February 26, 2001
THE CALIFORNIA LAW BUSINESS JOURNAL
By Katherine Gaidos
Will the legal recruiting industry ever rein in the maverick headhunters with whom it has a love-hate relationship?
Every legal recruiter has a story to tell about the competition. Almost none of them is flattering.
Partner A picks up the phone one day and retrieves a pre-recorded message: “If you are interested in real estate law opportunities at another firm and have a book of business totaling $1 million, please press one.”
Law Firm B receives a handful of resumes from a legal recruiter but shows no interest in any of them. In three months, the headhunter slaps the firm with an $8,000 bill for services rendered.
Headhunter C, while in the process of placing one associate with a firm, takes the liberty of poaching three more away.
And those stories pale in comparison to the tales lawyers tell about legal recruiters: “People see them as a sort of a necessary evil,” says one Los Angeles law firm recruiting director, who asks to remain anonymous.
Headhunters – viewed as anything from godsends to pests by law firms looking to enlarge their ranks – have earned a mottled reputation within the legal community. While many managing partners will swear by the services of one or two specific headhunters, others will swear never to use a recruiter again.
During the hiring frenzy of the last two years, law firms had little choice but to turn to recruiters to keep their associate ranks staffed. As the associate market has cooled, however, law firms and legal recruiters have begun to place renewed emphasis on character and reputation of the headhunters they use, in addition to a candidate’s book of business.
Legal headhunting evolved as its own specialty during the 1970s, when the executive search business sprouted a cousin known as legal recruiting. Today, the business is considered by some still in its infancy, with all the attendant problems and accessibility of a young profession, and no mandatory licensing or training to ease some of these problems.
“In this field, there’s no barrier to entry,” recruiter Marty Africa of San Francisco’s Major Hagen & Africa says.
Larry Watanabe of the Los Angeles-based search firm Watanabe Nason & Seltzer agrees.
“Get Martindale Hubbell, get a computer, start making some phone calls,” he quips.
In addition, Watanabe says, “There’s no bar that can sanction you.”
Legal recruiting has only one organization that resembles the California State Bar. The National Association of Legal Search Consultants, based in Chicago, has a three-page code of ethics – as well as an annual membership fee of between $395 and $595 – but many recruiters say it has almost no clout when it comes to enforcement.
“The National Association of Legal Search Consultants … has a code of ethics for the legal search profession, but there are members who regularly violate the rules,” Delia Swan of Los Angeles’ Swan Legal Search says.
The NALSC’s national membership roster currently includes 31 California members out of approximately 50 headhunters statewide, comprising both firmwide memberships and individual members. To join, a headhunter must agree to abide by the association’s code of ethics, and re-agree to the terms every year when he or she renews membership.
Essential to the code are rules such as “No search firm shall withhold candidate information which the employer would reasonably consider essential to its hiring decision,” and “No search firm shall recruit a candidate it has placed while the candidate remains with the employer that paid the recruiting fee.”
Generally, the association takes the role of a frowning, but gentle, mentor with respect to ethical violations.
“We’re not allowed to really tell somebody how to run their business or what to do, but we can make strong suggestions,” says Alan Miles of Los Angeles-based Alan Miles & Associates, a member of the association’s board of directors. Violators of the group’s code often fall through the cracks.
The association’s discipline trump card – in effect, the only card it has to play – is expulsion. In order to expel a member, however, the offended fellow-recruiter or law firm must send a written complaint to the association’s president. The association then calls both sides of the issue to get their story, and holds a hearing. If it chooses, the board can then ask the member to leave the organization – although not the business of recruiting.
According to Miles, however, members with complaints rarely follow through with these steps
“What really happens is that they claim this ethical violation, but a lot of recruiters are not willing to go through the process,” Miles says. “Usually they yell and scream and then do not follow up by writing in and making a formal complaint.”
In the past few years, Miles says, the association has taken only one action against a member:
Gregg Ziskind of search firm Ziskind Associates, a board member between 1995 and 1996, was asked to leave the board because of his involvement with “Emplawyernet,” an online recruiting service. His heavy investment in the service was considered a conflict, although not necessarily an ethical violation.
“One of his ads was ‘Take the chilling affect out of a headhunter fee by going with Emplawyernet,'” recalls Miles, a former partner of Ziskind’s.
Adding to the association’s discipline troubles is that not all recruiters belong to the organization.
“There are a lot of search firms out there that are not members,” Africa says. “First of all, it’s not cheap to belong. Second, all their meetings occur in expensive hotels” and require half the organization’s membership to incur travel costs, speculates Africa.
If the association did have a bigger disciplinary bite, it seems the organization would spend much of its time chomping away.
Conflicts and problems in legal recruiting range from innocent mistakes to not-so-innocent transgressions – and both types of problems often lead to fee disputes.
In addition, guidelines set up by recruiters to decrease the likelihood of fee disputes are sometimes abused. Take, for instance, the doctrine of “first in time, first in right,” which dictates that the recruiter who first sends a candidate’s resume to a law firm is entitled to at least a cut of the placement fee if the firm hires that attorney. In some instances, however, a canny recruiter will indiscriminately fire a candidate’s resume to law firm fax machines up and down the state, thereby securing for him or herself at least a technical “first in time” fee guarantee.
And in some cases, the headhunter giving such liberal business to Kinko’s to ensure a fee had no authority to inform every major law firm of the candidate’s quest for a new position.
Some of these unhappy attorneys may not even have known they were falling into the clutches of an unethical headhunter, Swan says.
“We have seen candidates respond to an anonymous job posting on the Internet, only to be papered around town without their knowledge and to their surprise,” Swan says.
According to most headhunters and the association’s code of ethics, candidates should be referred to firms only with their “express prior consent.” This particular section of the code is one of the most widely violated by rogue recruiters, according to Swan. Almost inevitably, the situation results in a fee dispute between the busily faxing headhunter and the recruiter whom the departing associate or partner officially chose.
“There are legal search consultants out there that are very shady, and they employ underhanded methods,” Julie Qureshi of Solutus Legal Search in Palo Alto says.
The six-month rule that applies to placement fees also applies to a recruiter’s freedom to find candidates within a firm where it has recently placed an attorney. The association’s ethical code dictates that a recruiter may not search for new candidates within a firm where it has recently placed a new lawyer – essentially keeping the fox out of the henhouse for law firms, even if that fox initially entered bearing a new hen.
Law firm recruiting directors are understandably unenthused when a headhunter, after placing an attorney with a firm, proceeds to deplete the ranks of that same firm.
Their displeasure rarely leads to any kind of effective action, however. “Some law firms will not look at a candidate’s resume if it is submitted by one of these disreputable recruiters. Some law firms simply won’t work with shoddy recruiters,” says Swan. “Others will take a good resume from any recruiter, whichever delivers first, right or wrong.”
The duration of this courtesy cease-fire is listed at six months in the association’s code of ethics but sometimes varies according to circumstances. Some recruiters place the stalemate at six months for associates, but a year for partner placements.
Other recruiters shorten these time periods, while still others say that they don’t always apply. If an attorney within the “hands-off” firm calls the headhunter and asks for representation, for instance, is that potential candidate still off limits?
“You know that person’s going to leave anyway, and a lot of firms understand that. Most firms will differentiate between a situation where you actively go and recruit out of their firm, and a situation where the person comes to you,” Mary Lee Augustine, of Advocate Legal Search in Los Angeles, says.
“But there are other firms who take it very seriously even if you haven’t made a placement, even if you’ve just submitted a resume in the past,” Augustine adds. “If that’s the case, where do recruiters get their candidates?”
Sometimes, according to Africa, larger search firms may accidentally violate a six month recruiting cease-fire. “Some of the search firms have gotten big enough that individual recruiters may not be aware of pre-existing relationships with a particular client,” Africa says. “In their enthusiasm to help a client or desire to make money … they end up calling into a law firm or corporation that is essentially hands-off for the time being because of a relationship with their search firm.”
Recruiters also must protect their reputations because of the high price tag they charge for their services. Placement fees run, on average, 25 percent of the candidate’s annual salary at her new firm – usually, but not always, exclusive of year-end bonuses. Placing one second-year associate at a large law firm, if that firm pays market compensation, will earn a recruiter about $36,000. Placing a partner who draws a salary of $300,000 will earn a recruiter $75,000.
The high cost of recruiters can sometimes make firms look kindly on associates that don’t come with a “$50,000 price tag,” according to one recruiting director. It can also make the firms less generous in excusing a recruiter’s faults.
“Sometimes I can’t help but think that the search firms do very little to earn their money. And when you think of the starting salaries going from $96,000 to $125,000, the search firms benefited from that, and why should they? Why should they earn all that extra money?” the anonymous recruiting director asks. “As far as I know, a lot of them don’t even interview their candidates in person.” Recruiting veteran Michael Waldorf confirms that recent trends in headhunting have not emphasized face-to-face contact with candidates.
“There are some who take pride in not even meeting with their candidates, because they feel they can talk to more people,” Waldorf says. “With the Internet now, many people are just dealing with this disembodied entity.” Another reason some recruiters have cut down on getting-to-know-you time is to increase their bottom lines. “Five years ago a law firm would compensate a lawyer with a million-dollar practice at or about $300,000 a year, which would equate to approximately a $75,000 fee to the search firm,” Watanabe explains.
“Now, given the rise in profitability, it is not uncommon at all to see a law firm pay a partner with a similar practice base between $400,000 and $500,000.” Headhunters confirm that the business has been lucrative enough to attract a wave of new recruiters over the past few years – which does nothing to benefit the reputation of the industry, since many of the new “heads” are green or untutored.
But lack of experience, and sometimes lack of ethics, won’t always hinder a headhunter who has found an attractive candidate.
“When I have an opening I might call four or five [trusted recruiters], but that’s not to say I won’t consider resumes from everybody who sends them,” the anonymous recruiting director says.
Most recruiters are clear that whatever their ethical values, the bottom line for the profession depends on a red-hot resume.
“They’ve never met the candidate [or] they’ve never met the client, but if they bring a firm the perfect candidate [the firm] will see them.
“Basically this is a candidate-driven market. And a law firm could hold me in the highest regard, have done literally 50 transactions with me, and a recruiter out of Washington, D.C., could call with the right candidate and they’re going to see that candidate,” Watanabe says.
He adds, “And I would encourage them to see the candidate. It’s the nature of the business.”
Law firms, by putting a high premium on good resumes, seem no more likely to elevate the ethical behavior in the headhunting community than the consultants association.
Many headhunters, meanwhile, continue to bemoan the sometimes sketchy behavior of their compatriots. “Ethical standards are upheld and the real slimeballs are the exception and not the rule, but that’s not the general perception of our field,” Solutus’ Qureshi says. “The grapevine in the legal profession is very strong, and lawyers talk. So it’s easy when somebody has a bad experience with a recruiter for that to kind of blossom … for more people to know about it.” According to Africa, this grapevine of bad news is a problem that recruiters share with lawyers.
“We are judged, as are lawyers, by the least ethical in our midst. That’s the assumption that gets projected on us, no matter how good we are,” she says. In lieu of a strong disciplinary influence from law firms or the association, a tightening of the legal market may be the only way to eliminate some of the industry’s more unworthy competitors.
“As the economy turns, it is likely that the unethical recruiters will be weeded out, and the reputable, ethical ones will remain,” Swan says.
But not all recruiters have given up hope that the association can help provide new legitimacy to legal recruiting.
“[Recruiting] gets much harder to do when times are hard, and I think we’ll see some of the newer recruiters, the less seasoned, the less committed, begin to drop out,” Augustine says. “And I think at that time too, relationships built upon experience, personal contact, and the NALSC code of ethics are going to be come more important to firms and their recruiters.”