Risk Insurance for Laterals
Suppose your firm’s longtime insurance advisor came to you and said:
“You have a substantial investment that we know will have a one-in-four failure rate over three years and about one-in-two failure rate over five years.* Would you like to insure against the risk of that happening?”
We have all kinds of insurance for our legal businesses – beyond professional liability. We have business interruption insurance. We insure and back up our IT investment. Some firms hold life insurance on key revenue generators. But precious few insure against the loss of a recently hired lateral.
The risk is real. Look at this recent table of partners who were in the market to move or have moved in the period 2010-2017. If you’re a firm leader in Atlanta or Chicago, look over your shoulder – over half the partners are looking to move!
And that insurance policy? You can’t buy it from a broker. You have to build the insurance from within.
We advise firms regularly on lateral integration programs – to create the glue that will keep them keep their laterals. Here are some of the things we’ve learned (Note: Here I am only addressing keeping your acquired laterals, not the risk of other partners leaving):
- At the point of recruitment, make sure that the lateral’s clients will be joining a practice and industry that you have established. (Moving in with a new self-contained practice also means they can depart easily.)
- At recruitment, have the lateral meet partners who will collaborate on business development.
- Check to see if this is the lateral’s second or third lateral move.
- Consider client teams for the new clients, so that you can offer seamless legal services across your practices.
- Identify an “integration advocate,” a partner who will shadow the lateral for at least six months and make sure that internal and external contacts are always growing.
- Don’t stop integrating the lateral and the new clients after a month of orientation. Orientation is administrative care; integration is cultural care.
- Evaluate the lateral’s success and areas for improvement every quarter for a year – on measures that go beyond the financial.
These practices, and many more, are the pieces of a “policy” that you need to insure against the significant risk of lateral departure. When we look at your integration practices, we may find ways to reduce risk – or we may advise you that the best lateral decision may be not to proceed.
* “It’s Time to Overhaul the Lateral Hiring Process” The American Lawyer, January 29, 2019