FORBES: Larry Watanabe Of Watanabe Nason, On Legal Recruitment And The State Of The Legal Market

February 28, 2017

By David J. Parnell

FORBES

Today we hear from California-based and -focused partner-level legal recruiter Larry Watanabe. With north of 1100 partner placements over his 28-year career, both he and his firm, Watanabe Nason, LLC, are two of the legal industry’s most active, influential, and experienced resources. We spoke back in July of 2014 about the legal market and the lateral attorney’s perspective. In this interview, we get his thoughts on weighing successful legal recruiters, trends in both the legal recruitment and legal industries, and the future of BigLaw. Please see our exchange below:

One Making It In Legal Recruitment

Parnell: The legal recruitment business is a competitive one. In your opinion, what separates the wheat from the chaff? How does someone make it in this business?

Watanabe: Discipline, tenacity and a true dedication to the business. There are very few partner recruiters that consistently, year over year, facilitate 35-40+ partner deals. Many do not possess the drive to work 12+ hour days and be on call 24/7 to assist their candidates and clients. In order to gain the required level of experience in representing law firm partners and groups in their moves, one must be passionate about the business itself, not the money. Expert partner recruiters have spent many years developing and nurturing relationships with law firm management and possess information and insight far beyond what is published or promoted by the firms themselves. This experience makes a material difference in the recruiter’s success in representing partners and groups in their lateral moves.

On Choosing A Legal Recruiter

Parnell: What are some of the mistakes partners make when deciding on working with a recruiter?

Watanabe: When considering a lateral move, a partner essentially has two choices. One, wait for the right call or opportunity and allow the market to come to them; or two, seek out a qualified recruiter who understands the market. Partners can often be misled by unproven recruiters and must be able to distinguish the differences. A partner’s practice, clients, metrics and income are highly confidential assets and should never be divulged unless and until the recruiter is thoroughly vetted. In evaluating a recruiter, experience matters, period. Most recruiters are hesitant to tell a partner about their specific deal experience because they lack the depth required to make a compelling case. The number of successful transactions a recruiter has handled directly correlates to the strength of their relationships with law firms and management. Certainly, if a recruiter can evidence experience handling hundreds of such transactions, they must be doing something right. A recruiter’s reputation and credibility in the market are also key factors. A highly-experienced recruiter will most often lead in negotiating compensation arrangements for the partner candidate. Law firm management will only work with and disclose detailed and confidential financial information to those recruiters they know and trust.

On Complaints About Legal Recruiters

Parnell: In your experience, what is the biggest complaint from attorneys about legal recruiters? What can the industry be doing better?

Larry Watanabe: “There continues to be an increasing need among the major firms to differentiate themselves and their market positions.” Photo Credit: Watanabe Nason

Larry Watanabe: “There continues to be an increasing need among the major firms to differentiate themselves and their market positions.” Photo Credit: Watanabe Nason

Watanabe: Because the majority of the partners I represent call me to assist in their move, I don’t receive many complaints about other recruiters. I do however receive countless complaints from law firm management about recruiters. The issues are far and wide ranging from a recruiters unauthorized submission of a candidate to grossly misrepresenting or inflating facts about a partner’s book of business. The legal search business can be extremely lucrative and unfortunately, there are virtually no barriers of entry in to the profession. There are no exams, license or other requirements to enter the business. With the advent of technology and information, nearly anyone with a computer and phone can access enough information to be dangerous. This can create havoc in the industry for both candidates and clients. Because the industry is unregulated, both firms and partner candidates need to be as discerning as possible when working with a recruiter

On Alternative Fee Arrangements In Legal Recruitment

Parnell: Have you seen firms looking for alternative fee arrangements from you? Are they looking for you to share more in the risk of laterals panning out, post transition?

Watanabe: Quite frankly, no. I am somewhat surprised the topic has not been raised but we exist in a profession where there is a continued race for top talent in an increasingly competitive market. I believe law firms recognize that successful go-to recruiters are rare and will bring their candidates to those they trust and where there is a genuine partnering relationship. Participating in some element of the risk of the hire would only make sense if there were an upside to share as well. The fact remains that despite all the vetting and due diligence, lateral hiring is a high-risk proposition. Once the partner or group joins the firm, the recruiter is no longer involved and consequently does not have the capability to contribute to the success of the acquisition.

On Vetting Book-Of-Business Portability

Parnell: When you are vetting the portability of a partner’s book of business, what are you looking for in terms of credibility?

Watanabe: This is a key and crucial role for an experienced recruiter and one of great potential benefit to the partner candidate. Many recruiters do not participate in this aspect of the process because they do not understand how to address the issues involved. In evaluating a partner’s practice and estimating the likelihood of porting that practice and revenues to another firm, we have a comprehensive and methodical level of inquiry involving the partner’s data. Because this is not a science, we look at various angles relating to the data and are expert in scrutinizing its finer points. Among these points, we explore: the history of each client and revenue generated by client, learn about the partner’s relationship with the client, how the client and matters(s) were originated, the type of legal work that is being handled, which lawyers are handling those matters, discern whether there any other attorneys with the same client relationships, evaluate current work in progress and the partner’s overall views of the potential portability of their practice. Having brokered over 1,100+ partner deals throughout California, we are in the fortunate position of having a database and wealth of information of literally thousands of partners’ practices and clients. This additional layer of data enables us to flag discrepancies so it is often difficult for us to miss much through this type of checks and balance system

On Vetting Law Firms For Partners

Parnell: I often find that partners will ask my opinion of a firm, while not really knowing what, specifically, they are looking for in the opinion. What criteria do you find most useful in helping a partner vet firms of interest? Culture, footprint, economics, primary client lists, etc.

Watanabe: In representing the partner, a recruiter needs to learn every facet of their practice including but not limited to their clients and how they have been able to develop their client base, resources required to enhance the likelihood that clients and matters may follow them, detailed economics of their practice, compensation expectations and their personal goals and attributes. Understanding the goals of a partner’s decision to consider a lateral move is paramount. If their expectations and priorities and objectives cannot be readily met in the marketplace, I will counsel the partner to strongly consider remaining at their current firm. Making a lateral move is difficult and risky and there should be ample business reasoning to do so.

On The Consolidating Market

Parnell: What are your thoughts on the consolidating market? Do you think that this will be good for the market?

Watanabe: As we discussed in 2014, there continues to be an increasing need among the major firms to differentiate themselves and their market positions. For many, the belief is part of that distinction will ultimately be determined by sheer gross revenue and geographical reach. The market will continue to consolidate through firm mergers, acquisitions, and major lateral group hires, as that is the fastest and most effective manner in which to increase revenue. This activity will also obliterate some firms, which will leave the market entirely. I firmly believe that in the coming years, there will be a top 20-25, not 100, of the world’s most prominently distinguished law firms. The remaining firms will be positioned in the middle of the pack and will need to take differing paths to separate themselves from the others and their respective market positions. The client market for law firms is already changing and the demand for RFP’s is at an all-time high. Law firms need to invest in resources and develop branding strategies to distinguish themselves with their clients. An increased emphasis on branding and the use and implementation of technology will help in this effort. Overall, it will be good for the market as firms need to separate and establish their respective market and niche positions.

On Hiring Trends In BigLaw

Parnell: Are there any hiring trends on the horizon? What practices do you see firms focusing on developing over the next year or two?

Watanabe: Data privacy/cyber security and FinTech are two practice areas where the demand for services far exceeds the means of experienced attorneys. Other practice areas that are currently in demand include corporate M&A, private equity, regulatory compliance, complex litigation, employment, and real estate. While patent litigation filings have been on the decline, there will be a consolidation and reorganization of the IP bar. The need for a deep and meaningful patent litigation practice is critical to any major law firm’s practice structure. Many firms are now taking strategic advantage and assessing their bench strength while talent in this area can be acquired at a more reasonable price point. Despite the uncertainty many feel about the economy and new administration, firms will continue to invest in bolstering their corporate practices around the world.

 

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