By Amanda Robert
A s recent years of economic turmoil persist in high unemployment rates, declining home prices and increasingcommodity prices, it seems like the legal industry also struggles to regain its footing.
According to Chicago Lawyer 's 2011 survey of the largest law firms in Illinois, 13 of the 20 largest firms reported employing fewer Illinois lawyers in 2011 than in 2010.
The top three law firms — Kirkland & Ellis, Sidley Austin and Mayer Brown — all downsized in the number of Illinois lawyers. Kirkland & Ellis decreased from 634 to 616; Sidley Austin, from 561 to 532; and Mayer Brown, from 425 to 411.
Other examples of large law firms that lost Illinois lawyers in the past year include Jenner & Block, from 362 to 289; Baker & McKenzie, from 210 to 209; and DLA Piper, from 216 to 198.
On the flip side, while only three of the 20 largest law firms in Illinois showed increases in lawyers in 2010, six of the largest firms showed gains in lawyers in 2011. Winston & Strawn's Illinois numbers grew from 361 to 369; McDermott Will & Emery, from 282 to 301; and Latham & Watkins, from 150 to 269.
Chicago Lawyer's 2011 survey of the largest law firms in Illinois, which appears on page 24, not only charts the number of Illinois and Chicago lawyers, but also those in non-Illinois and non-U.S. offices.
As the business and legal worlds become increasingly global, the number of non-U.S. lawyers at the 20 largest firms in Illinois especially stood out in 2011.
For example, Sidley Austin reported employing 274 lawyers outside of the U.S.; Mayer Brown, 725 lawyers outside of the U.S.; and Baker & McKenzie, 3,038 lawyers outside of the U.S.
In a recent roundtable discussion, Charles Douglas, chairman of the management committee of Sidley Austin; Michael Morkin, managing partner of the Chicago office of Baker & McKenzie; and Bert Krueger, chairman of the management committee of Mayer Brown, considered globalization and its impact on the growth and culture of their firms.
Here is a portion of their discussion:
Chicago Lawyer: When did your firm first decide to become a global firm, and what steps did you take to achieve that goal?
Morkin, from Baker & McKenzie: 1949. From the moment we started it was Russell Baker's vision to be a global firm. Within the first 10 years, we had 13 offices and were growing largely by a combination of moving existing Baker & McKenzie lawyers to new offices and by hiring locally.
Douglas, from Sidley Austin: The firm went from being a more regional firm in the 1970s to becoming a more national firm through the next two decades. By the time you got to the 1980s, it was a significant push to become more global.
We already had a London office that was open in 1974. As we got to the 1990s, we really did push significantly. We changed the form of our London office so that the office could become one in which we had UK-licensed solicitors as partners in the firm. Prior to 1994, the UK Law Society did not allow that, but when they did allow it, we recruited four partners into the firm from UK-based law firms.…
By the time we got to the late 1990s, we said we intended to be a much more global firm. And actually, our first step in that regard was to expand significantly our New York office with a merger with Brown & Wood. We thought a large part of the practice internationally would be in the capital markets and finance area.
From that, we also opened a Hong Kong office. The merger with Brown & Wood added the Brown & Wood lawyers in Asia. The Sidley firm had opened an office in Shanghai in 2000, Brown & Wood had one open in 1998 in Beijing. In 2003, we opened the office in Tokyo, again, replicating the model we were using in London of having Japanese-licensed bengoshi as our partners and focusing on the practice of Japanese law.
And the process continues.
Krueger, from Mayer Brown: Our timeline is similar to Sidley's, although the approach is different.
In the early '80s, we were primarily in Chicago with a very large client called Continental Bank and when that failed in 1984, we took diversification much more seriously and became a national firm.
We've had international offices for a long time. We had them when I came in 1975. We had been in Paris and London, in Brussels, but we didn't become serious until the late '90s. We decided that we should combine with a UK firm and we seriously met with a number of firms and did a combination there.
The way we've grown, rather than opening offices, has been really to combine with existing firms. London was a big one. Paris. Germany. Asia was a very big one about three years ago now ... and most recently in Brazil, where we have an affiliation.
Our objective is to have that growth through combining with existing law firms with a significant number of lawyers and local strength in order to piggyback the global operation. We haven't gone into locations and generally opened an office. …
C.L.: What kind of lawyer do you think works best in a global law firm?
Krueger: A good one.
Douglas: That would be a good start. Let me take a stab at it. Certainly, the quality of the lawyer is absolutely essential and a given for any of the three firms you have seated around the table today. I think in today's day and age, they have to be quite entrepreneurial. They really have to recognize that there is a very competitive marketplace out there.
The three firms that are sitting in here today are not the only ones who are thinking about Asia. All firms are thinking about the move toward a more global client base, and many are opening offices, as we speak, in China. You have to have someone who is prepared to be quite entrepreneurial, quite competitive.
I think the other aspect is cultural. I like to tell all of our partners that they succeed in large part because they are quite competitive, but we want to see that competitive nature directed to the outside world, not internally....
Krueger: What doesn't work is a solo practitioner in a big firm, no matter how entrepreneurial he is. Going back to culture, in order to make firms succeed, we need people who understand the necessity of building bridges across our geographic regions.
We have a concept in our compensation system where we share collection credits among partners and, in March, I was looking at our top 12 matters and six of them had partners sharing in different geographic regions. I would say it's those kind of partners who understand that the way we're going to win business from our competitors … that the number of competitors will be fewer where we can really bring the geographic scope together. ...
Morkin: Certainly the quality is always going to be the most important thing, but when you get into the cultural aspects, that's going to be important for it to work in any firm. Every firm's culture is a little different. For us, the people who we look for really have three additional qualities that we hold very dear to our culture since the way we grew up.
One is that it's almost impossible now to come work for us if you're not passionately global. Everything we do, the clients we serve, even the clients we serve in the local markets, we serve better if our lawyers have had experience working with people from other jurisdictions. You help your clients solve problems better if you've been there before, if you've been to the jurisdiction they're thinking about, if you have lawyers who are indigenous to the areas they're thinking about.
Second … we're told by our clients that what they like about us is that when we're working together, they're surprised that we're friends ... We spend enormous resources getting our people together, and it's a lot of people to get together. It's been important for us from the beginning.
The third and equally important is that they are client-focused. They are not focused on how much they are going to make. They are not focused on how important they will become. They are focused on how they can best help their clients. ...
C.L.: How does the economy affect your mission to be global?
Krueger: I'm not sure it affects the mission. It obviously affects the business that we have right now and the type of business. In some respects, the global nature of our practice means that some areas will be up when other areas are not doing as well. Asia last year was terrific for us, even though the U.S. economy was not as robust as we would've liked. I think the economic cycles we go through in different periods is one of the reasons we wanted to become global and diversified, to serve our clients' needs better. … The economy hasn't slowed us down. We, as I said, did our Asia deal about three years ago and our Brazil deal about a year or so ago. So we look at this as really a long-term strategic direction for the firm.
Douglas: I would say the economy has both underscored the need to be more global and has, in some respects, made it more difficult to accomplish that goal. It certainly underscores the need to be more global, because as Bert just said, the economic downturn affected different parts of the world quite differently.
I was just reading a news clip from a couple days ago that talked about how the Chinese government was taking steps to cool down the economy's growth while we're still talking about stimulus packages. We saw the same thing that Bert's firm did, in 2007 and 2008, the offices in the Pacific-Asian region were virtually unaffected. They did extremely well. By the time we got to 2009, they began to feel some of the impact. But it underscored the fact that firms have always benefited from having a balance of diversified practices and that helps as times change.
The legal consultants used to tell us, if you went back to the 1990s, that there was no role for a full-service law firm. That business model was not the right one. You had to focus on one or two areas. They had a couple of prime examples, most of which are no longer in business....
The diversified practice of the full-service firms helps with the changes. The same is true on the world economy. The effect of economic forces is different in different areas. A broader-base platform will help firms grow and expand.
By the same token, there is no getting around the fact that the economic downturn certainly made those parts of the business that are affected by it less profitable. Growth is expensive, and ambitions cost a lot of money. Fortunately, the well-managed firms have enough wherewithal to be able to continue their growth.
Morkin: It builds on itself. The more global you become, not only the more diversified you are and the less affected your overall firm is going to be by economic downturns in various geographies, but you're also going to be better at adapting to them and better at helping your clients adapt to them.
You were there in Latin America when they had a crisis, and then when they had one in the U.S. or in European economies. They are different, but you've been through them. Your firm has been through them. Your lawyers have been through them. You have helped your clients through them.
C.L.: How do you balance your local presence here in Chicago with that global presence that we've been talking about?
Krueger: We have more of a dual-focus than Baker. Globalization is part of our practice, but we also believe that there are a lot of very strong local practices in all of the firms that have combined to become Mayer Brown, including Chicago. We are as much focused on building the strength of the local practices that may not have as much of a global emphasis as we are on building the global piece. There is virtually no practice in our firm that doesn't have some global element to it.
When we started down this road, litigators didn't think they'd ever benefit from globalization. They'd just have conflicts and no business. But we see cross-border litigation.
Fundamentally, we think that having a very strong Chicago presence is critical to who we are and to our success on the global platform. If you look at some of our corporate clients, they use us in every region, but they originated in Chicago given our strong reputation here. They've basically grown as clients as we've moved around the world.
Douglas: For as strong as our Chicago is, and there's no question that it is quite strong, it's only about 30 percent of the total firm even today. That means that 70 percent of our lawyers are somewhere else. And, increasingly, we believe that will be the case, that we will grow much more rapidly in other cities.
We'll still grow in Chicago, no doubt about that, but you'll see us continuing to grow much more aggressively in cities outside of Chicago, because that is, frankly, where we'll have the opportunity to build those offices as we've typically built them. …
There are a few firms that are historically U.S.-located who today have more than half of their lawyers outside of the U.S. I think that's a trend that you'll see continuing even for firms such as ours where our method of growth has been to do it more indigenously than by merger. But, having said all of that, we're happy to have Chicago. It's a very successful practice.
Krueger: It's interesting the way the Am Law  came out. Our three firms are in different categories. We're all global, but Sidley is recorded as a national firm, I think because of the percentage in the U.S. We're international because we're about 50-50 inside and outside. We're a little bit more inside in the U.S. And they've come up with this new category for [Baker & McKenzie] and DLA [Piper] called a verein, which they seem to be pitching as not a real law firm. Did you react to that article?
Morkin: We had a bit of a reaction to that.
Douglas: Was it a positive one?
Morkin: It was not. The verein — we're far from the first people to use it. It's our legal structure. It has nothing to do with how we practice law, how we work as a law firm or how we serve clients. But the local versus global piece is different for us, and different for me, in two ways.
One, I don't have the burdens that Chuck and Bert do. I manage the Chicago office and play a role in our policy committee for the global firm, where they chair the whole firm.
We all started here, and we all grew up from there differently. We, as a firm, don't like to think of ourselves as a Chicago firm. We have about 5 percent of our lawyers in Chicago. We only have 20 percent of our lawyers in North America. And yet, Chicago is, at any given time, our second or third largest office. We have a lot of spread, but we have never had in any of the major markets the presence that Mayer Brown and Sidley have here in Chicago.
In a sense, we grew up as a global firm, and now, we have continued to expand globally. We just opened another office earlier this week. We are focusing as much in each geography to continue to build up the local offices, the local practices.
In Chicago, I've been at the firm for 21 years and we're about 40 lawyers larger than we were 21 years ago with most of that growth coming in the last three or four years … that's important to us as well. We want to be a bigger presence in Chicago, in the community and in the corporate community.…
Douglas: My guess is Mayer Brown is probably the same on this front — I think we all struggled, notwithstanding the historic origins of the firm, to avoid the firm being perceived as Chicago-centric. You won't see anything that describes Chicago as the headquarters of Sidley Austin. We strenuously resist doing that. It is the single largest office, that's certainly true, but our New York office isn't far behind. Our Washington office isn't far behind. Someday we hope one of our offices outside of the United States will not be far behind. One thing you raised Bert that I was kind of curious about, having done two very large mergers, how do you structure Mayer Brown if you're not using the verein system?
Krueger: That's an interesting discussion. We're probably all different in that respect. Part of it depends on the regulatory requirements and the tax requirements. We have a number of legal entities if you read our letterhead. But functionally, we manage ourselves as if we were one.
We have a management committee that is comprised of one person from London, one person from Paris, one person from Hong Kong, three people from the U.S. in addition to me. And so, our different entities may have somewhat different fiscal years and tax years based upon how they were, and we don't try to bring those all in. Our business models are very different in the different areas. …
I guess, legally and taxwise, we have these various different entities, but in terms of how we manage the lawyers and the business and the clients, the partners don't recognize it. It's just Mayer Brown.
And I agree — we've looked at a verein and it's more a question of a structure than how to practice law. We didn't think it was critical for us at this stage.
Morkin: Until 10 years ago, we were an Illinois general partnership, everybody globally. That's how we grew up. We moved to a verein just to be compliant, to be able to work there.
Krueger: When we combined with the UK firm, their tax system was different and how they treated income was different. That's been one of the challenges for a variety of people who do combinations, and for some of those firms, the verein really is a way of just keeping two different businesses … parallel. We've had to keep our separate entities.
Douglas: It's a matter of some curiosity because you hear people talk about the verein as the answer to how you merge large organizations. We have no experience with it because the growth of all of our offices has been much more indigenous. It's not that we don't have a Sidley Austin UK. We do. But the partners in Sidley Austin UK include a whole bunch of us from the U.S.
C.L.: As a managing partner of a global law firm, do you find you're becoming a world traveler?
Morkin: I actually traveled more when I was practicing full-time than when I started managing.
Krueger: But that's because you're really focused on the Chicago office, right?
Morkin: Right — although we have plenty of meetings. But I mean, for me, I'm a disputes lawyer, too. I veered toward international arbitration early on, and as a result, I have tried cases in Asia, in Europe and in South America....
I will say that just in my role as the Chicago office managing partner, I'll have probably half-a-dozen international trips and another half-dozen domestic trips just for the management side of things. Our chairman, who can't be here today, because he hasn't been in one place since he took the job, is literally on the road 80 percent of the time.
Krueger: I think being on the road is critical to the job of the chairman. With us, as we've grown through a combination of law firms with different cultures, different histories, etcetera, integration is a never-ending job.
People around the world feel that they're really part of one firm if they know the chairman and can call the chairman and can reinforce values and culture and this whole concept of our core clients and what are we doing for them in each region — that's really critical to the chairman of a firm like Mayer Brown.
Douglas: I agree with that, but as Bert points out, we're a little different in our viewpoints of growth and strategy. Technically in our system of governance, we have had a management committee composed of eight partners. That's what I chair.
The other seven partners who are on the management committee are all responsible for something, including large parts of the regions. So, one member of the management committee is resident in the Hong Kong office. He is responsible for the Asian-Pacific offices. Another partner on the management committee is responsible for all the offices on the West Coast. There are managing partners in New York on the management committee, one from Washington, from Europe.
And so, we've got a structure in which we have very strong local managing partners who have substantial autonomy and responsibility for managing the offices and members of the management committee who are broadly tasked with making certain that the various pieces of it are functioning in a way in which they should. ... There is no substitute for having the senior leadership of the firm physically come to the office and spend time with the partners face to face, to deal with the issues and to make certain they are fully integrated and that their talents are being deployed optimally for the benefit for everyone.
I was in Asia in March, I was in Asia again last fall and in London and Europe both last fall and last summer. You can't forget about your domestic offices in the U.S.
There's nary a one of them that you won't see me showing up at along the way on a fairly regular basis.
In our system, I think we have the management responsibilities pretty well diffused into the hands of people who are really on the ground. I don't spend the 80 percent of my time that Baker & McKenzie's chair has to spend traveling. I still do try to serve some clients along the way. It gets increasingly difficult as time goes on.
I think this is increasingly true for all firms who have much more global and expansive ambitions — the people running those firms will have to be spending more and more time on the road, in the offices and actually focused on the management of the firm.