Recently, the Legal Times blog reported that Squire Sanders was losing four healthcare partners to competitor Jones Day. This news isn’t in itself particularly shocking—according to The American Lawyer’s 2014 Lateral Report, more than 2,500 partners in the US moved to different firms last year and 96 percent of law firms say that more lateral hiring is part of their growth strategy. What is unusual is that, according to Legal Times, the partners announced their intent to move in April, but Square Sanders did not allow the partners to leave for another 60 days.
The Chicago Tribune reported on a similar situation in October 2010, when Wildman, Harrold, Allen & Dixon enforced its requirement that departing partners give 90 days notice.
For the firms adding new partners, the messaging around the lateral hire becomes increasingly complex.
That is not how these transitions have traditionally gone. Although most firms include notice periods in partnership agreements, they are not usually enforced. According to the American Lawyer, laterals generally move to new firms within two weeks after they give notice (and sometimes within a day). Among other reasons to waive the notice period, no one wants to subject the entire office to two or three months of uncomfortable interaction with partners who have one foot out the door. “Usually they feel it’s in the best interest of everybody for the partners to move to their new home…and cut the cord,” legal recruiter Dan Binstock, of Garrison & Sisson, told Above the Law.
So why might these law firms want to hold their partners to their notice periods? While we might never learn the truth about any particular partner move—tight lips and non-disparagement clauses make that unlikely—the motivations behind this potential trend are worth considering.
Interestingly, the firms mentioned above that held their partners to the notice period had one factor in common: an upcoming merger. For a firm engaged in merger discussions, perhaps there is some value in maintaining its head count, and its collective book of business, for a few extra weeks during negotiations? There is also the possibility that firms might choose to enforce notice periods simply to wring every last dollar of profit from them, regardless of the discomfort that ensues. And, of course, a more petty motivation might drive a law firm to prevent laterals from starting a happy life with a new firm. Break-ups are never easy, and even the most civil divorce brings about a certain degree of resentment.
The most likely explanation, however, is a more strategic one. In its 2013 publication “Lateral hiring: be prepared,” Clyde & Co recommends not only that law firms lengthen their notice periods to discourage lateral moves, but that firms include “gardening leave” clauses, which place limits on the activities that departing partners can engage in during the notice period (leaving them to tend their home gardens for the interim period). The garden leave period gives firms an extra couple of months to bolster their existing client relationships, in the hope that clients will stay true to them, and decide against following the departing partner.
Given the heated competition for business today, it seems like a strategy that could catch on.
If it does, what does it mean for the future of lateral hires? For one thing, extended notice periods combined with garden leave clauses, if enforced and effective, could discourage lateral movement.
For those lateral moves that go forward, the trend has significant implications for law firms’ strategic communications. For the firms adding new partners, the messaging around the lateral hire becomes increasingly complex. While the firm is itching to promote the new hire, it becomes difficult to take advantage of the momentum created by the announcement when the new partner is not actually joining the firm for 60 days or more. Holding off an announcement until the new partners arrive will be the ideal approach in many cases, but to do so effectively means controlling leaks from any number of sources in the meantime, which could prove an impossible task, especially in the case of high-profile hires. Furthermore, the firm adding partners cannot control the messaging of the spurned firm, which may or may not make some announcement of its own in connection with the departing partners. All of which means that on both sides, communications is likely to become an even more important part of the lateral hiring equation.
Earlier this year, HC launched LATERAL proMOTION, a program designed to help law firms promote laterals to key audiences and turn new hires in positive business results. Whatever the actual reasons driving firms to enforce notice agreements and gardening leave are, law firms should have a strategy in place to deal with the substantial communications issues that arise from this new trend in lateral movement.