Don't hire Outsider Partners
Three months after the Trump administration ended and President Biden took office, we have seen a swelling wave of announcements from law firms that have hired former Trump officials as partners. On 27 April for example, Jones-Day, Morrison & Foerster and Womble Bond Dickinson proudly released statements that they had landed heavy weight former officials. While perhaps the Trump administration has been somewhat controversial, the practice of appointing former government officials as partners is nothing new for US law firms.
Actually in the United States the principle of ‘Revolving Doors’ where there is a permanent fluid exchange between the private sector and the government, has always worked quite well. The government hires industry professionals for their private sector experience, their influence within corporations that the government is attempting to regulate or do business with and in order to gain political support from private companies. Industry, in turn, hires people out of government positions to gain personal access to government officials, seek favorable legislation/regulation and government contracts in exchange for high-paying employment offers, and gets information on what is going on in the government. Scientific papers have demonstrated the consequences of the revolving doors practice and the side effects of those movements can be beneficial both for the companies and for the regulatory bodies (government).
In the United States, the revolving doors practice for the legal industry not only exists between law firms and the government, but also between law firms and in-house legal there is a fluid exchange as former GC’s are hired as partners and partners move to a GC position in-house.
Not successful outside the US
One might be inclined to assume that what works well in the US, will also work well in the rest of the world. Unfortunately, this is not the case. Sure, also for law firms outside the US it could be tempting to hire a former government official, someone from a regulator or a former General Counsel. The motives are no different from those in the US: expert insider knowledge and a valuable network. Unlike in the US, this type of hiring mostly ends in disappointment on both ends. Let’s have a closer look at why this might be the case.
Having analyzed a few dozen of ‘outsider’ partner hires in Europe, it shows that in more than 80% of all cases, the inability to build a significant practice becomes the main disappointing factor. For status reasons, the former government officials or General Counsel are predominantly appointed in partner positions. Off-counsel positions are rare, as it is often unpalatable for a former high-ranking official or a GC to be given a second-tier position in a firm where partners are clearly the top-dogs.
The issue with a full partner position is that it not only comes with high rewards, but also with high responsibility. Law firms expect each and every partner to create a certain amount of revenue and contribute their fair share to the profit pool of the firm. For outsider partners this can be very hard.
Switching from a salaried high responsibility position, where everyone would treat you with high regards because of your position, to a role where you have to charge by the hour and may be challenged by your client on everything you say, can be incredibly hard. It is the number-one reason that outside the US most outsider partner appointments ultimately fail.
This is less of an issue in the US. The reason is in the revolving doors. Whereas in the US there is a more or less constant exchange between outside and inside the law firm, most outsiders have had previous law firm experience when at the point where they are re-hired in a partner position. In Europe for example where there is no revolving door tradition, it is more like closing a door behind you and entering a new space without the intention to go back.
It might do more harm than good
If you are a law firm outside the US it would be advisable to use great caution as it comes to hiring outsider partners. You now already know that the odds will be stacked against you as it comes to success. What we see happening is that, instead of bringing the great connections with the regulator or the client that the law firm is looking for, when things do not work out the relationships get worse than before as a result of the former official/GC being bitter and disappointed.
Outside the US, appointing outsiders as a partner in most cases also does not lead to better business. Former GC have little or no ability to help bring in new clients, as this is not the nature of the relationships they have with the GC in their network. Law firms have a tendency to be over optimistic in this respect.
Outside the US, law firms tend to have a strong culture based on growing their own talent. It can already be hard for a partner who comes in as a lateral hire from another law firm to fit in. It is even harder for those who are not raised within a law firm to adjust and feel at home and thrive.
What about academics?
One only needs to take a look at the partner profiles of the US elite law firms, to realize that there is no similar revolving door tradition as it comes to academic positions. Where in the German speaking part of the world almost every partner is a Doctor and some even also Professor, this is not at all the case in the Anglo Saxon world. Here academics are frowned upon as there is much more focus on delivering client results than on displaying theoretical knowledge. If you are doing a pitch with a US firm, you might even want to leave your academic titles out.
A special species in this article on outsider partners is the ‘retired partner’. In the past, partners that retired withdrew from the lawyer world and attended their rose garden, became an investor or a consultant. Today, many partners feel far too young when they have to retire and want to continue being a partner. The number of retired partners that are re-hired as a partner at another firm is strongly on the rise. The new firm hopes that with the retired partner comes the book of business and the reputation. In reality it does not. Hiring partners that are retired at their original firm is not a great idea in general. It demonstrates an inability to home-grow talent. Strong law firms should avoid raising the average age of the partners.
A system of revolving doors as it has been in practice for decades in the US is great. It tends to raise the quality on both ends. Appointing outsider partners without a structured influx and outflux is generally not such a great idea. Once the revolving door is just a normal door, 80% of the appointments end in disappointment.