published December 18, 2014

Basic Rules Regarding Recruitment and Compensation of Lateral Partners

Basic Rules Regarding Recruitment and Compensation of Lateral Partners

Do:

Don't:
  • Pursue laterals whose primary complaint about their current firm is that they make too little money and whose primary reason for leaving is to make more money. The chances are overwhelming that their next move is right around the corner, when they think they can make more somewhere else.
     
  • Shake existing partners' confidence in the fairness of the firm's compensation system. Some firms inadvertently breed tremendous levels of discontent among owners by overcompensating lateral partners in comparison to existing partners. That's particularly true in firms that recruit significant numbers of laterals each year. The flip side: You over-compensate a lateral and then have to make a downward adjustment. In this situation, firms run a substantial risk of demotivating someone they're counting on to fill an important hole in your strategic plan. What you do is undervalue the long-term contribution that you're trying to have the other partners make.
     
  • Pay lateral partners significantly more than their old firm did, although we concede that this tactic may hurt your firm's chances of landing some laterals. Still, you will inevitably see partners who are looking to make big compensation increases with a lateral move, but your best bet is to reward outstanding performance with a bonus instead of locking the firm into a higher level of compensation to start with. An interesting approach: To focus laterals on teamwork as soon as possible, one major law firm allocates points to them instead of giving them a substantial guarantee and attaching many performance criteria to their compensation. "If you're saying to a lateral partner, 'We're going to compensate you at a much higher level based on your business generation and the number of hours you work, you discourage them from being involved in important client work generated by the firm, business development work that can be done with other partners, and generally becoming a solid team member," one firm leader explains.
     
  • Overlook your existing partners; communicate openly about what the firm is doing and why. This is particularly problematic in firms with an open compensation system where every partner in the firm knows what every other partner makes. In addition, during the final stages of recruitment, many firms disclose what it will pay incoming lateral partners. Having that knowledge goes a long way toward alleviating partner concern and dissension.

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