Steve's Rules with legendary executive recruiter Steve Nelson from the McCormick Group

Steve Addresses Some of the Landmines in Hiring Business Professionals

Steve Nelson Season 1 Episode 5

Law firms need to hire business professionals as skilled and capable as the lawyers in their respective areas of focus. And yet, many firms still try to hire professional staff by relying on self-sourcing, agencies, or contingency recruiters. Steve explains why these results are often mixed at best. And what firms need to do to make sure they are recruiting the very best talent. Steve also shares his thoughts on some recent survey results regarding lateral partner financial performance. (Hint, multiples are not what they used to be if they ever really were.)

Contact Steve
McCormick Group

Contact Murray
M Coffey

Unknown:

Murray, welcome to Steve's rules, periodic podcast featuring Steve Nelson, executive principal at McCormick group in the law and government affairs practice. My name is Murray Coffey, and I am the principal of Adam Coffey, a law firm marketing and business development Boutique. For more information, please visit my website at M coffey.net Steve has been an executive recruiter for nearly three decades, and without naming names, he is ready to spill the tea on best practices, and maybe a few not so best practices by firms and candidates that he has seen during his career, recruiting some of the most driven and successful professional into highly profitable and growing firms. Steve is a former lawyer and journalist and is a fellow of the college of law practice management and a proud son of Wilkes Barre, Pennsylvania. Full transparency here, Steve has helped my career immensely through the years and has become something of a career shaman to me and I know many others. Hey, Steve, how are you good to see you? Hi, Murray. Been a little How are things with you and your friends at McCormick

Steve:

group? Oh, it's great. We're we're actually having our retreat right now. So we're getting everybody together, people from out of town, me meeting some of them for the first time. So it's a great, it's a great event, and we're glad to be doing that. So it's, it's exciting.

Unknown:

It's nice to be able to get together with in in person, with people again, you know. And you know, with such a such a people forward, kind of industry that you're in, it's you got to make these relationships Right,

Steve:

absolutely. So really beneficial.

Unknown:

Hey, before we jump into our topic today, I was, I was doing my my usual review of of my friends posts on LinkedIn, and saw an interesting post that you flagged a story or maybe a survey from that group decipher, maybe talking about who they are, but, but, but you flagged that. I thought it was really interesting, and it kind of ties back to what we were talking about in our last episode about evaluating a evaluating a lateral partner in one of the elements being, you know, book. So talk a little bit about that, because I think it's really interesting. And the way you position it was, was fascinating as well, right? So

Steve:

decipher. It's probably been around for more than five years. It's, it's a company that really has its major product is in the due diligence area. Others, they'll, they will conduct certain due diligence background checks on various partners in the market for for firms, you know, that contract with them, it's not something we're really involved in. We're not, certainly not anything that we have any involvement with, but, but they do put out a lot of good data and a lot of good surveys. And I saw a recent survey that they did which had a lot of data about, you know what's been going on in the market. But what's interesting to me was they had been doing studies of the book of business, which we talked about last right? And what's interesting was that they came up in 2023 the book of business, the percentage of the the ratio between compensation and book of business is over 60% so for example, if you've got a partner who claims to have a million dollar book of business, the average comp for that partner is six over 600,000 which is kind of out of line with the general thinking And the general ways that firms approach it. And I, and I don't believe that that's related at all to sort of discounting the book of business. I think that's what what the lateral is claiming to have. So, so it's really a high number, and I think part of that is there are a fair number of what we would call succession hires, where you're hiring somebody at a partner level with little or no business, because you've got some retiring partners who are riding off sunset. So So to some degree that will, you know, that will skew the numbers. But still, that surprised me, since we really we tend to be thinking of 35 to 40% as the kind of ratio in market, right? So I think that's interesting, but it also illustrates that, you know, if you, if you adhere to a, you know, a very strict, formulaic approach to the so called book of business, you're probably going to run into trouble, and you're probably not going to. At many valuable items that way, if you're, if you're discounting too much, and you're and you're skipping on the compensation, yeah,

Unknown:

and, you know, I just saw an article again in LinkedIn. It popped up in one of my feeds. Thompson Reuters just put out a report on realization, which is something you and I talked about as well last, last, last week. I'm just remembering this now. And and our, some of our firms, are struggling with keeping those realization rates where they need them to be. And so if you start talking about, you know, a million dollar book of business with a realization rate of, let's say, 80% that's suddenly an $800,000 book of business, and you're paying$600,000 to buy $800,000 worth of business. You know, there's the I'm not I have no head for numbers. But something tells me it doesn't quite add up. So so interesting and interesting to see how this, all this stuff is, is converging and and how one thing impacts another. And, you know, typically on these podcasts, and thus far, we've talked about recruiting as it relates to lateral partner recruiting or lateral attorney recruiting, but I think we're going to switch gears a little bit today and talk about the professional staff side, the C suite folks, even some of the senior director folks. And those are those, are those. Those have always been tricky positions to fill, but it does seem like they're harder to fill these days. And when you go even to the layer below that, to the manager and all level. It's really hard, but, but we won't talk a little bit today about what those what the reason for some of those struggles might be, and as firms are thinking about how they engage recruiters, what they need to do to evaluate the recruiter that they're talking to and what kind of relationship they need with that recruiter. So, you know, I think it would be good for us to maybe do a little bit of a recruiting 101, here, Steve, and talk about the difference between retained and contingency search. So maybe we start there.

Steve:

Absolutely, that's exactly the way to start, because I think law firms are adhering to a very much of a two tier system for the C level, CEOs, CMOs, CFOs, any C, most C level positions, the firms will many firms, most firms will use a retained search firm to handle that, that search. And there are, there are some of the national, what are known as the Shrek firms, which is, you know Heidrick and you know Russell Reynolds and court fair and so forth. And then, then, of course, there are others that are focused on the legal profession, several of those that anybody who's who's familiar, who's involved in that will know who those people are. Those are working the C level. When you get down, even at the director level, more common, even at the manager and below level, the firms are likely to use contingency recruiters or agencies, and in that case, what they're what they like to do, most often, not always, but most often, if they can't fill it themselves. That's always the first, the first line of defense. Let's see if we can fill ourselves, the the recruiting people within the firm, within the HR department will usually reach out to a fair number of contingency firms and let them know about the opening and have them try to find people for for those openings. And so there's in those situations, most often it's multiple, multiple firms, contingency firms, agencies actually searching for those people concurrently. Correct. So I mean and that, and we'll get into it, that raises a bunch of problems. Yeah,

Unknown:

and I've got some thoughts on that as well, but please, yeah, all

Steve:

right. So, um, let's start. Let's start with the the search firm, the the C levels. I think we should start with them and talk about the the sort of advantages. I mean, you do have several dominant search firms in the in the legal industry, and sometimes those do include the large firms that I mentioned before, and they're dominant, and there is an attitude among the leading firms, it's almost what we call the Cravath syndrome, where we're going to use this reliable, well known search firm. To handle our search, because if it goes wrong, nobody's going to second guess me as to why I hired X firm, right? And and so those firms tend to get the work over and over again. Now, you know, most of those firms are, you know, I mean, they are, you know, they're staffed by some really good people. There are a lot of good search executives out there at those firms, but there are a couple of weaknesses that I think, you know, I think that people point out. One is conflict space. So if you're using one of the dominant firms, there's a good chance that they've placed, over the last number of years, X number of people at Next, number of firms and and certainly within the last year or two, if they've placed somebody at firm X, they can't recruit either that person they place. They certainly should not. Should Never recruit that person directly, or be anybody else at the C level at that firm. I mean, they have a client relationship. They don't, they don't. They're not supposed to recruit for clients. So at best, you're dealing with a somewhat reduced percentage of the market that they can actually even reach out to second point that I want to mention is I think there's a tendency at some of the of the large search firms to recycle the same candidates over and over again. They may not be people they place, but they're sort of, they have their list of what they deem to be qualified candidates, and they'll keep running those people over and over again, because it's a little bit of shooting fish in a barrel. You know, they don't really reach out to more people because they feel they can find, you know, one of their, you know, tried and true people will take a job, and therefore they're not. They're not pushing the envelope, I think in many cases of so much as they should be. Another point is the they're very tiered organizations, so the people who are making the initial contacts and even the secondary contacts with the candidates are often not very sophisticated about the market. Don't understand the law firm market. I really don't understand what really even what they're looking for. What are the attributes that that really separate the contenders from the pretenders in terms of a particular search. So it's really, it's very difficult, because sometimes they lose candidates along the way who who basically come out and say, you know, I got contacted by x, and the person was so unprofessional that I just decided, I just said, I'm not moving forward with it. So you may be missing out on people because you're not using your top people early enough in the process.

Unknown:

Talk about that. Yeah, yeah. So, so I do, because as somebody who's hired a lot of people and a lot of different levels, as you know, the candidate experience during the recruiting process is is essential, and I think it's something that gets lost and forgotten. Sometimes, you know, working with you and your team can't, you know, always, always a great experience. It, but there's not a lot of levels at your organization that said, you know when you're when you get that call from that junior person and they they really can't answer questions. They've got a they've got a list of of questions that you clearly know they're just checking off the answers to once they get them. That's not helpful. That's not helpful as a candidate, and that's not helpful for my candidates who I want to bring in to feel great about, about, about taking that call, because the people who you want usually are people who can take a lot of different calls. And so you know, out, you know, there's, there's a the, I think the, I think the firms that are not educating their junior staff a little bit more fully on on the on the position and on the market, what's going on in the market, are losing an opportunity there. I mean, I understand why you've got to have the juniors making that first round of calls. I get it, the larger the organization is, the you know, harder it's going to be for the senior people to make those, those initial calls. But I'll tell you something when, when I get a call and it's, it's the senior person at the at the recruiting firm, I I'm it. I'm kind of. Interested in having that conversation. That's a more, you know, that that's a that's a door. I'm more interested in in walking through. And I'm not looking to walk you through any doors, folks. I'm doing great happy here, but, but, but I do want to. I do want that. You know, the idea of the candidate experience is, is, boy, is that is that key, right?

Steve:

Okay, yeah. And that's what I wanted to, you know, talk about a little more, because I definitely, I have talked to any number of candidates at the C level position and their experience with a couple of the leading search firms in the legal market is, I mean, they are very critical about how they were treated. Never you know, kept in mind. Never you know, never contacted about their status within the process, never given good reasons for feedback. And so there is a lot of chatter in the market about the quality of some of the search firms.

Unknown:

So, yeah, yeah, yeah, absolutely right, yeah. It's Go ahead, please. Yeah.

Steve:

So then I wanted to switch it and talk about the about the other positions, you know, the particularly manager positions, directors. To some degree, some firms will use the big search terms for Director. Sometimes they don't. In fact, a lot of director positions, to be fair, are often he are the ones that are best recruited by the firms themselves, because they know them. You know the C levels. Your CMOS going to know lots of directors out there, just because they've worked with them before. They see them at events. So they kind of know that field. They don't know the manager level and below nearly as well. But at the manager level, I mean, you're talking about, in most cases, very savvy professionals, people with a lot of expertise in a practice area, whether it's practice group management, pricing, lpm, information technology, HR, uh, Marketing, BD, um, they're they're very qualified people and and often, while there is some movement, of course, they're not the easiest to dislodge from their firms and and so, but the approach where you know, you use one of these contingency firms to go look for those people, I Think it, what it leads to, in many cases, is the contingency firms, they have a method of doing business. Their method of doing business is basically, let's get these candidates really fast. Let's have a good database so we know that people are out there, you know, who's reached out to us recently? Let's get to our candidates really fast, get them in the door, because we're competing with somebody else, and, you know, and move on. And if we can't place them in a couple of weeks, we're moving on to the next job. So you're getting kind of this sort of half a market. You're really only focused on people who are already sort of motivated to leave a lot of times you want to. You know, a search firm really wins its plaudits by going out and finding people who are reasonably happy in their jobs, sometimes quite happy in their jobs, but but if you offer them an opportunity that you know, that really, you know, moves them up a level, whether it's leveling firm or whether level of responsibility, sometimes level of compensation, that may change their view, and they may throw their hat into the ring. If you use this sort of tried and true or tried and false, I would say formula, or using multiple recruiting firms at the same time, I think there's a good chance you're going to miss out.

Unknown:

And I think the quality of the candidates, my experience has been, and I, you know, I've had good experience with contingencies, you know, contingency, recruit, recruitment. But by and large, my preference is always to go with a retained search all the way down to even for me, I was even doing it at the specialist level because, because I there just was so much competition out there, and what I would find with the with the agencies, especially the agencies, more so even than the contingency fee shops, is you get, you get, you get a bushel full of CDs, but they're not on target. Sometimes they're so off target that it's kind of hard for you to understand how that even got under. Knows from this, from this agency, you know, classic is looking for a marketing manager. And, you know, if the word market appears in somebody's CV, they, you know, I'm all of a sudden looking at a, at a, you know, a CV for somebody who's, who's, who's, you know, who's the the, the procurement chief for a supermarket in in Poughkeepsie, right? And, and so it's, it's, it's that too, because they don't, the other part of is they don't know, they don't know the the field. They don't know it well. And it's really hard with marketing and BD folks to to have a an agency or contingency folks, you know, recruiting because they just, they don't, they don't, they don't understand the nuances of that particular role. With an IT role, you can say, Look, do you know these languages? Are you qualified in this kind of technology? Do you there's a certain like you can, you can pretty quickly sift through the qualifications that you need for somebody on the IT side or even the HR side, but it's, it's, it's, it's not as it's not as cut and dried with with, you know people you might hire from recruiting, or people you might hire from marketing or BD,

Steve:

yeah, I would, I would, I would add this that might you know, a person who does our law firm technology recruiting would disagree with you about the words. I mean, there are, just like with BD and marketing, there are separators, things that people have done that aren't going to come through on a word scan on a resume. So, I mean, I think this is really across the board is the level of detail that have to do. Let me just wait one other comment about contingency firms, because we're a hybrid firm, so we do work on contingency. It's just that the exclusivity you doing, exclusive contingency search is often a really good benefit. It does protect you, because at least you know that that firm knows that if they do their job right, and they find a person, they'll get paid, rather than the situation where, in a in a sort of straight competitive contingency situation, they can do their job, right? Somebody just beats them to the candidate and so, so I think that you can get value without having to pay or retain it's just, it's more about, okay, what are, what is, what is this search firm? What are they going to do? What's their methodology? How are they finding candidates? How are they delivering candidates that's more important than, you know, the number of placements they've made, or, you know, or you know, whatever. It's just, it really is important, I think, for firms to think about the particular position and the level of detail they need. Because those people who are at the manager level, they can, they can make the difference between succession failure of your whole program. And why would you use a different approach for them as you would for your CMO? You wouldn't. You would never run your cmo through a contingency search firm situation. Maybe I've heard of

Unknown:

it. Actually think that? You think that, but, yeah, no, I you're

Steve:

right because that we know one search firm that does it that way, but, but it's not, it's, it's, it's frowned upon. Let's put it that way. Yeah,

Unknown:

yeah, no, no, no, question about it. Before we wrap here, I wanted to just get a sense from you of what you're seeing right now in terms of number of available candidates out there, because we're, you know, this, we've got this, we've got this economy that's seems weird. And we have some law firms are doing, you know, pretty significant layoffs. And, you know, other law firms are really, you know, kind of playing everything very close to the vest right now. How is that impacting the number of candidates, or the quality of the

Steve:

candidates up? Yeah. So 2022, was a wild, you know, wild west market for for the law firms in the on the professional side, there were a lot of openings. People were looking for people, you know, they had come through the pandemic. They cut during the pandemic, all of a sudden, Business was booming and and so there was a lot of hiring going on. And there were, you know, a fair number of people in the market. I think one of the things with regard to the talent side, is that, and we, you know, we've heard all about, you know, the millennials and Generation Z and so forth and so on. But there's, there's definitely a lot of people in the market that were using this as an opportunity to increase their pay and. And their status, and so those people were pretty heavy market. So you had, at that point, you had a market with lots of jobs and a fair number of candidates. The number of jobs have been cut significantly in the last year, and you've seen a lot of firms lay off people on the on the staff side. So I think that's the case. Still a fair number of people are in the market. I think, you know, we're seeing, it's still a pretty active market for people to move, but we do have to be careful about the motivations of the people who are moving, because you just, you get a lot of, I mean, you know, we never used to have an issue with people taking counter offers. And now it's, you know, you know, we talk sometimes about a joke. And one of my, you know, one of the things I do on my comedy routine sometimes, is, I, you know, one of the things I talk about is the secret language of candidates. And one of the things that the secret language of candidates is when you when you present them with a job offer. You know, the response from them is, you know, got this job. Are you ready to accept it and say, Well, I've got to go talk to my significant other about this before I but what that really means is, I'm going to go out get a counteroffer if I can. And so that's what's in the market right now. People are very much that way. And the whole there's been in for years, there's been a lot said in the marketplace about the inadvisability of accepting account offer. You know that it's not you know. You know your your loyalties. Now question, they're not really going to solve your real problems. All they're doing is throwing money at you, etc, etc. But candidate base isn't thinking that way. They're saying this. And if I can get, you know, and get another $25,000 I'll take it, then I'll move on, whenever I move on. So it's a tough market with regard to that, but still, overall, good market for talent, but but part of it is you have to sell opportunity, right? You have to have a good story to tell, and I'll sell you the job descriptions. We could do another, another program on job descriptions about that. And so part of it is you have to be able to sell the opportunity, and you have to have our partner if you're going to go that route, you're gonna have to have a partner. That's, you know, that's that you can rely on to go get the best possible person in the market at any one time. Yeah,

Unknown:

yeah, yeah, absolutely. And, and it's a that counteroffer business. I, you know, I, I have friends, colleagues who will call me until I got a counter. I mean, don't do it, but don't, don't do it. Here's, here's, what's going to happen. And you know, inevitably it does happen. I mean, once you've psychologically walked out the door, you it's, you're not really walking back in, right? You're just, you're always on that threshold at both from your employer side and from your side, you're always on the threshold. And let me tell you, when things get rough, that person who got the counteroffer, you're the first one out the door.

Steve:

All right. So anyway, before we wrap up, I just want to mention my team that works in the and the professional side. I want to give kudos to the people I work with. Obviously, I'm involved in the professional staff. But I also want to talk about Cassie battle, who's been with us for years. You've worked with her, Wiz and the marketing, BD, pricing, lpm area. Deborah page is a Senior VP with us. Is All Things technology. She works both legal market and non the non legal market. And she knows all the CIOs, and she can get them, you know, she can get them to call back, you know, snap crackle, pop. And then Mandisa Marshall is is with us. She's a bit newer with us, but she's a she's a crack recruiter. Really understands technology, really understands social media, so she's a star in the making. And then there's a newer guy, even by the name of reed Weston, who are very, very excited about so it's a good team. So obviously I want to let everyone know that you know that we do this work. We got a good team to do it, and

Unknown:

you do and I know that. I know that from personal experience. So alright, see, well, why don't we go ahead and wrap it? We'll, we will, we'll, we will explore some other areas in our in our subsequent podcasts, and enjoy your retreat, getting together with your your colleagues and you know, having a good time. Great. All right, talk to you soon.

Steve:

All right. Take care. You.