It's no secret that lateral movement in law firms has increased over the last five years, with more partners willing to move between competing firms. In fact, the National Association for Law Placement (NALP) reported lateral hiring of associates was up by about 22% in 2018. This momentum is expected to continue—a 2019 survey by Citi, cited by the ABA Journal, noted 61% of firm leaders expect to grow their equity partnerships in the next two years through lateral hires and promotions.

The increase in lateral traffic can be attributed to several environmental and economic factors, and also mirrors the evolution of firms and shifts in the overall legal landscape.

Factors to Consider

Long gone are the days of a lawyer spending his entire career with one organization. About 15 to 20 years ago, it wasn't uncommon for attorneys to retire at the same firm at which they began their career out of a sense of loyalty or aversion to risk.

However, with the industry experiencing unprecedented levels of economic growth and law firms reporting steady revenue increases, the reluctance to move jobs has significantly waned, and the millennial workforce is much more inclined to take a risk for potential benefit. This point is exemplified by a 2018 study by staffing agency Robert Half, which found that 64% of surveyed employees reported viewing job hopping as beneficial.

It's also obvious that younger attorneys appear much less loyal to their place of employment than previous generations. However, this shift in perspective is tied to more than just generational values. It speaks directly to the tremendous consolidation the legal industry is experiencing both in Philadelphia and throughout the country.

In 2019 alone, there were 115 law firm mergers and acquisitions throughout the United States according to Altman Weil MergerLine. As more firms announce mergers, we will see an ongoing transition away from the traditional midsize firm model.

As the merger and acquisition trend continues in 2020, it will remain a factor in lateral moves. Rate pressure, growing client conflicts, decreased buy-in from leadership for specific practice areas, changes in strategic direction or even a shift in culture can all be consequences of firm mergers. The reality is, even if an associate was motivated to stay at his current firm for the long run, the firm as they know it could look dramatically different in just a few short years.

Opportunities

Regardless of the reason behind individual lateral movement—whether a change in generational patterns or simply economic influences—the cultural shift also creates opportunities for law firms.

Most notably, firms have a greater opportunity to expand and grow revenue with top-notch legal talent. In an increasingly competitive legal market, firms can work to strategically attract the associates and partners they want through culture, individual practice area investment or other differentiators. Bringing on individual laterals or groups also gives firms the ability to further tap into an expanded network of clients and potential referral sources.

For example, the culture at Kleinbard is a huge draw for younger attorneys, especially millennials, who tend to gravitate toward environments that are more entrepreneurial where they have greater autonomy and direct client involvement. We typically staff matters in a one-to-one/partner-to-associate ratio, which means young lawyers are getting more practical, hands-on experience than they would at a much larger firm. We make it a point to foster this firm culture and take steps to attract laterals with an entrepreneurial spirit to complement our current attorney roster.

In addition, bringing on lateral hires can help breathe new life into the firm (even if you think it doesn't need it). At most firms, the most senior rainmakers are the ones setting the vision for the firm. But having fresh perspectives and wider points of view is beneficial to existing clients and can also help firm leadership think more creatively about running the business.

At Kleinbard, we understand that communicating what the future of the firm looks like is important to lateral hires as well as young attorneys. When we went through our strategic planning process a few years ago, we made sure associates were involved in a meaningful way, and sought their input on governance structure and succession planning. We make a conscious effort to give all attorneys a voice and to listen to it.

The lateral movement trend will continue. In order to be successful in the ever-changing legal market, it's imperative that firms develop strategies to attract top-tier legal talent as it relates to short- and long-term firm goals, while also placing focus on fostering and retaining that talent.

Michael Frattone is a managing partner and partner in the business and finance department at Kleinbard in Philadelphia. He practices in the areas of mergers and acquisitions (representing sellers and buyers), corporate and real estate financings, corporate restructurings, venture capital investments, joint ventures and executive compensation. He can be reached at [email protected].