November 16, 2023 • 30 mins
In this episode Steve provides some intel on the hottest lateral partner market (hint they call this city the Third Coast, and its the place Murray first drew breath.) Then we discuss contingency and retained search and relative merits of each approach based on your firm's profile and needs. Finally we hear a hunk from Steve's standup show. We packed a lot into 30 minutes. If you have any thoughts or ideas for future programs please feel free to contact Steve or Murray. Thank you as always for listening.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Unknown (00:07):
Murray, welcome to Steve's rules periodic podcast
featuring Steve Nelson,executive principal at McCormick
group in the law and governmentaffairs practice. My name is
Murray Coffey, and I am theprincipal of M Coffey, a law
firm marketing and businessdevelopment Boutique. For more
information, please visit mywebsite at M coffey.net Steve
has been an executive recruiterfor nearly three decades, and
(00:28):
without naming names, he isready to spill the tea on best
practices, and maybe a few notso best practices by firms and
candidates that he has seenduring his career, recruiting
some of the most driven andsuccessful professional into
highly profitable and growingfirms. Steve is a former lawyer
and journalist and is a fellowof the college of law practice
(00:49):
management and a proud son ofWilkes Barre, Pennsylvania. Full
transparency here, Steve hashelped my career immensely
through the years and has becomesomething of a career shaman to
me and I know many others. Hey,Steve, welcome back. This is the
Thanksgiving edition, and I'mthankful for you, Steve.
Steve (01:12):
I'm thankful for you
Unknown (01:15):
and but we're back.
We're in the dreaded fourthquarter for our law firm
friends, which means that thatthey will ignore us until until
January. Absolutely the case.
That's absolutely the case, but,but that doesn't mean that they
shouldn't be thinking aboutrecruiting, and it doesn't mean
(01:36):
that they shouldn't be followingtrends. So I know that that you
and the your your brainiacs atMcCormick Place are always
keeping track of trends andseeing what's going on and
seeing what's hot, and I knowyou've got some thoughts on all
of that, so let me turn it overto you, because I'm I don't know
(01:57):
what you're going to say here,so I'm right. I'm excited to
hear what you
Steve (02:00):
have to say. Alright, so not only do we keep our records,
but we're also follow the otherthe other people who are keeping
statistics, the decipher group,
Unknown (02:13):
which is out there last time I believe,
Steve (02:14):
yeah, and they do a lot of tracking of information.
They've come out with statisticsfor the first nine months of the
year, basically reported thatoverall recruiting is down
partner level, down less so thanassociate not surprising, but
(02:36):
down 4% from 2022 that's stillup from even pre COVID years. So
still a strong market.
Interestingly, a couple ofinteresting things that they
also reported. One was that thecouncil level hiring is
significantly down. And thatmakes sense, because I think
after COVID, you did have aspade of retirements and people
(02:59):
you know, people you know,easing back. And so there was
more succession planning goingon, succession hiring going on.
And I think that that, coupledwith, you know, sort of more
difficult economic times, hasled firms to be more
conservative about investmentdollars. And councils are
usually investment others. So Ithink that's number one. Number
(03:22):
two was interesting is that ofall of the markets, geographic
wise, Chicago was the onlymarket that indicated an
increase, which I know is dear,near and dear to your heart,
being a native Chicago, but, butthat was interesting. I've got
some ideas as to why that is.
Unknown (03:43):
Why is that? I mean, Chicago kind of goes up and down
in its in its the market. Andyou know, if you talk to anybody
from Chicago about what's goingon in Chicago right now, they're
gonna say everything's down. Butactually that's not the case,
right? So what's going on? Yeah,I
Steve (04:01):
think it's because I think that we're seeing
increased billing rate increasesacross the board, across the
country, and I believe that, Ithink corporate law departments
are more willing to accept thatfrom New York firms or New York
offices. And I think they lookat if they're going to go to a
Chicago firm or Chicago office,they're expecting lower rates.
(04:26):
And I think that the big firmsare pushing their rates, just
like the New York firms are. Andlet's face it, you're talking
about big, big Chicago firmsthat are out there that are as
you know that they're asprestigious as the New York
firms. But we're also seeing,interestingly enough, that even
some of the Midwestern firms arepushing their rates up. So with
this constant pushing rates up,that is the number one thing
(04:50):
that we're seeing that is thatis forcing laterals to think
about changing. Is they're justgetting pushed on rates. Their
their clients are pushing back,and they're feeling. Like, I've
got to go someplace with a lowerrate structure, and we're seeing
that across the board, and Ithink in Chicago, that hits home
even
Unknown (05:06):
harder. Yeah, yeah, those, those, those thrifty
Midwesterners, right? The so, sowe're seeing, we're actually
seeing, we're seeing partnersgetting priced out of their own
firms,
Steve (05:20):
right? Absolutely. Is there any practice that
Unknown (05:23):
you're seeing that where that's more prevalent than
others?
Steve (05:27):
I really see that's pretty much across the board,
maybe not on the corporate M andA side, you know that that
practice probably can, canhandle the rates, but we're
seeing it particularly in IPwe're seeing it in litigation,
you know, we're seeing it laborand employment. I mean, we're
seeing it pretty much all of theof the sort of non, you know,
(05:50):
you know, public company tech,kinds of practice areas,
Unknown (05:54):
interesting, interesting. Well, we'll, we'll
need to keep, keep an eye onthat and see where, you know
where things are going. I knowyou all are tracking that, and
that's a service to the to theto the sector, for sure. But
let's hop into today's today'stopic, which is really
understanding the various kindsof relationships that can be
(06:19):
developed between recruitingfirm and and their clients, and,
you know, really bringing itdown to contingency or and or
retained search. And we'll talka little bit about the benefits
of each and and where theremight be a hybrid approach along
(06:41):
the way. So, you know, Steve, Ithink you know, maybe we can
define terms here and talk alittle bit about what is
contingency. I think a lot ofpeople in our world know it, but
let's hear it from somebody whoknows it, right?
Steve (06:55):
So contingency obviously means that the recruiting firm
only gets paid when they make aplace. They don't have any
upfront payment at all. It'sjust based on success. And if
you success, you get a big fee,et cetera. And that is in the
(07:18):
law, in the legal world in thepartner and associate for the
talent, that has been thetraditional way that firms have
used recruiters. There's not,haven't been as much Retained
work. And that's there's a goodreason for that, which is, if
I'm a law firm and I want, let'ssay an intellectual property
partner, patent patentlitigator, let's say the chances
(07:42):
of any one search firm findingthat person in a six month
period is pretty low these therearen't that many people in the
market, no matter what we hearabout in terms of how much
movement there is, there aren'tthat many really strong partners
With business who are ready tomove at any one particular time,
(08:03):
and therefore the chances ofsuccess are really low. And law
firms don't want to start payingout money. Totally
understandable, paying out moneyand then having to report back
to management says, well, wepaid this, you know, this, 10
firms, $50,000 and we didn't getanybody right. So that's, it's
pretty logical that that's theway it works. And then if you
(08:26):
take it from there, the way thatthat law firms traditionally use
recruiters is they will, theywill call up, you know, their
recruiters of choice, with thefour or five different
recruiters, let them know aboutwhat they're looking for, and
then they let them go out. Theybasically let the recruiters go
(08:48):
out, find the people and comeback to the firm with with their
selected candidates. So it is,it is, you know, pretty much,
almost totally outsourcing thejob to the recruiters to find
the talent. And that's, youknow, and then obviously, some,
you know, definitely, you know,recruiters get their percentage,
(09:08):
you know, percentage of peoplethey can find, they can present,
and you know, and you know, afair number of instances,
they're successful, not not amajority of the time, but you
know certainly that there issome success there, and that's
the way the recruiting firmsgenerally do that. Now, couple I
mean, there's an advantage,obviously, because you've got,
(09:29):
you know, you got a lot ofpeople working for you, you can
get the good talent. It'sparticularly good, I think, for
groups, because groups willoften, when they are they've
decided, the pre formed grouphas decided to move. They'll
call their recruiter of choice.
They realize the benefits that arecruiter will give them, and so
therefore that that that thosegroups can sometimes be placed
(09:51):
by the recruiter of choice, whohappens to have the relationship
with them one way or another.
Um, so. There's a benefit there.
The downside is that the firmnever has, has assurance that
everybody is actually, thatanybody's actually doing any
real work. Are they just callingtheir their buddies? Are they
(10:12):
calling people they know, thepeople they've placed, you know,
so forth, or, you know, is therea really market coverage going
on? And I and I don't think so,because I think that the
recruiters are, they're tryingto figure out the best way to
make the placement, and if theycan make as few calls as
possible, that's what they'lldo. So that's, that's number
(10:33):
one. Number two, I think, isdepends a little bit on your on
a law firm's placement, youknow, in the tier of firms, if
you're, you know, a top firm,and you've got a name
reputation, there's a goodchance that the candidates that
a recruiter will generate have agood chance of being sent to
(10:58):
your firm, because they'll bethe firm that they think of, and
that no has the reputation, andthat when they talk to their
lawyers, the lawyers know thefirm, so they say, oh, yeah,
I'll go there. It's not asvaluable for firms that aren't
you know in the top tier, interms of the firms, if you're
not a known quantity, you maynever get called. You may the,
(11:21):
you know, the best candidateswill never get to you, because
they'll, they'll call everybodyelse first. It's, you know,
you're in a tiered situation.
And if you're, if you're in a,in a contingency mode, there's
no incentive for the firm tothink of your mid sized firm. So
I think that's a downside thatyou've got to be
Unknown (11:42):
thinking about. We're we're entering, we're entering
the the beginning of the year,you know, the the pre, the pre
sale time, if you will, in thebeginning of the year. And I
know what happens at thebeginning of the year, after all
the, you know, after all theledgers are taken care of.
There's oftentimes a fresh lookat the strategic plan, or maybe
(12:05):
there's some some new strategicplanning that that's that's
going on, or, you know,measuring success against the
strategic plan over the prioryear. And a lot of times with
firms that are looking forgrowth, they will, they'll say,
Okay, we need, we, you know,there is a, there is a practice
that we don't have, that we needto have in place that's going to
(12:28):
be strategically important forus to be able to go to the next
level with our M and A group, orwhatever the case might be. So
we need, we need a team ofbenefits lawyers, let's say, and
that happens, say that we, or,you know, our benefits lawyers
left, we need to get benefitslawyers in. Is, does it behoove
(12:48):
them to work with, to work on acontingent the firms to be
working on a contingency basisin that situation, or a retain
situation? We'll talk aboutretainer in just a minute. I'm
just kind of curious about abouthow you said that the groups
that are looking to move maywant to work with somebody who
works on a contingency basis.
What if you're trying to fill agap or create a, create a
(13:09):
strategic strap on,
Steve (13:15):
right? So, yeah, let me qualify a little bit on the
group situation. There will besort of the preformed group that
you know that there, there's atleast a reasonable shot that
they will be using a contingencyfirm, because they're the ones
hiring they're hiring the searchfirm, not the law firm, if you
know what I mean. So I think soyou always want to keep that
(13:37):
option open at least, at leastat the beginning of your search
process, is, it's probably agood idea if you're just
starting to look at it, is that,you know, let's see what the
market will give us. You know,let's see what benefits lawyers.
Let's say, Well, maybe outthere. And again, more you know,
particularly if you're lookingat a group, I think that where
(14:02):
it's really you know whether,when you're on a strict time
frame, you've got to get thisgroup in in the next three
months, six months, somethinglike that, and or you're going
to lose business, that's whenyou may want to think about
retained. Because I think whathappens is, on contingency, one
of the things you don't get is,you don't you, as I said, you
(14:22):
don't get market coverage.
You're never assured thateverybody out there is being
called. And second thing is,you're not getting feedback on
the marketplace either,generally. I mean, if you're
doing sending a contingency firmout there, they'll, they'll call
you when they have somebodythey're not going to go out and
volunteer a lot of informationabout, well, you know,
occasionally they'll say, youknow, we can't succeed because
(14:44):
your reputation is bad orsomething. You're not getting
that kind of real feedback. Andyou're also, the other thing
that you don't necessarily getis, um, is, if you need, let's
say, you know, there are five orsix people, you know, in the
market. They're great lawyers.
And you might know them a littlebit, you're not willing to call
them up on the phone that a lotof lawyers do not want to call
(15:06):
up other other lawyers and askthem, I would that can happen.
It's great. You can do it. But alot of times there's, you know,
there's a hesitancy there. Andparticularly because if you,
let's say, You call that personup and that person, you find
out, you know, person doesn'thave enough business or
whatever, now you've got to tryto figure out a way to let them
(15:27):
down. Well, your dowry wasn'tbig enough, right? So, so, so I
think that there's a real reasonto bring in a search room, and
so that's where retainer becomesimportant, because it's, it's,
it's a search terms dedicated toyou when you know they're
dedicated to you and they'reknow, they're giving your
feedback, they're, you know, we,we, when we do these, retain
(15:48):
agreements. We always have aschedule, usually every two
weeks, we're checking in andtelling you what we've done and
what the market's saying. Weprovide reports at the end of a
search. If we're not successful,a lot of times we are
successful. When we're not,we'll give you a report that
(16:08):
says, Okay, we call these peopleand we can't, we can't tell you
anything told to us inconfidence. But if things you
know, people can say we're notinterested, I'm not interested
in leaving at all, or I'm notinterested in going to a firm
like that, whatever, so I thinkyou want to have that
information. Market Informationis worth something, whether it's
(16:28):
the market information aboutyourself, whether it's the
market information aboutparticular candidates. Sometimes
we've had firms who we do thatproject with, we give them that
information. Two years later,that candidate becomes
available, and they know at thattime, they know more about that
candidate than they did goingin. They know that that person
might be very valuable. Sothere's a real benefit to a law
(16:52):
firm, but they have tounderstand, and they have to
have management understand thatthis is not a guarantee of
success. It's you're paying formarketing information. You're
paying for somebody who'sdedicated on your behalf.
Unknown (17:06):
And let's talk about retained while we're while we're
in this, you know. And kind ofthe the outline of that retainer
relationship, I think you talkedabout a, talked about some of
the pluses on it, but maybedefine it a little bit here and
and dig into the dig into thepluses. I have specific thoughts
(17:26):
about retain search. I when Ican at what I typically like to
do,
Steve (17:31):
right, right? So, you know, I guess first of all, the
the amount of the retainer ispretty standard, at least in our
work. It's, it's a flat fee, andit is not a percentage of the
placement. So if you're lookingfor a partner, that you're going
(17:51):
to pay a million dollars, youknow, and then the fee on that
General, the general terms, islike $250,000 fee. We're not
going to ask you for a third ofthe fee upfront. That's way too
much money, so I'm not going totell you what we would charge.
It does depend a little bit onthe size of the firm and the
size of the project, but it'snot at the level of a third of a
(18:13):
fee, which is what is standardin the retained industry. If
you're looking for a if you'relooking for a COO of a law firm,
that's what you pay, you know?
And these days at a major firm,CEOs make a million dollars. So
you can figure it out. So that'snumber one, you don't pay that.
Number two is the time period inwhich that gets applied to the
(18:36):
fee. So you pay us a retainer.
And then, you know, six monthsdown the road, we make a
placement that, not that thatamount is is applied, and at
least our firm does it. Weextend that even another year,
because if, if, in case, we'resuccessful, and this has
(18:57):
happened many times, we're notsuccessful during the first 90
days, but we're successful. Ayear later, we still apply the
fee in that situation. So thefee is, is sort of, and we have
often we even, to be fair, Imean, it's, we don't love to do
it, but we'll end up doing it,which is, we, we're doing a
(19:18):
corporate search for a firm, andthen we come in with a
litigator. A year later, we endup applying the fee. It just,
that's just the way it works.
And so that you do get the moneyback if we're successful in any
endeavor on on your behalf,that's a fair shake, okay? The
other, the, the other thing I'dlike to stress on retainer is
if, if we, if we attract acandidate on your behalf, on a
(19:43):
firm's behalf, and and you'reinterested, and you start
discussions with a candidate,we, under our terms, we are
prohibited from sending thatcandidate to another firm, even
if they ask us, you. You know,they say, Listen, I'm, I'm in
the market. Now I want to go to,I want to look at other firms.
(20:03):
We are not allowed to do that,except with the permission of
the firm that we are, that wehave contracted with. Now,
sometimes they allow us to do itanyway, but I can get into that.
But that was in a, in acontingency situation. Yeah, if
I, if I get somebody for yourfirm, I'm free to send them
(20:23):
anywhere I want.
Unknown (20:27):
So if, if the if you're gonna make sure I understand
this there. So if you have aretained search and you present
candidate and the firm says, No,that's not the candidate that
we're looking for, you can'tturn around and open shop that?
No,
Steve (20:42):
no, that's not what I'm saying. What I'm saying is, if,
if I, if I, if I present thatcandidate and you are interested
in, uh, interviewing him or her,we cannot send that candidate
anywhere else at the same time.
Unknown (20:56):
So during the courting, during the courting stage, if
the current firm says, hey, youknow what? Let's bring that
person in and let's talk tothem, you can't then try to try
to work with another firm onthis person's behalf. But if
they reject them, yeah, you can,yeah, yeah, obviously
Steve (21:19):
you're free. It's more about what happens when you,
when you, you know when you,when there is interest. Because,
again, in the contingencysituation, even if I've even if
I my first call to a candidatewas about Firm A and Firm A's
interested. If I'm on acontingent basis, I've got
(21:40):
total, the total freedom to sendthem to firm, B, C or D, and it
becomes a competition, and thefirms understand that. I mean,
it's not like the firms getupset if you're doing
contingency, but that's anadvantage of doing it on a
routine basis.
Unknown (21:56):
Got it? Got it. Okay, okay. And is there any sort of
hybrid or, I mean, where you'rekind of, kind of working with a
firm in, in with, with yourfeet, in both, both camps.
Steve (22:11):
Well, not really, except for the fact that the you know,
the fee is so the percentagethat we get up front is so small
that it tends to work more likea contingency arrangement. So I
think that's true. The The otherthing I will say, though, and at
least, and I'm not sure this istrue for other firms that do
(22:31):
Retained work, but our view is,if we're doing a Retained work
for your firm, and by justchance, nobody else has really
been, you know, been calling,you know on your behalf, but
somehow a candidate comes yourway, either through a personal
relationship or through anotherrecruiter, and it's a good
(22:51):
candidate, we encourage you totalk to them. We just need to be
informed. But other than that,we're not exclusive to the point
that you couldn't consideranother candidate that just
happens to be on the market atthe same time that does happen.
And we just feel like if we'redoing a Retained work, you
shouldn't be excluded from that.
Unknown (23:14):
Now I've, I've heard in some instances where if, if you,
if it's a retained search, andyou wind up hiring somebody who
wasn't presented by the by thefirm, by the recruiter, that the
recruiter is still recruiterstill gets a piece of that. Is
that right?
Steve (23:34):
Can you repeat that?
Unknown (23:36):
So if, if you're a, if, if you're a, if, if you have a
retained search, you have arelationship with a firm, and
it's retained search, and thatfirm finds or has a candidate
walk in the door that you havenot presented, and they decide
they want to hire that person.
They're, they're they're free todo so. But what is, what is the
(23:58):
impact on the on the feet,
Steve (24:01):
again, again. I don't again. I can only speak to what
we do. We would not try tocharge a fee in that situation.
I see, you know, as long as we,you know, as long as if we are
not involved in the actualrecruiting of the of the
candidate, that's, you know,that's not, you know, we
wouldn't get charged for that.
Now that's a little bitdifferent than the situation
(24:21):
where the firm says, We know ofa candidate, we've worked with
this candidate, but we want youto hire we want you to recruit
them directly. Then we get paid,although often we negotiate with
that
Unknown (24:36):
fee. Got it? Got it.
Wow. It's a lot to consider forfor the firms. And I, you know,
I wonder if the firms thinkthrough all of the all the
various, you know, aspects ofit, as you outline here, or if
they just say, Oh, we only docontingency, or we only do
(24:57):
retain, um. Right withoutthinking, Is this really the
right, the right way to proceed,or what is the right way to
proceed on a given search?
Because I assume too that therethat it's from search to search.
It may be, they may want tohandle it differently.
Steve (25:17):
Yeah, one other thing I would say that has an impact on
that is that we often doconsulting before we even do a
search. Other words, a firm willcome to us and they have, let's
say, they want to know whattheir perception in the market
is, right? Or they they say, Wewant to have a an honest
(25:38):
evaluation of whether we canbuild this practice in this
city, and so we will often gethired to do that kind of work
upfront, with no obligation oneither side to use us to
recruit. So that is anotheraspect of it which allows the
(26:00):
firm to understand how we work,understand, you know, what the
issues are going to be, how theycan craft their story to attract
these people, and we get moreinformation about the firm. I
know that we did stuff. We'vedone studies of when we've done
consulting versus othersituations. When we've done
(26:21):
retained search, we are moresuccess. We're successful about
three times as much when we doconsulting on the front end than
we do if we're just doing aretained search, because it's
just, it's both sides. Get somuch benefit out of, you know,
the amount of intensive workthat's being done during that
(26:43):
consulting stage, consultingphase. It almost,
Unknown (26:46):
it almost seems like, you know, the the the high
performing, savvy firms wouldwant to have that research done
before they got started, becausethere's, there's, you know,
unless they've got a reallystrong presence in that
particular jurisdiction andreally know it backwards and
(27:07):
forwards, you're always going toknow it better, right? Yeah.
And, and they can make the go,no go decision. And I think a
lot a lot of ideas are also comeup through all of this and and,
you know, people really figureout what they want, what they
need, instead of just saying,Well, you know, go, go to the
(27:29):
biggest firm in thatjurisdiction and get me the the
leader of of that particularpractice. Well, that might not
be the right way to go, right?
You might. It might be that it'sbetter to go after somebody in a
local office, who knows?
Steve (27:43):
Yeah. Plus, if there is a successorship issue, you know,
you've got that retiringpartner, you want somebody who
can devote some time, somepercentage of their time, to the
clients that have already beendeveloped. You don't want
somebody who's got, you know, $2million of their own business,
and they're going to put all oftheir time into their existing
(28:06):
clients. That doesn't do you anygood. You still, you end up
losing the clients anyway. Soyou have to think that through.
And sometimes you need thatconsulting help to to figure all
that out.
Unknown (28:19):
A lot to chew on, Steve, and before we before we
close, we haven't done this in acouple of our couple of our last
go rounds, but those of you whoare maybe listening to the
podcast for the first time, youclearly hear the professional
acumen of of my good colleague,Steve here, in terms of
(28:43):
executive recruiting. But whatyou may not know is that is that
Steve side hustle, is that heis, he is a stand up comedian
and and so once in a while, weget a chance to hear some of his
some of his work, and I thinkyou've got a something for us
(29:06):
today that I think is bothtopical and quite humorous.
Steve (29:11):
Alright, so people always come to me and they ask. They
always ask things like these.
Are often non lawyers, butsometimes lawyers as well. So
say if you ever placed a senatoror a cabinet official or
somebody really famous, and theanswer honestly is No, I haven't
done that, but I have placedfive lawyers who've been fired
(29:33):
by Donald Trump,
Unknown (29:38):
and are they putting that on the resume? Is that now?
A resume builder?
Steve (29:42):
Yes, no, I don't think so.
Unknown (29:48):
Well, very good, alright, Steve, Well, thank you,
as always, for your wisdom andyour thoughts, and if you have
any questions or you havesuggestions or you've got a
topic that you. Like to see uscover in one of these, one of
these podcasts. Please let Steveand, or I know you'll find our
email addresses in the in theshow notes for the for the show
(30:12):
and, and please keep those cardsand letter letters coming.
Right, right.
Steve (30:16):
Comment, comment, like us, all that stuff,
Unknown (30:19):
all that stuff, all that stuff that you hear all the
time. All right, Steve, takecare. Thank you. We'll talk
soon. Bye, bye. You.
Murray, welcome to Steve's rules periodic podcast
featuring Steve Nelson,executive principal at McCormick
group in the law and governmentaffairs practice. My name is
Murray Coffey, and I am theprincipal of M Coffey, a law
firm marketing and businessdevelopment Boutique. For more
information, please visit mywebsite at M coffey.net Steve
has been an executive recruiterfor nearly three decades, and
(00:28):
without naming names, he isready to spill the tea on best
practices, and maybe a few notso best practices by firms and
candidates that he has seenduring his career, recruiting
some of the most driven andsuccessful professional into
highly profitable and growingfirms. Steve is a former lawyer
and journalist and is a fellowof the college of law practice
(00:49):
management and a proud son ofWilkes Barre, Pennsylvania. Full
transparency here, Steve hashelped my career immensely
through the years and has becomesomething of a career shaman to
me and I know many others. Hey,Steve, welcome back. This is the
Thanksgiving edition, and I'mthankful for you, Steve.
Steve (01:12):
I'm thankful for you
Unknown (01:15):
and but we're back.
We're in the dreaded fourthquarter for our law firm
friends, which means that thatthey will ignore us until until
January. Absolutely the case.
That's absolutely the case, but,but that doesn't mean that they
shouldn't be thinking aboutrecruiting, and it doesn't mean
(01:36):
that they shouldn't be followingtrends. So I know that that you
and the your your brainiacs atMcCormick Place are always
keeping track of trends andseeing what's going on and
seeing what's hot, and I knowyou've got some thoughts on all
of that, so let me turn it overto you, because I'm I don't know
(01:57):
what you're going to say here,so I'm right. I'm excited to
hear what you
Steve (02:00):
have to say. Alright, so not only do we keep our records,
but we're also follow the otherthe other people who are keeping
statistics, the decipher group,
Unknown (02:13):
which is out there last time I believe,
Steve (02:14):
yeah, and they do a lot of tracking of information.
They've come out with statisticsfor the first nine months of the
year, basically reported thatoverall recruiting is down
partner level, down less so thanassociate not surprising, but
(02:36):
down 4% from 2022 that's stillup from even pre COVID years. So
still a strong market.
Interestingly, a couple ofinteresting things that they
also reported. One was that thecouncil level hiring is
significantly down. And thatmakes sense, because I think
after COVID, you did have aspade of retirements and people
(02:59):
you know, people you know,easing back. And so there was
more succession planning goingon, succession hiring going on.
And I think that that, coupledwith, you know, sort of more
difficult economic times, hasled firms to be more
conservative about investmentdollars. And councils are
usually investment others. So Ithink that's number one. Number
(03:22):
two was interesting is that ofall of the markets, geographic
wise, Chicago was the onlymarket that indicated an
increase, which I know is dear,near and dear to your heart,
being a native Chicago, but, butthat was interesting. I've got
some ideas as to why that is.
Unknown (03:43):
Why is that? I mean, Chicago kind of goes up and down
in its in its the market. Andyou know, if you talk to anybody
from Chicago about what's goingon in Chicago right now, they're
gonna say everything's down. Butactually that's not the case,
right? So what's going on? Yeah,I
Steve (04:01):
think it's because I think that we're seeing
increased billing rate increasesacross the board, across the
country, and I believe that, Ithink corporate law departments
are more willing to accept thatfrom New York firms or New York
offices. And I think they lookat if they're going to go to a
Chicago firm or Chicago office,they're expecting lower rates.
(04:26):
And I think that the big firmsare pushing their rates, just
like the New York firms are. Andlet's face it, you're talking
about big, big Chicago firmsthat are out there that are as
you know that they're asprestigious as the New York
firms. But we're also seeing,interestingly enough, that even
some of the Midwestern firms arepushing their rates up. So with
this constant pushing rates up,that is the number one thing
(04:50):
that we're seeing that is thatis forcing laterals to think
about changing. Is they're justgetting pushed on rates. Their
their clients are pushing back,and they're feeling. Like, I've
got to go someplace with a lowerrate structure, and we're seeing
that across the board, and Ithink in Chicago, that hits home
even
Unknown (05:06):
harder. Yeah, yeah, those, those, those thrifty
Midwesterners, right? The so, sowe're seeing, we're actually
seeing, we're seeing partnersgetting priced out of their own
firms,
Steve (05:20):
right? Absolutely. Is there any practice that
Unknown (05:23):
you're seeing that where that's more prevalent than
others?
Steve (05:27):
I really see that's pretty much across the board,
maybe not on the corporate M andA side, you know that that
practice probably can, canhandle the rates, but we're
seeing it particularly in IPwe're seeing it in litigation,
you know, we're seeing it laborand employment. I mean, we're
seeing it pretty much all of theof the sort of non, you know,
(05:50):
you know, public company tech,kinds of practice areas,
Unknown (05:54):
interesting, interesting. Well, we'll, we'll
need to keep, keep an eye onthat and see where, you know
where things are going. I knowyou all are tracking that, and
that's a service to the to theto the sector, for sure. But
let's hop into today's today'stopic, which is really
understanding the various kindsof relationships that can be
(06:19):
developed between recruitingfirm and and their clients, and,
you know, really bringing itdown to contingency or and or
retained search. And we'll talka little bit about the benefits
of each and and where theremight be a hybrid approach along
(06:41):
the way. So, you know, Steve, Ithink you know, maybe we can
define terms here and talk alittle bit about what is
contingency. I think a lot ofpeople in our world know it, but
let's hear it from somebody whoknows it, right?
Steve (06:55):
So contingency obviously means that the recruiting firm
only gets paid when they make aplace. They don't have any
upfront payment at all. It'sjust based on success. And if
you success, you get a big fee,et cetera. And that is in the
(07:18):
law, in the legal world in thepartner and associate for the
talent, that has been thetraditional way that firms have
used recruiters. There's not,haven't been as much Retained
work. And that's there's a goodreason for that, which is, if
I'm a law firm and I want, let'ssay an intellectual property
partner, patent patentlitigator, let's say the chances
(07:42):
of any one search firm findingthat person in a six month
period is pretty low these therearen't that many people in the
market, no matter what we hearabout in terms of how much
movement there is, there aren'tthat many really strong partners
With business who are ready tomove at any one particular time,
(08:03):
and therefore the chances ofsuccess are really low. And law
firms don't want to start payingout money. Totally
understandable, paying out moneyand then having to report back
to management says, well, wepaid this, you know, this, 10
firms, $50,000 and we didn't getanybody right. So that's, it's
pretty logical that that's theway it works. And then if you
(08:26):
take it from there, the way thatthat law firms traditionally use
recruiters is they will, theywill call up, you know, their
recruiters of choice, with thefour or five different
recruiters, let them know aboutwhat they're looking for, and
then they let them go out. Theybasically let the recruiters go
(08:48):
out, find the people and comeback to the firm with with their
selected candidates. So it is,it is, you know, pretty much,
almost totally outsourcing thejob to the recruiters to find
the talent. And that's, youknow, and then obviously, some,
you know, definitely, you know,recruiters get their percentage,
(09:08):
you know, percentage of peoplethey can find, they can present,
and you know, and you know, afair number of instances,
they're successful, not not amajority of the time, but you
know certainly that there issome success there, and that's
the way the recruiting firmsgenerally do that. Now, couple I
mean, there's an advantage,obviously, because you've got,
(09:29):
you know, you got a lot ofpeople working for you, you can
get the good talent. It'sparticularly good, I think, for
groups, because groups willoften, when they are they've
decided, the pre formed grouphas decided to move. They'll
call their recruiter of choice.
They realize the benefits that arecruiter will give them, and so
therefore that that that thosegroups can sometimes be placed
(09:51):
by the recruiter of choice, whohappens to have the relationship
with them one way or another.
Um, so. There's a benefit there.
The downside is that the firmnever has, has assurance that
everybody is actually, thatanybody's actually doing any
real work. Are they just callingtheir their buddies? Are they
(10:12):
calling people they know, thepeople they've placed, you know,
so forth, or, you know, is therea really market coverage going
on? And I and I don't think so,because I think that the
recruiters are, they're tryingto figure out the best way to
make the placement, and if theycan make as few calls as
possible, that's what they'lldo. So that's, that's number
(10:33):
one. Number two, I think, isdepends a little bit on your on
a law firm's placement, youknow, in the tier of firms, if
you're, you know, a top firm,and you've got a name
reputation, there's a goodchance that the candidates that
a recruiter will generate have agood chance of being sent to
(10:58):
your firm, because they'll bethe firm that they think of, and
that no has the reputation, andthat when they talk to their
lawyers, the lawyers know thefirm, so they say, oh, yeah,
I'll go there. It's not asvaluable for firms that aren't
you know in the top tier, interms of the firms, if you're
not a known quantity, you maynever get called. You may the,
(11:21):
you know, the best candidateswill never get to you, because
they'll, they'll call everybodyelse first. It's, you know,
you're in a tiered situation.
And if you're, if you're in a,in a contingency mode, there's
no incentive for the firm tothink of your mid sized firm. So
I think that's a downside thatyou've got to be
Unknown (11:42):
thinking about. We're we're entering, we're entering
the the beginning of the year,you know, the the pre, the pre
sale time, if you will, in thebeginning of the year. And I
know what happens at thebeginning of the year, after all
the, you know, after all theledgers are taken care of.
There's oftentimes a fresh lookat the strategic plan, or maybe
(12:05):
there's some some new strategicplanning that that's that's
going on, or, you know,measuring success against the
strategic plan over the prioryear. And a lot of times with
firms that are looking forgrowth, they will, they'll say,
Okay, we need, we, you know,there is a, there is a practice
that we don't have, that we needto have in place that's going to
(12:28):
be strategically important forus to be able to go to the next
level with our M and A group, orwhatever the case might be. So
we need, we need a team ofbenefits lawyers, let's say, and
that happens, say that we, or,you know, our benefits lawyers
left, we need to get benefitslawyers in. Is, does it behoove
(12:48):
them to work with, to work on acontingent the firms to be
working on a contingency basisin that situation, or a retain
situation? We'll talk aboutretainer in just a minute. I'm
just kind of curious about abouthow you said that the groups
that are looking to move maywant to work with somebody who
works on a contingency basis.
What if you're trying to fill agap or create a, create a
(13:09):
strategic strap on,
Steve (13:15):
right? So, yeah, let me qualify a little bit on the
group situation. There will besort of the preformed group that
you know that there, there's atleast a reasonable shot that
they will be using a contingencyfirm, because they're the ones
hiring they're hiring the searchfirm, not the law firm, if you
know what I mean. So I think soyou always want to keep that
(13:37):
option open at least, at leastat the beginning of your search
process, is, it's probably agood idea if you're just
starting to look at it, is that,you know, let's see what the
market will give us. You know,let's see what benefits lawyers.
Let's say, Well, maybe outthere. And again, more you know,
particularly if you're lookingat a group, I think that where
(14:02):
it's really you know whether,when you're on a strict time
frame, you've got to get thisgroup in in the next three
months, six months, somethinglike that, and or you're going
to lose business, that's whenyou may want to think about
retained. Because I think whathappens is, on contingency, one
of the things you don't get is,you don't you, as I said, you
(14:22):
don't get market coverage.
You're never assured thateverybody out there is being
called. And second thing is,you're not getting feedback on
the marketplace either,generally. I mean, if you're
doing sending a contingency firmout there, they'll, they'll call
you when they have somebodythey're not going to go out and
volunteer a lot of informationabout, well, you know,
occasionally they'll say, youknow, we can't succeed because
(14:44):
your reputation is bad orsomething. You're not getting
that kind of real feedback. Andyou're also, the other thing
that you don't necessarily getis, um, is, if you need, let's
say, you know, there are five orsix people, you know, in the
market. They're great lawyers.
And you might know them a littlebit, you're not willing to call
them up on the phone that a lotof lawyers do not want to call
(15:06):
up other other lawyers and askthem, I would that can happen.
It's great. You can do it. But alot of times there's, you know,
there's a hesitancy there. Andparticularly because if you,
let's say, You call that personup and that person, you find
out, you know, person doesn'thave enough business or
whatever, now you've got to tryto figure out a way to let them
(15:27):
down. Well, your dowry wasn'tbig enough, right? So, so, so I
think that there's a real reasonto bring in a search room, and
so that's where retainer becomesimportant, because it's, it's,
it's a search terms dedicated toyou when you know they're
dedicated to you and they'reknow, they're giving your
feedback, they're, you know, we,we, when we do these, retain
(15:48):
agreements. We always have aschedule, usually every two
weeks, we're checking in andtelling you what we've done and
what the market's saying. Weprovide reports at the end of a
search. If we're not successful,a lot of times we are
successful. When we're not,we'll give you a report that
(16:08):
says, Okay, we call these peopleand we can't, we can't tell you
anything told to us inconfidence. But if things you
know, people can say we're notinterested, I'm not interested
in leaving at all, or I'm notinterested in going to a firm
like that, whatever, so I thinkyou want to have that
information. Market Informationis worth something, whether it's
(16:28):
the market information aboutyourself, whether it's the
market information aboutparticular candidates. Sometimes
we've had firms who we do thatproject with, we give them that
information. Two years later,that candidate becomes
available, and they know at thattime, they know more about that
candidate than they did goingin. They know that that person
might be very valuable. Sothere's a real benefit to a law
(16:52):
firm, but they have tounderstand, and they have to
have management understand thatthis is not a guarantee of
success. It's you're paying formarketing information. You're
paying for somebody who'sdedicated on your behalf.
Unknown (17:06):
And let's talk about retained while we're while we're
in this, you know. And kind ofthe the outline of that retainer
relationship, I think you talkedabout a, talked about some of
the pluses on it, but maybedefine it a little bit here and
and dig into the dig into thepluses. I have specific thoughts
(17:26):
about retain search. I when Ican at what I typically like to
do,
Steve (17:31):
right, right? So, you know, I guess first of all, the
the amount of the retainer ispretty standard, at least in our
work. It's, it's a flat fee, andit is not a percentage of the
placement. So if you're lookingfor a partner, that you're going
(17:51):
to pay a million dollars, youknow, and then the fee on that
General, the general terms, islike $250,000 fee. We're not
going to ask you for a third ofthe fee upfront. That's way too
much money, so I'm not going totell you what we would charge.
It does depend a little bit onthe size of the firm and the
size of the project, but it'snot at the level of a third of a
(18:13):
fee, which is what is standardin the retained industry. If
you're looking for a if you'relooking for a COO of a law firm,
that's what you pay, you know?
And these days at a major firm,CEOs make a million dollars. So
you can figure it out. So that'snumber one, you don't pay that.
Number two is the time period inwhich that gets applied to the
(18:36):
fee. So you pay us a retainer.
And then, you know, six monthsdown the road, we make a
placement that, not that thatamount is is applied, and at
least our firm does it. Weextend that even another year,
because if, if, in case, we'resuccessful, and this has
(18:57):
happened many times, we're notsuccessful during the first 90
days, but we're successful. Ayear later, we still apply the
fee in that situation. So thefee is, is sort of, and we have
often we even, to be fair, Imean, it's, we don't love to do
it, but we'll end up doing it,which is, we, we're doing a
(19:18):
corporate search for a firm, andthen we come in with a
litigator. A year later, we endup applying the fee. It just,
that's just the way it works.
And so that you do get the moneyback if we're successful in any
endeavor on on your behalf,that's a fair shake, okay? The
other, the, the other thing I'dlike to stress on retainer is
if, if we, if we attract acandidate on your behalf, on a
(19:43):
firm's behalf, and and you'reinterested, and you start
discussions with a candidate,we, under our terms, we are
prohibited from sending thatcandidate to another firm, even
if they ask us, you. You know,they say, Listen, I'm, I'm in
the market. Now I want to go to,I want to look at other firms.
(20:03):
We are not allowed to do that,except with the permission of
the firm that we are, that wehave contracted with. Now,
sometimes they allow us to do itanyway, but I can get into that.
But that was in a, in acontingency situation. Yeah, if
I, if I get somebody for yourfirm, I'm free to send them
(20:23):
anywhere I want.
Unknown (20:27):
So if, if the if you're gonna make sure I understand
this there. So if you have aretained search and you present
candidate and the firm says, No,that's not the candidate that
we're looking for, you can'tturn around and open shop that?
No,
Steve (20:42):
no, that's not what I'm saying. What I'm saying is, if,
if I, if I, if I present thatcandidate and you are interested
in, uh, interviewing him or her,we cannot send that candidate
anywhere else at the same time.
Unknown (20:56):
So during the courting, during the courting stage, if
the current firm says, hey, youknow what? Let's bring that
person in and let's talk tothem, you can't then try to try
to work with another firm onthis person's behalf. But if
they reject them, yeah, you can,yeah, yeah, obviously
Steve (21:19):
you're free. It's more about what happens when you,
when you, you know when you,when there is interest. Because,
again, in the contingencysituation, even if I've even if
I my first call to a candidatewas about Firm A and Firm A's
interested. If I'm on acontingent basis, I've got
(21:40):
total, the total freedom to sendthem to firm, B, C or D, and it
becomes a competition, and thefirms understand that. I mean,
it's not like the firms getupset if you're doing
contingency, but that's anadvantage of doing it on a
routine basis.
Unknown (21:56):
Got it? Got it. Okay, okay. And is there any sort of
hybrid or, I mean, where you'rekind of, kind of working with a
firm in, in with, with yourfeet, in both, both camps.
Steve (22:11):
Well, not really, except for the fact that the you know,
the fee is so the percentagethat we get up front is so small
that it tends to work more likea contingency arrangement. So I
think that's true. The The otherthing I will say, though, and at
least, and I'm not sure this istrue for other firms that do
(22:31):
Retained work, but our view is,if we're doing a Retained work
for your firm, and by justchance, nobody else has really
been, you know, been calling,you know on your behalf, but
somehow a candidate comes yourway, either through a personal
relationship or through anotherrecruiter, and it's a good
(22:51):
candidate, we encourage you totalk to them. We just need to be
informed. But other than that,we're not exclusive to the point
that you couldn't consideranother candidate that just
happens to be on the market atthe same time that does happen.
And we just feel like if we'redoing a Retained work, you
shouldn't be excluded from that.
Unknown (23:14):
Now I've, I've heard in some instances where if, if you,
if it's a retained search, andyou wind up hiring somebody who
wasn't presented by the by thefirm, by the recruiter, that the
recruiter is still recruiterstill gets a piece of that. Is
that right?
Steve (23:34):
Can you repeat that?
Unknown (23:36):
So if, if you're a, if, if you're a, if, if you have a
retained search, you have arelationship with a firm, and
it's retained search, and thatfirm finds or has a candidate
walk in the door that you havenot presented, and they decide
they want to hire that person.
They're, they're they're free todo so. But what is, what is the
(23:58):
impact on the on the feet,
Steve (24:01):
again, again. I don't again. I can only speak to what
we do. We would not try tocharge a fee in that situation.
I see, you know, as long as we,you know, as long as if we are
not involved in the actualrecruiting of the of the
candidate, that's, you know,that's not, you know, we
wouldn't get charged for that.
Now that's a little bitdifferent than the situation
(24:21):
where the firm says, We know ofa candidate, we've worked with
this candidate, but we want youto hire we want you to recruit
them directly. Then we get paid,although often we negotiate with
that
Unknown (24:36):
fee. Got it? Got it.
Wow. It's a lot to consider forfor the firms. And I, you know,
I wonder if the firms thinkthrough all of the all the
various, you know, aspects ofit, as you outline here, or if
they just say, Oh, we only docontingency, or we only do
(24:57):
retain, um. Right withoutthinking, Is this really the
right, the right way to proceed,or what is the right way to
proceed on a given search?
Because I assume too that therethat it's from search to search.
It may be, they may want tohandle it differently.
Steve (25:17):
Yeah, one other thing I would say that has an impact on
that is that we often doconsulting before we even do a
search. Other words, a firm willcome to us and they have, let's
say, they want to know whattheir perception in the market
is, right? Or they they say, Wewant to have a an honest
(25:38):
evaluation of whether we canbuild this practice in this
city, and so we will often gethired to do that kind of work
upfront, with no obligation oneither side to use us to
recruit. So that is anotheraspect of it which allows the
(26:00):
firm to understand how we work,understand, you know, what the
issues are going to be, how theycan craft their story to attract
these people, and we get moreinformation about the firm. I
know that we did stuff. We'vedone studies of when we've done
consulting versus othersituations. When we've done
(26:21):
retained search, we are moresuccess. We're successful about
three times as much when we doconsulting on the front end than
we do if we're just doing aretained search, because it's
just, it's both sides. Get somuch benefit out of, you know,
the amount of intensive workthat's being done during that
(26:43):
consulting stage, consultingphase. It almost,
Unknown (26:46):
it almost seems like, you know, the the the high
performing, savvy firms wouldwant to have that research done
before they got started, becausethere's, there's, you know,
unless they've got a reallystrong presence in that
particular jurisdiction andreally know it backwards and
(27:07):
forwards, you're always going toknow it better, right? Yeah.
And, and they can make the go,no go decision. And I think a
lot a lot of ideas are also comeup through all of this and and,
you know, people really figureout what they want, what they
need, instead of just saying,Well, you know, go, go to the
(27:29):
biggest firm in thatjurisdiction and get me the the
leader of of that particularpractice. Well, that might not
be the right way to go, right?
You might. It might be that it'sbetter to go after somebody in a
local office, who knows?
Steve (27:43):
Yeah. Plus, if there is a successorship issue, you know,
you've got that retiringpartner, you want somebody who
can devote some time, somepercentage of their time, to the
clients that have already beendeveloped. You don't want
somebody who's got, you know, $2million of their own business,
and they're going to put all oftheir time into their existing
(28:06):
clients. That doesn't do you anygood. You still, you end up
losing the clients anyway. Soyou have to think that through.
And sometimes you need thatconsulting help to to figure all
that out.
Unknown (28:19):
A lot to chew on, Steve, and before we before we
close, we haven't done this in acouple of our couple of our last
go rounds, but those of you whoare maybe listening to the
podcast for the first time, youclearly hear the professional
acumen of of my good colleague,Steve here, in terms of
(28:43):
executive recruiting. But whatyou may not know is that is that
Steve side hustle, is that heis, he is a stand up comedian
and and so once in a while, weget a chance to hear some of his
some of his work, and I thinkyou've got a something for us
(29:06):
today that I think is bothtopical and quite humorous.
Steve (29:11):
Alright, so people always come to me and they ask. They
always ask things like these.
Are often non lawyers, butsometimes lawyers as well. So
say if you ever placed a senatoror a cabinet official or
somebody really famous, and theanswer honestly is No, I haven't
done that, but I have placedfive lawyers who've been fired
(29:33):
by Donald Trump,
Unknown (29:38):
and are they putting that on the resume? Is that now?
A resume builder?
Steve (29:42):
Yes, no, I don't think so.
Unknown (29:48):
Well, very good, alright, Steve, Well, thank you,
as always, for your wisdom andyour thoughts, and if you have
any questions or you havesuggestions or you've got a
topic that you. Like to see uscover in one of these, one of
these podcasts. Please let Steveand, or I know you'll find our
email addresses in the in theshow notes for the for the show
(30:12):
and, and please keep those cardsand letter letters coming.
Right, right.
Steve (30:16):
Comment, comment, like us, all that stuff,
Unknown (30:19):
all that stuff, all that stuff that you hear all the
time. All right, Steve, takecare. Thank you. We'll talk
soon. Bye, bye. You.
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