Date: April 12, 2013 Topic: The Shrinking ... - Georgetown Law

Limiting the Damage of Lateral Partner Movement:
Exit Quantity, Geographic Focus, and Multiple Movers
Rhett Brymer
Miami University, Farmer School of Business
Len Bierman
Texas A&M University, Mays School of Business
Partner movement between law firms has become commonplace in the legal labor
market. While historically the movement of partners was a relatively rare phenomenon compared
to the movement of professional managers within other industries, law firms now must cope with
the realities of an active lateral market. The human capital loss when partners exit presents
several organizational issues – partner disruption of social structures and their associated
routines, diminished firm expertise, and the erosion of firm-client relationships. Greater amounts
of turnover are associated generally with negative firm performance outcomes, such as decreased
returns on sales. What is not understood well, though, is what types of partner loss are more or
less detrimental. Further, organizations may be structured in particular ways that can help
mitigate possible negative effects. Thus, it is of strategic importance that law firms understand
the implications of who leaves and how to structure the firm to best brace human capital loss.
As such, this study seeks to answer the following research questions: What variables
determine the impact of the loss of partners from law firms? Specifically, what characteristics of
the remaining firm, the exiting partners, and their destinations erode the focal organization’s
value generating capability? Finally, what strategies can law firms employ to ameliorate the
damage from exiting partners?
Using over 19,000 lateral partner events within the American Lawyer 200 law firms over
an eight year period (2000-2007), this study examines the effect of exiting partners on the
financial performance of the firm. Consistent with turnover research in other industries, greater
amounts of partners leaving is associated with decreasing return on sales (ROS) performance.
For example, five partners leaving is associated with a 8.2% decrease in ROS the following year.
Fifteen exiting partners is associated with a 13.2% decrease. Interestingly, these performance
impacts are independent of several measures of lawyer quality, such as lawyer rating, tenure,
level of education, and law school quality. The characteristic of exiting partners that does make a
notable impact is whether or not the partner is a “multiple mover”, i.e., a partner who has
switched firms in a previous year and thus has moved laterally at least twice in her/his career.
Losing more multiple movers ameliorates the negative performance effect. If the concentration
of these multiple movers is high enough in the exiting partner group for any given year, the
subsequent effect on the performance of the firm can actually turn positive.
Additionally, firm structural variables are tested to determine which organizational forms
are more robust to high levels of partner exit. The leverage of the firm, i.e. the number of
associates per partner, has a direct negative effect on ROS, but has no effect when coupled with
the number of partners exiting in a particular year. However, more geographically diverse firms
are subject to worse firm performance when many partners leave as compared to geographically