US/UK firms and the battle for team talent
There are high stakes involved when a few partners club together to join another firm. These team moves – often involving partners and their associates – can reap huge rewards for the hiring firms, allowing them to quickly gain presence in a new or emerging practice area and win over clients who are more likely to follow a whole team. They can be a costly endeavour, however, if they fail to bring on-board the wish-list clients and/or they never properly integrate.
It can also spell trouble for the firm losing such talent. The loss of a high-performing team will leave an expertise gap that needs to be filled quickly. But worse is the potential reputational damage caused by team moves that might drive away critical talent further – a fact not helped by the huge publicity these moves attract. No wonder then, that team moves have become a particularly sensitive and fiercely contested area of recruitment across the legal sector.
Team moves have become more common over the past ten years. Some moves have come about due to partners breaking out from the big firms to launch their own boutique practices – a recent example being that of Three Crowns, an international arbitration firm set up by a group of leading practitioners, including three from Freshfields Bruckhaus Deringer – others due to a desire for career progression, in the same way an individual partner moves.
US recruiting zeal
There are a growing number of US firms in London that are shaping the team moves trend. They have a more acquisitive culture. Team hires are far more common in the US legal market and they see no reason to discontinue the same activity now they are practising in London. If anything, the drive to win over magic circle talent has only increased in the wake of some seriously successful lateral hires. When Clifford Chance lost head of funds Jason Glover to Simpson Thacher in 2010, and then head of private equity David Walker to Latham & Watkins in 2013, it was proof that US firms had the clout to attract the biggest-name talent and, importantly, key clients from the Magic Circle firms, which according to City folklore, doesn’t happen.
This in turn propelled interest in the potential quick win of a team hire. Goodwin Procter’s recent recruitment of four partners from Taylor Wessing further showcases a spreading trend: US firms are willing to shoulder the risk of a team hire for the possibility of lucrative rewards.
The high salaries on offer at US firms are often touted as the major reason for partners deciding to jump ship. But there are other attractions too – working in a smaller office of a firm that has global reach, for instance. US firms are quite expansionist and come with US offices and major US corporate clients. That’s an appealing growth platform for ambitious UK partners.
Even the perception that US firms have a brutal culture – that they’ll take their pound of flesh and work you to the bone – has been somewhat dispelled of late. While it may be in the interests of UK firms to allow such rumours to flourish, there are now sufficient numbers of partners that have successfully made the transition to report back a far more palatable truth: it might even be fun to work for a US firm!
The UK response
UK firms are no different in wanting to attract great talent, particularly in the top 30 mid-market UK firms, but struggle to achieve their goals in this area more than their US counterparts. It’s fair to say then that it’s the US firms that are currently on the offensive. And that is making UK firms defensive. Many have begun to actually enforce the restrictions that have always been imposed to stop partners from leaving and minimise losses. Law firms are invoking standard clauses like garden leave to act as a deterrent from moving on and exercising the creation of waiting room clauses to further impact a team’s ability to leave. Such hurdles make it logistically very hard for partners/teams to conduct the work necessary to take clients with them.
These manoeuvres are risky, though. It’s double standards if you’re locking down your partners while at the same time fighting hard to lure partners from other firms (‘what’s yours is mine and what’s mine’s my own’ springs to mind). Equally, overly-onerous restrictions may merely make a firm unattractive – it’s hard to get excited about joining a firm if you must also sign away all your freedom. This can have a sizeable impact on a firm’s reputation, damaging the brand and presenting them in a defensive position and a negative light.
The loss of an important team can be severe but at the same time disputes arising from imposing strict limitations are time consuming, expensive and ultimately uncertain. Enough teams have successfully moved to new firms to prove that with the right approach, most obstacles can be overcome.
Better then to look at why these team moves happen in the first place. It’s rarely just about money. It’s the chance to move to a firm that offers positive room for growth. UK and US firms each have unique selling points in terms of their clients, market reach and operating environment – win some or lose some, team moves are likely to go both ways, if firms play their cards right. What is certain is that team moves are not going to go away any time soon.
As of now, there are law firms seeking out team hires and getting smarter about doing them well. There are others focused on mounting their defences. And there are some paradoxically trying to do both. The only sustainable future is one in which all parties accept the reality of team moves and embrace a simple truth: the firm that attracts and retains the best talent will be the one that is seen to be the most attractive place to work and grow.
By Jonathan Fort, Director in Charge of the London Partner Team
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