Law firm leaders grew up on one of the industry’s most sacred truths. So did more than 50% of partners. The fundamental truth coloring their world: Clients Hire Lawyers, Not Law Firms. This belief shaped almost everything we know about law firms, including:
- Origination credit
- Partner compensation
- Client ownership
- Lateral strategy
- And multimillion-dollar bidding wars for rainmakers
As lateral hiring moves into bubble territory – we wanted to test this belief – as so many truisms are falling by the wayside.
We asked more than 350 corporate counsel if they hire lawyers or law firms. Clients don’t believe it nearly as much as law firms do. Let’s dissect their thinking:
The Lawyer Loyalists: 23.9% are all in on the lawyers – they hire the lawyer – the firm is largely backup.
Lawyer Leaning: 47.8% hire lawyers – but the firm can strengthen it, weaken it, or kill it.
Firm Influenced: 28.4% are buying the firm – they don’t see the individual lawyer as enough. The firm plays a substantial role in the decision.
Only 1 in 4 clients hire lawyers, not law firms. The others give the firms a vote. This changes the lateral math: A lateral’s book may include value created by the firm they’re leaving.
Two identical books can have radically different values. A $20 million partner whose clients hire the lawyer is fundamentally different from a $20 million partner whose clients are attached to both lawyer and firm.
The biggest unknown in lateral valuation may be hiding in plain sight. Firms know the partner’s revenue, rates, matters, clients and profitability. They may not know the one thing determining how much of the book actually moves:
Who does the client think they’re hiring?
BTI research reveals 21% of clients don’t know who their relationship partner is. Think about this in a market built around portable relationships. You can’t automatically take a relationship with you if the client doesn’t believe the relationship belongs to you.
Clients harbor the missing intelligence in lateral due diligence. Big Law spends millions determining how big the book is. The question worth more millions is how much of the book actually belongs to the lawyer. The firm finding out before writing the check has a distinct advantage.
Best in the market ahead.
MBR
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