 
january 2019 by JordanFurlong
Eversheds rolls out app to capture internal innovation ideas - Legal Futures
A global law firm has implemented a web-based crowdsourcing app to harness innovative ideas from its thousands of employees worldwide.

IdeaDrop, an off-the-shelf product used by other large companies, was adapted by Eversheds Sutherland, which has 66 offices in 32 countries. It has been piloted and since last week is being rolled out among the legal practice’s 5,000 staff. It has already accumulated over 100 suggestions.

Similar to social media platforms, the app allows users to ‘drop’ an idea, which other users can comment on, share, like and rate.

Users can also ‘drop’ a challenge, using the app as a crowdsourcing platform in an effort to find solutions to particular problems. The firm monitors the online results and the intention is that the best ideas will be captured and put into effect.

Lee Ranson, Eversheds’ co-chief executive and former managing partner, said: “As our scale and reach grows we want to continue to drive innovation across the business globally, harnessing the creativity of our people to help deliver our strategy.

“The beauty of IdeaDrop is its simplicity and inclusivity – it allows everyone to be a part of making change happen, regardless of their role or geographical location.”

He told Legal Futures that the platform had been piloted among around 500 people in the firm’s partner group from July 2018, following a conference in New York.
innovation  crowdfunding  firms  laterals  r&d 
november 2018 by JordanFurlong
The Battle For Talent Is Disrupting The Business Of Law | The American Lawyer
When partners move (and big-money partners, in particular), they may give any number of reasons as to why, but when push comes to shove, the vast majority move for one or more of three reasons: (i) more money, (ii) and/or to stop carrying unproductive partners (this is a “social” aspect, is generally highly underrated by courting firms in the way of motivation, and goes hand in hand with making more money) and/or (iii) anxiety surrounding their firm’s strategy and general durability. Let’s look at each:

Aggressive payouts: When you are already making $5M and really like your firm, it is one thing to refute the allure of another $1M, but another $5-6M? That’s a different animal altogether. This may sound, well, odd, to the average person – “another $1M isn’t enough to jar someone loose?” – but in many-to-most instances at the higher levels, no, it is not. Generally speaking, the highest producers are not actually driven by money, which has helped them get to their current station in the first place. They work a lot because they like it; they are (almost exclusively) fiscally responsible; they focus on skill/knowledge/personal development, client service and solving practical problems; and their current financial success is a happy byproduct, not the driver, of their decisions. But, we all have our price, do we not? The current climate is proving this and it is happening more and more.

“Equality” issues: With the roots of all law firms hailing from a partnership culture – i.e., one of equality, contribution and having the same amount of “skin” in the game – it is generally very difficult for firms to openly discuss, much less act upon, what is effectively (and sometimes blatantly) unequal contributions to the firm’s bottom line. Further, with (a) the ease of information flow, (b) the (almost uniform) presence of transparent compensation systems, and (c) the relatively recent spike in huge lateral paydays, it is becoming harder for major rainmakers to feel comfortable being paid “in-and-around,” or in some cases equal to, their lesser-contributing partners.

Durability: The movement of big names, firms’ inability to backfill those names with commensurate finances and reputational capital, and the resulting optics have caused significant anxiety amongst partners in many firms, including those that once were considered bulletproof.
laterals  firms  talent  partners 
august 2018 by JordanFurlong
Four charts to better understand the Class of 2017 (060) | Legal Evolution
One of the NALP findings latched onto by the legal press was the increase in hiring among 500+ lawyer firms — up 368 jobs, or 8.6% from the prior year.  However, the data in Chart 4 suggest that BigLaw is unlikely to power a recovery for law schools.  Although the number of lawyers working in 500+ lawyer firms has increased significantly over the last 11 years (+36%), associates appear to be waning in importance. We see this through the shrinking proportion new-hires within large law firms.  Why is this happening?

A partial answer is that firms are finding it harder to sustain organic growth. See, e.g., Georgetown Law, “2018 Report on the State of the Legal Market” at 14 (“Since 2008, the overall growth trend for demand for law firm services has (with certain spikes and dips) been essentially flat to negative in every year.”); MacEwen, “It’s [not] The Economy. Stupid,” Adam Smith Esq., Aug. 5, 2018 (showing large drop-off in annual revenue growth after 2008). Because many lawyers and firm managers associate size with safety, growth through mergers and lateral partner hiring has become a dominant strategy.  The idea is to focus on groups of lawyers who can pay their own way in the current fiscal year.

One of the primary consequences of this strategy is that firms are relying less on associates and more on staff attorneys, counsel, and non-equity partners. See Henderson & Parker, “The Diamond Law Firm: A New Model or the Pyramid Unraveling?,” Lawyer Metrics Industry Report No. 1 (2013). First-year associates require higher salaries; more training and supervision; engender greater client pushback; and often leave before the firm recovers recruitment costs. Thus, large firms are finding ways to get by with fewer of them.
firms  laterals  partners  admisison  schools 
august 2018 by JordanFurlong
Associate Starting Salaries: The Week the Firewall Failed? | The American Lawyer
There’d be a certain justice in these increases if the only firms damaged were those who made the precipitous moves. Alas, this is unlikely to be the case. Rather, firms of comparable stature now come under increased pressure to self-harm also. Where will it stop? Reed Smith, ranked 81st by PPP among the Am Law 200, have laid down a new Greenberg-like marker by suggesting they are disinclined to move citing ‘interests of clients’. It’s 40 firms lower in PPP rank than where the firewall could have been set, but hopefully one will emerge.

Middle Law has a set of challenges distinct from those of the high-profit elite. Facing these challenges would be helped by uncoupling the cost structure of the two segments. The opportunity was there to do it. It may well have been blown. There have probably been comparable moves in other industries, but they don’t flood to mind.
laterals  compensation  firms 
june 2018 by JordanFurlong
Alternative Legal Service Providers: Changing buyer perception | Answers On
Who are the ALSPs?
This is still a developing, fragmented market. We’ve identified five main types of providers and an estimated market size in the table below. In addition to the legal Current use cases Areas of potential growth Law firm Corporation process outsourcing companies and e-discovery service and document review service providers that form the largest segment of the market, we see insourcing and staffing companies and the Big Four accounting and audit firms as large parts of the market. Smaller shares of the total $8.4 billion market are accounted for by law firm-owned affiliates and an emerging set of Managed Legal Service providers.
productivity  laterals  competition 
june 2018 by JordanFurlong
Forum Magazine: Dead Weight and “Disappeared Revenue” – The Legal Industry’s Overcapacity Problem
“You have all these data points which reinforce each other – there are fewer hours-per-lawyer billed than years ago, the growth in lawyer head count is outpacing growth in demand – and you start to see this overcapacity problem for what it is,” says Bruce MacEwen, publisher of Adam Smith, Esq. and a highly regarded legal industry consultant. “And with 110,000 lawyers populating the Am Law 200 firms, that’s about $8.2 billion in essentially disappeared revenue each year.”

How We Got Here
If you look at the chart that shows the balance between lawyer growth, demand growth and productivity over the past several years, you can see the path that the legal industry has been on. Since 2012, as the chart shows, demand growth, though often fluctuating moderately and dipping often into negative territory, stayed pretty reliably in the range between -1% and +1% growth per quarter.

Lawyer growth, on the other hand, remained steady, though moving down from 2% quarterly growth to the 1% range in recent quarters. Still, that means even at the slower pace, the hiring continues even if the client business isn’t there to meet it – which is why productivity, the end result of the interplay of these two factors, has been on a general downward trend over the last several years and in fact, hit historic lows in Q4 2017.
productivity  laterals  competition 
june 2018 by JordanFurlong
Associate Salary Increases: Don’t Follow Milbank’s Lead | Law.com
There is another reason most law firms should resist following Milbank’s lead. The tradition of matching salaries is a relic from a different, simpler, time in the legal industry. Announcing across the board salary increases and automatically matching Cravath’s or Milbank’s pay scales makes no sense in today’s legal market. The current system only benefits the Cravath’s and Milbanks of the world. Most law firms should be actively trying to undermine this system.

To that end, here is a summary of the advice this analyst is giving law firm leaders:

Follow if You Must

Some law firms will have to follow Milbank’s lead. If your firm is one of those few, do so quickly.

Milbank’s announcement was, for all intents and purposes, a branding initiative. The firm is signaling to the market that they are willing to pay top dollar for the best talent. In doing so, they have, essentially, labeled themselves as the home of the best talent in the legal market. The firms that compete with Milbank for talent should not cede that ground to them. They should match, or even surpass, Milbank’s new pay scale. It would be savvy for Cravath, for example, to one up Milbank and announce a $20,000 increase. Such a move would allow Cravath to retain their position as the ultimate arbiter of associate pay. It would also help further differentiate themselves from the firms which are not willing to follow.

Most Firms Should Not Follow
laterals  compensation  admission 
june 2018 by JordanFurlong
Clients have 2 big sources of insomnia. Law firms only cause 1. — BTI Consulting Group
Almost 30% of corporate counsel are unnerved because of the following experiences with their primary law firms:

Partner turnover—lateral movement is making clients less confident in their firm’s ability to deliver without gaps and turnover. Clients are also concerned about the loss of institutional memory and the additional labor and elapsed time required to bring a new partner up to speed.
 
Partner retirements—clients know when key partners at their primary law firms are nearing retirement—but clients believe their firms just passively react to the departures and let things take their course. These clients believe there is no formal plan or thought as to how their matters will be managed going forward. This has the same negative impact as partner turnover.
 
Loss of associates—just as clients are getting to know associates working on their cases, these associates seem to disappear. Clients are fully aware of the high associate turnover rate—but believe their firms will be figuring out how to retain their best associates—which, of course, is any associate your client really likes.
 
No support—clients are discovering their law firms just want to do the work. These firms have no apparent interest in helping their client think through new issues, initiate and carry on conversations to help clients sort out their thoughts, and engage at a level beyond the scope of work. Clients believe this type of dialogue is not only helpful but also crucial to understanding client goals and sensitivities.
 
No team—many attorneys are doing the work, and clients don’t see 1 single attorney as being in charge or accountable. Clients perceive the finger pointing among partners when things don’t go according to plan as evasiveness.
 
Inconsistency—clients experience superstars, mediocrity, and embarrassments all from the same firm. These corporate counsel openly worry the performance will sink to the lowest level delivered.
clients  quality  partners  laterals  strategy  firms 
may 2018 by JordanFurlong
Parsing the Data as Susskind Warns of ‘The End of Leverage’ | The American Lawyer
Nicholas Bruch, a senior analyst at ALM Intelligence, said he does not predict an “end” of leverage, but rather that the high leverage model would be reduced to a smaller amount of firms and practice areas. As clients demand more efficient services and technology makes more types of legal work routine, Bruch said determining the composition of a law firm will become more complicated.

“There is a tendency to see these things as either dead or alive,” Bruch said. “The truth is usually somewhere in between. But we’re definitely seeing the breakdown of this model.”

One law firm that has long eschewed a high leverage model is Honigman. The firm’s 2005 leverage was 1.67, and that number has since fallen to 0.97 last year, making it among the lowest-levered firms in the Am Law Second Hundred.

Foltyn, Honigman’s leader, said he has seen changes in his firm’s staffing model across the spectrum. Work that used to be done by second-year associates, for example, is often now done by staff attorneys who aren’t on the typical partner track. That change goes “all the way up the chain,” said Foltyn, with the goal today being to have “the right person doing each task.”

“Lots of what the 15- or 20-year person does can be done by an eight-year person, and a lot of what the eight-year person does can be one by a four- or five-year person,” Foltyn said.

Foltyn noted that Honigman can deliver a “better, less-expensive product” at a similar margin for the firm when matters are “proportionately leveraged.”

“In that sense, I think leverage is increasing but in a nontraditional way,” Foltyn said. “It’s not the typical triangle model of the law firm where a bunch of associates are working for a few partners. It’s a more complicated leverage model.”

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leverage  partners  laterals 
october 2017 by JordanFurlong
Prism Legal Document Assembly in the Real World (Live #ArkKM) - Prism Legal
Faster, better, cheaper, smarter, happier > the key drivers.

When billing by the hour, faster drafting makes a practice more competitive. One firm cites big drop in write-offs – and cost reduction – by using D/A.

Faster is great, but must also deliver high value. One firm says using D/A right way takes time from 40 hours to 20 minutes.

D/A ensures higher consistency than humans can.

Re-allocate lawyer time from mechanical drafting to higher value, critical thinking.

Practice analytics, for example, capture party data systematically

Embed training in the document to assist new lawyers.

Improve lawyer satisfaction by reducing drudge work.

Collaborate more effectively with clients.

Benefit form vendor-provided, ready-to-go templates.

Challenges

Leadership buy-in: Management may be skeptical that it’s possible to automate complex documents. One way to overcome: do a proof a concept.

Form development: Can be hard and time consuming. Some practices have forms that are not so good, they may blame D/A software or KM for fact that it’s hard to automate form – when the form itself is bad. Another example: one practice realized, from doing PoC, that it had to change it forms. Note that some providers, not just D/A ones, provide forms.

Billable hour reductions: Management may not like reduction in hours = “Associate Killing Technology”.

Commoditization fears

Cost concenrs

Labor / staffing

Training opportunities: More senior lawyers say “I learned by spending hours or weeks going through a form – others should do so”. Panelists believe that’s not necessary. (RF: I agree with panel)

Adoption

Is It the Right Solution?

Volume of use must be high enough to justify investment in building an automated form.

If turn aound time is key, then yes.

If consistency is critical, then yes.

If firm or practice faces price pressure, yes.

If keeping associates is a goal, yes.

If above answers are no, you may have to wait.
docs  it  firms  process  laterals 
october 2017 by JordanFurlong

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