INHOUSE INSIDER Forum, News, and Career Center for In-House Counsels

30Dec/090

Why Recruiters Are Worth What They Charge

In this economy, I hear a lot of companies asking the same question: "Is this legal search firm worth what it charges?"

Paul Hawkinson of the Fordyce Letter answers all of these questions in a timeless piece filled with humor, insight, and in-depth knowledge of the industry to help clients understand a recruiter's true commercial worth - in any economy.

When I need a heart by-pass, rest assured that I won’t select my surgeon on the basis of what he charges.” That’s what an ailing executive recently opined when he was informed by his doctor about his arterial blockage problems.

Why then are corporate executives so tightfisted when dealing with what is so commonly thought of as the “heartbeat” of their companies . . . top-talent?

Companies think very little about paying the often excessive fees charged by their outside accounting and legal firms . . . or even to the gaggle of consultants who promise cost-cutting and streamlining miracles in other areas of operations.

Yet, when faced with brain drains, talent deficiencies or the need to replace a legal counsel with a better one, their thoughts too often turn to parsimony. This K-mart mentality belies and contradicts their stated objectives to “hire the best,” especially at pecking order levels below the “big picture” executive suite inhabitants.

Of course recruiting fees can vary from legal search firm to legal search firm but, when they do, you will almost always find that those on the low side are sure to exclude some very key ingredients of the process, all of which are vital to providing the indispensable services necessary to satisfy the needs of the employer.

So why are legal recruiters worth what they charge? Just a few of the often unspoken reasons are:

1. EXPERTISE

Nobody knows the legal marketplace better than a professional legal recruiter or legal search firm . . . nobody! In-house human resources and company recruiters, no matter how effective, view the legal marketplace through an imperfect or misrepresentative prism, and tunnel vision is their occupational hazard.

Just as physicians are cautioned against treating members of their own families, so too is it folly for an in-house H/R professional to believe that they have an undistorted and unbiased picture of the legal employment landscape. They are vulnerable to the pressures of internal politics and cultural dimensions which do not hinder the outsider.

Street-smart legal recruiters already know the neighborhood, including the unlisted addresses so often overlooked by the insiders.

2. CAST A WIDER NET

A professional fisherman will always have more to show than a weekend angler. Legal search firms are in the legal marketplace day in and day out. They know the unfished coves, reefs and inlets that are unknown to others. The job-hunter bookshelves are filled with lore about the “hidden legal job market.” The same holds true for professional legal recruiters who have a detailed roadmap to the hidden talent sources which will never be accessed by newspaper ads, alumni associations, applicant databases, job boards or any of the other more familiar sources of people.

There are occasional pearls through these sources (and someone inevitably wins the Publisher’s Clearinghouse Sweepstakes too) but you have to shuck an awful lot of smelly oysters to find them. Legal search firm only give you oysters proven to contain pearls. Your only job is to determine which pearl is the best.

Want to catch what you’re fishing for? Hire a guide!

3. COST

There is a misconception among employers that the cost of an attorney hire equals the cost of the ads or Internet postings run to attract the attorney hired. Nothing could be further from reality.

Try adding these to the true cost and you’ll see just how cost effective an outside recruiter can be:

  • Salaries and benefits of the employment/recruiting staffs plus those of the line managers involved in the hiring activity (who are not productive in their normal job pursuits when they’re out recruiting).
  • Travel, lodging and entertainment expenses of in-house recruiters; source development costs; overhead expenses including but not limited to telephone, office space, postage, and PR literature.
  • Applicant database maintenance, reference checking, clerical costs to correspond with the hundreds of unqualified respondents, etc.

4. UNBIASED THIRD PARTY INPUT

Contrary to what some believe, legal search firms don’t try to put square pegs into round holes. A legal recruiter’s stock-in-trade is their integrity and their reputation for finding someone better than a company could have found for themselves.

For a mid to senior-level attorneys, the average legal recruiter may develop a “long list” of a hundred or more possibilities. Each must be called and evaluated against the position specifications as well as the personality “fit” with the company and the people with whom they will ultimately work. Once this is winnowed down to the “short list,” an even more intensive interviewing process begins to narrow the search to a panel of finalists for review by the client.
This process is not, as some believe, simply romping through the file cabinets, harvesting from the Monster lookalikes or putting the job opening out to others on the legal recruiter’s network with crossed fingers that someone good will show up.

It is highly unlikely that a legal search firm will be plowing new ground with your opening. They deal within spheres of influence far more familiar with your needs than any internal recruiter and, more often than not, view the finalists as people who are competent to solve client problems rather than just fill an open slot in the organizational chart.

Because they want to do business with you again and again, they are looking for (and challenging you to excellence by hiring) the “truly exceptional” rather than the “just satisfactory” so often settled for by in-house hirers.

5. CONFIDENTIALITY

Advertising or otherwise publicly proclaiming an opening, aside from its cost and demonstrated ineffectiveness for sensitive senior level counsel openings, often creates anxiety and apprehension among the advertiser’s current employees who wonder why they aren’t being considered or worry about newcomer transition problems. Just as often it alerts competitors to a current weakness or void within the company.

6. SPEED

The recruiting process is always faster through a legal search firm that is continually tapped into the talent marketplace than one having to start the process from scratch. For every day that a key opening remains unfilled, a company’s other employees must grudgingly do double duty, or a company may need to rely more extensively on expensive outside legal counsels. And this doesn’t factor in the profit opportunities or competitive advantages lost to a company because a position remains unfilled or is done on a part-time basis by others less qualified.

7. POST HIRE DOWNTIME

Not only is speed an essential part of the legal search firm’s process, the ability to locate an attorney who can immediately “hit the ground running” with a minimum of “ramp-up time” saves time and money after the hire. All too often, a hire selected through less effective sources offering a smaller talent pool requires several months of expensive training and orientation.

8. REALITY

Legal search firms often recognize and have a duty to inform clients that they may be mistaken as to the type of person sought, the salary required to attract them, or the possibilities that the solution might just lie in areas outside the traditional target industries . . . something an internal recruiter is politically disinclined to do. Too many hirers fail to understand that a legal recruiter’s primary function is not necessary to fill a slot, but to provide the right candidate to solve a problem.

9. NEGOTIATION

Master negotiator Herb Cohen says that, “negotiation is the analysis of information, time and power to affect behavior . . . the meeting of needs (yours and others’) to make things happen the way you want them to.” As a buffer and informed intermediary, legal search firms are better able to blend the needs and wants of both parties to arrive at a mutually beneficial arrangement without the polarizing roadblocks which too frequently materialize in face-to-face dealings.

10. PRIORITIZING COMPANY RESOURCES

It is often amazing to see how much of a company’s revenues are squandered on non-productive perks for existing high-level employees while they penny-pinch on what is every company’s lifeblood . . . talent acquisition.

Club memberships and the like may be fine, but no one with an IQ higher than Forrest Gump’s believes that these expenditures substantially contribute to a company’s profit margin. But one well-placed general counsel save a company a tremendous amount of money. And the fee for having hired these legal counsels pales to insignificance when compared to the contributions they make to the bottom line.

The next time you think a legal recruiter’s fees are too high, put them in the proper perspective before asking for that Blue Light special or spinning your wheels thrashing about trying to fill vital openings with less effective (but not necessarily less expensive) pedestrian methods. Savvy executives learned long ago that the fee paid to a legal recruiter is a shrewd strategic investment, not an extraneous expense. They also know that the “best” is far different from the “best available.

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2Dec/090

Who Will Be Getting Squeezed in 2010?

As we are nearing the end of 2009, one of the toughest economic times of our generation, one would hope to see lessons learned on the eve of a new year. One thing remains clear: greed is far from dead. It is alive and kicking. So who will be squeezed as we enter 2010?
In a recent survey by Altman Weil, law firms are not standing idle. Rather than pondering measures to reduce or freeze their fees for the coming year, they are planning an average overall increase in rates of 3.2 percent for 2010. No, your eyes are not deceiving you; you’ve read the word increase correctly.

That said, no need to worry, law firms have a heart after all, and most of them won't seek an across-the-board rate increase. That’s a relief, except for those poor clients who’ll fall in the increase pool. One has to wonder who they are to be deserving of such treatment?

Will legal services be any better in 2010? Will law firm associates be better compensated in 2010? Will fixed costs increase for law firms next year? There are no reports of anything that would indicate changes in the quality of legal services to be provided in 2010. If you’ve read recent reports regarding outsourcing, law firms have been looking at creative ways to offshore legal work at a fraction of the cost. Law firm training has remained relatively stagnant over the years, and there are no changes being proposed by law schools to improve the practical skills of its graduates. The answer here seems rather clear.

As for compensation, if you’re a law firm associate, chances are you will receive a smaller paycheck in 2010. An American Lawyer survey of law firm leaders found that 40 percent of the firms had reduced starting pay for their associates, and 44 percent are considering cuts next year. If you are counting on bonuses, these are disappearing almost as fast as our polar ice caps. They are unlikely to increase overall compensation figures for 2010.

What about fixed fees? Due to intensifying focus on expense control, total overhead expenses decreased 0.6 percent from the previous year in the first three quarters of 2009 according to www.constantcontentblog.com. Law firms cut expenses and saw decreases in the areas of non-lawyer compensation, including occupancy, technology, library, marketing etc. That trend is likely to continue into the New Year. One has to wonder where the impetus for a 3.2 percent increase came from.

Could law firms try to freeze their rates for two consecutive years in a row? Yes, but are they ready to continue to deal with decreased profitability? The answer is evidently no. Partner-per-profit concerns continue to gnaw away at law firm leaders who are scrambling to find solutions to keep these profits from decreasing any further. A 5% partner-per-profit decrease seemed to take law firms into a tailspin of unprecedented layoffs, salary cuts, delayed starts dates, and other cost cutting measures. When Clifford Chance reported a record 30% decrease in partner profits; the news reports were full of dread. Of course, partners still took home a hefty $900,000 a year. That made for fewer sympathetic readers.

When the Am Law 100 showed yet-another-across-the-board 5 percent bump in profitability, you would have expected compensation figures to hit rock bottom. Profits per partner fell by 4.3 percent, to an average of $1.26 million, and revenue per lawyer dropped 1.2 percent, to $818,000. One might argue that if you were already overweight, losing 5% of your body weight is not such a big deal. I guess it's all relative.

If law firms are relying on client goodwill to support this proposed rate increase, they may have to re-think their strategy. According to a recent Reuters press release, for the first time in nine years in-house counsel predict they’ll pay no increase in outside law firm hourly rates. 64 percent said they have implemented or will implement rate freezes. 46 percent of law departments surveyed said they have cut their hourly rates paid to outside counsel, or will reduce their rates. That still leaves a rather significant 36 percent who may go along with rate increases, and 56% who will be requiring as much if not more legal services for 2010, which is probably what law firms are banking on.

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