Marketing to Laterals: 3 Key Considerations for Your Future Internal Clients
By Michael Ellenhorn
September 08, 2022 | 4 minutes
Client Services Internal Client Communications and Feedback Content Type Article
Lateral hiring is inextricably linked to law firms’ business development strategies.
In fact, in a 2021 survey by Decipher Investigative Intelligence for ALM Intelligence, more than half (56%) of law firms said that the “ability to generate business, port clients and build a practice” was the most important quality in a lateral partner. By contrast, just 10% of law firms prioritized the “ability to serve the firm’s clients effectively.”
Moreover, according to analysis by Decipher, lateral partner hires represent the single largest source of revenue growth potential for law firms, besting organic new client acquisition, firm mergers and rate increases.
It’s unfortunate, then, that legal marketers are often kept from this process by nature of the law firm org chart. We too often hear from law firm marketers that they are kept completely in the dark about the lateral pipeline — until they are expected to drop everything to onboard a lateral who, had they been consulted, they may have recommended against hiring.
Indeed, law firms that separate marketing and recruiting are missing out on opportunities to communicate more effectively with this particular (and sometimes peculiar) demographic; to build early connections between marketing and their new (sometimes high-maintenance) internal clients; and to benefit from marketing’s collective knowledge and market intelligence.
What must legal marketers know to add value to the lateral hiring process?
Budgeting for Lateral Business Development
Rainmaker candidates can carry hefty business development allowances that are likely to hit the law firm’s marketing budget. While there’s no industry standard for calculating individual business development budgets, some benchmarks can be helpful.
The average lateral partner candidate reported $28,251 in annual business development expenses, according to Decipher’s analysis of more than 1,000 lateral partner questionnaires.
On average, lateral partners requested 2.9% of their compensation for business development budgets. While this is the mean, laterals present a wide range, with requests spanning 1% of total compensation to an impressive 19%.
Given that the average compensation for these candidates was $1.02 million, the upper range would suggest lateral business development budgets of $193,800 — a significant line item in most law firm marketing budgets.
What Laterals Want Most
Legal marketers can help law firms stand out to lateral candidates, most of whom are shopping around. According to the Lateral Partner Satisfaction Survey, 70% of lateral candidates look at more than one firm; more than one-third, or 35%, look at four or more.
When asked why they left their current law firm, 35% cited “lack of support to build the practice” — another argument for involving marketing early on.
Related, “practice area support” was the No. 1 selection factor for the new firm, outranking firm culture, management and anticipated compensation. In this survey, practice area support encompassed complementary practitioners, associates and marketing, specifically.
From the website, to materials, to a lateral’s meeting schedule, how can your firm demonstrate that it will provide the resources the most lucrative laterals want and need? Why not approach a multimillion-dollar lateral with the same attention you would give a multimillion-dollar new client opportunity, including a bespoke proposal with biographies of key support team members?
Take caution to be honest, and not to overpromise: Less than half of lateral candidates described their new firms as “very candid.”
From the website, to materials, to a lateral’s meeting schedule, how can your firm demonstrate that it will provide the resources the most lucrative laterals want and need?
It is a sad reality that not all laterals will fulfill their business development promises.
In the 2021 Decipher survey, nearly half of law firms said the majority of their firm’s lateral partners underperform when it comes to portable business. Eleven percent said the majority of their laterals only brought 50% to 75% of their expected books.
Moreover, over the past five years, 67% of firms said they had a partner leave for failing to bring business from the previous firm, and 56% said they had a partner leave due to inability to develop new client relationships. These two issues — both squarely in the realm of business development — were the largest reported drivers for laterals failing, outpacing cultural fit, client conflicts and behavioral issues.
Some of these lateral partners will underperform in good faith; the clients may resist the transition, the former firm may put up a good fight to keep them. However, other lateral partners may inflate or misrepresent their revenue.
Because lateral compensation is tied to the portable business, there is an incentive for exaggeration, to be sure; almost every candidate screened by Decipher has inflated some section of the lateral partner questionnaire.
And sadly, the legal profession is not immune to the occasional charlatan.
Before devoting significant business development resources to laterals — like that request for a BD allowance of 19% of comp — firms should ensure their lateral hiring processes are prudent and purposeful.
This calls for a comprehensive evaluation of the firm’s procedures, from the lateral partner questionnaire to compensation structures and integration protocols. This also calls for clear lines of communication across the firm and the inclusion of marketing and business development professionals in the recruitment process. Smart firms will include marketing leaders in the talent strategy process, keep them informed on all steps of lateral recruitment and seek their input, and involve them meaningfully in the interview process.
This internal work is complemented by sophisticated due diligence, which can validate revenue and support smart business development budgeting and planning. It also can identify red flags, such as questionable legal skills, challenging personalities, unethical behavior and more.
For law firm marketers, due diligence will keep today’s lateral candidate from becoming tomorrow’s crisis communications project.