New leaders face challenges from economy, mergers

(Left) Robert Shuftan, Edwards Wildman managing partner, and Mary G. Wilson, Chicago office managing partner of SNR Denton, work at firms that recently grew by merger.
(Left) Robert Shuftan, Edwards Wildman managing partner, and Mary G. Wilson, Chicago office managing partner of SNR Denton, work at firms that recently grew by merger.  —Photo by Natalie Battaglia
April 2012
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By Roy Strom

During the first two months of this year, at least half a dozen firms named Chicago partners as new firm leaders or changed their Chicago office's managing partner.

For example, Kaye Scholer; Edwards Wildman; Dykema; SNR Denton; Nixon Peabody; DLA Piper; and Brinks Hofer Gilson & Lione made changes at the top of their firms or in their Chicago office management ranks.

Some of the new managers, and in some cases management structures, occurred as the result of firm mergers. For others, voting time came and the partners elected a new leader.

But whatever the reason, the new managers step into their roles in a profession that, like most other businesses, still seems disrupted by the recent recession. Law firm consultants said management structures must be rethought as firms change. And several new managers discussed how their firm management structures work within this climate.

Michael Solow, the new and first Chicago-based managing partner of New York-founded law firm Kaye Scholer, said the recession's effect on law firms "makes management different and I would say more difficult than it was if you looked at it pre-2008."

Annual billing rate increases, hand-over-fist associate hiring and the ability to make a profit while training all those associates went out the window in 2008, Solow said. As managing partner, he and the firm's executive committee must find ways to deal with that.

While managers calibrate to a less-profitable legal field, firm mergers complicate running a law firm by making communicating with and directing legions of lawyers from around the globe all the more difficult.

Robert Shuftan, the new managing partner at the recently restructured Edwards Wildman, said firm mergers can provide a cost savings for clients because the newly merged firm provides "multiple legal disciplines at a deep level on a larger platform."

"I think the law firm leaders themselves are trying to structure their firms to most appropriately position their organizations and their partners to best respond to market demand and client demand," Shuftan said.

When he took the reins of the firm, which merged Oct. 1, he said he planned trips to each of the firm's 15 global offices as a way to get in touch with the new firm's attorneys whom he didn't know.

"It becomes increasingly important to be in contact on a regular basis with the attorneys and staff within a firm," Shuftan said.

Post-2008 management

Bill Brennan, a principal at law firm consulting company Altman Weil, based outside Philadelphia, said the legal marketplace "is more challenging today than it has ever been in any time in the past."

Because of that, Brennan said firms need "dynamic, powerful" leaders. Their sole responsibility no longer lies in making sure lawyers keep up with their billable hours, he said.

"Law firms are truly a business now," Brennan said. "It was not the case in the '70s, it started to become the case in the '80s, and without a doubt today, every law firm has to be run like a business or it won't survive. It's a challenging and unsympathetic marketplace for law firms today."

Solow, from Kaye Scholer, said his firm responded to the lagging legal market by hiring fewer associates and by implementing fee structures that allow the ones they do hire to stay engaged with any associate-averse clients.

The firm found creative ways to keep associates involved in matters, but "we recognize we're just going to make less money," he said.

Solow said fixed-fee billing can be a good way for managers and firms to get their associates experience if clients don't want to pay for training young lawyers.

"(A general counsel) is getting what they need from a fixed fee, which is certainty, and we're getting what we need, which is getting to plug in lawyers from many different levels," Solow said. "So, it allows us to train younger lawyers without having to worry about the bill that might be sent to the client because the price is fixed."

Michael Solow
Michael Solow, managing partner at Kaye Scholer, said since 2008 law firm management became even more difficult.
Photos by Natalie Battaglia.

That method ensures associates stay busy, which means they can more quickly raise their billing rates, Solow said.

Communicating expectations of associate profitability to the firm becomes an important role for managers in the current market, Solow said.

"You just have to understand that instead of making a significant amount of money on those young lawyers at those early stages, you're making more of an investment in them," he said.

"From a management perspective, you hope that you maintain a level of profitability that satisfies your owners. So far we have."

On top of smaller associate classes, managers spend more time dealing with an active lateral market — a result of attorneys with moneymaking books of business becoming more sought after.

Derek Cottier, managing partner of Dykema's Chicago office, said his management team finds that the current lateral market benefits the firm.

"The greatest effect on the economy for the lateral market is the pressure the economy has put on the rate structures that larger firms have traditionally charged and want to charge now," Cottier said.

"Our greatest market for laterals are people coming from larger firms where the rate structure they've been working under is putting them at a competitive disadvantage.

"If you're coming from a firm where you're being asked to charge $700 an hour, and you can come here and reduce that by a reasonable amount, that is only going to help you to maintain the amount of business that you have."

Joseph Altonji, a Chicago-based principal at LawVision Group, a legal consulting firm, said recruiting expenses at law firms jumped 25 percent last year.

"That's fairly significant," he said, adding that in a flat legal market, lateral additions, mergers or clients switching firms seem to be the three ways to grow business at a firm.

Today's active lateral market shouldn't cause a drastic change in firm culture because even with the increase in lawyer mobility, total turnover remains relatively low, Altonji said.

"If all a firm is doing is worrying about what clients a lawyer brings with them to the firm and not worried about how they're going to fit into the firm, then they're making a big mistake," he said. "But I don't think most firms are doing that.

"The firms that do it best wouldn't hire a person who wouldn't fit into their culture no matter what their book of business was, and that's the way it should be."

Communication remains key

Law firm mergers often mean managers at newly formed firms must manage far more lawyers — and more lawyers that they do not necessarily know.

Brennan, with Altman Weil, said communication becomes a more important, more difficult task for managers who adopt roles at new, bigger firms.

"It's extremely hard to do," Brennan said. "It's difficult to do when there are two offices and much more difficult when there are 15 offices."

A well-planned merger should entail a communication plan that outlines the firm's new management to all the employees, Brennan said. In addition, managers from the separate firms need to continue to talk to one another and to their new lawyers and staff as the merger progresses.

Shuftan came to manage a much larger law firm than he used to when Edwards Angell Palmer & Dodge merged with Wildman Harrold Allen & Dixon to form Edwards Wildman.

He and the two other members of the leadership team went to great lengths to introduce themselves throughout the recently merged firm so the lawyers could meet the management team.

That included a series of conference calls after the partnership voted to elect the trio and then trips to each one of the firm's 15 global offices.

"The day after the election results ended with this (management team) coming in, the first thing we did was to hold a series of conference calls in which we introduced the new managing team, talked with people about our vision and took questions about what was important to them, and we answered them," Shuftan said.

"An important part of management is setting out a vision and talking to people about it."

For example, Shuftan said the firm merger trend comes about as a response by firm managers to clients' needs.

"Industries and clients are requesting both the ability of firms to handle a broader array of services and needs and to provide a deeper array of services," Shuftan said.

Law firm managers see bigger firms with a broader geographic and practice group base as the way to deliver those needs, Shuftan said.

"I think the last three or four years have required law firms to make choices and I think many of the leaders are probably reflecting similar choices that their clients made," he said, referring to consolidation in industries.

Mary G. Wilson became the new Chicago office managing partner for SNR Denton in the middle of January.

SNR Denton formed in September 2010 when Sonnenschein Nath & Rosenthal merged with UK-based Denton Wilde Sapte. Today, SNR Denton consists of 60 offices worldwide.

"Communication when you have so many offices and so many opportunities is even more important," Wilson said.

To assist the firm's employees as they learn about one another, Wilson said the entire firm plans to meet each year. The next such meet-and-greet comes in May in Orlando, Fla.

"I'm hoping the managing partners of our offices will take advantage of the fact that we have three or four days together and will chat about what we're doing in our offices, and I'm hoping mainly to take advantage of getting ideas and to hear on a global scale what our sectors are doing," Wilson said.

"I'm excited," she said. "(Being an office manager) is definitely a commitment, but I think for me it will be a fun one. A lot of it is spending time with your colleagues."

In addition to SNR Denton's yearly meetings, Wilson said she spends time with colleagues through partner dinners, monthly attorney and paralegal lunches, regular small group meals and meetings and at a monthly all-office happy hour.

She said getting partners, associates and staff together from different practice groups often results in finding spontaneous connections among employees' practices or clients.

"Almost every time you talk to someone, if you just get a chance to hear what's on their plate or what's bothering them … you always learn things about how we might be able to help clients that they wouldn't realize or ways that my colleagues didn't realize that I could be helping them," Wilson said.

Although his appointment didn't result from a merger, James R. Sobieraj, the recently appointed president of the intellectual property firm Brinks Hofer Gilson & Lione, said understanding lawyer concerns as a new manager becomes vital.

When he took the helm of his 140-lawyer firm on Jan. 1, he met in person with all 70 partners at the firm.

"I listened to their thoughts and opinions," Sobieraj said. "(I wanted to know) how will people really feel about things and how many people feel that way and which are the people that feel that way."

Sobieraj said he considers that kind of consensus-building the best way he knows to manage a law firm.

After all, "Your lawyers are your revenue generators," he said.

Management structure

As law firms continue a decades-long trend of growing through mergers, law firm consultants said it becomes more important to centralize power in a CEO-type figure or a smaller management board.

When dealing with national or international firms, a centralized management structure works best, said Brennan of Altman Weil.

"A strong CEO and corporate-type structure is the best," he said. "It requires a one- or two-year transition period so the new leader has the vision and credibility to lead the firm in the future. And they need to be held accountable by a much larger group that will hold their feet to the fire and make sure they actually deliver."

Donald Mrozek, chairman of Hinshaw & Culbertson for the past 23 years, saw Hinshaw & Culbertson grow into a 500-plus attorney nationwide firm.

Mrozek said he believes himself to be the longest-serving chairman in Chicago and operates as part of a seven-member management board.

"The six other members are appointed by me," Mrozek said. "They serve at my discretion and we have a larger body called an executive committee of 24 partners who study issues facing the firm and come up with suggestions and ideas as to how to deal with those issues."

Mrozek said firm management "has changed dramatically" over the past two decades from a "management kind of role to a leadership kind of role."

"Twenty-three years ago, I was very involved in operations; supervising the staff ... I don't even know if you would call it a chairman back then," Mrozek said.

"The managing partner made sure all the bills got paid on time, made sure the conflicts checks got run and the carpets were cleaned. It's a huge change from managing the operations side of the firm to setting the strategic goals and moving the firm forward."

Today, Mrozek said non-lawyer managers or nonpracticing lawyers often handle all those "back office" roles.

"In today's world (a managing partner) better have some vision of where the firm needs to go in the future, and the future is tomorrow; it's short-term, midterm and long-term.," he said.

Mrozek said it's his job today to answer these questions: "Which practices are we going to devote more energy to developing? What are our geographic plans? Are we servicing the clients well? How can we continue to meet the value proposition they're all looking for? How are we marketing ourselves to the existing client base and the market at large?"

Once he thinks he knows the answer, he said he goes to his partners to build a consensus on his plans. If he gets the go-ahead, he executes the strategies and keeps his partners in the loop on results, he said.

Janet M. Garetto, the managing partner of Nixon Peabody's Chicago office as of Feb. 1, said her firm, "is very decentralized."

Nixon Peabody's firmwide managing partner works in Boston and he selects and leads a management team comprised of three practice group heads, a professional operations manager and a liaison for non partner attorneys, associates and counsels, Garetto said.

A policy committee comprised of representatives from the firm's individual offices acts "like the board of directors" and selects the managing partner, Garetto said.

None of the offices come with term limits, she said.

"There's an expectation that you'll do it for a period of time and then move on," Garetto said. "So I'll do this for a period and then I'll migrate to something else. And I think that's how we all view these roles. It's really a labor of love to help out and do what you can and at some point someone else is going to take that over."

Volunteer-type management positions help firm members "recognize and appreciate the fact that everyone's trying to contribute to the team," Garetto said.

Knowing the firm doesn't intend to keep lawyers in management positions for a prolonged period of time means there's no "up and out" feeling when you're replaced, Garetto said.

"I hope I don't view it as in a few years I would be replaced, I think it's just a need for a fresh pair of eyes," she said.

Edwards Wildman didn't get time for a yearlong transition period from the time of the merger in October to when it made its first management change in February.

In February, the firm announced that a single managing partner, Walter G.D. Reed, would no longer manage the firm. Shuftan said Reed told the firm last year that he planned to step down from a management position at the end of 2011.

When he stepped down, the firm switched to a four-person leadership team with three lawyers and a chief operating officer. Laurence Harris, the new deputy managing partner, comes from Kendall Freeman, which previously merged with Edwards Angell Palmer & Dodge.

The chairman, Alan Levin, comes from Edwards & Angell and Shuftan comes from Wildman Harrold. Judy Hurley, a certified public accountant, works as chief operating officer.

The management change took about six weeks from start to finish, Shuftan said.

"We had a discussion in a partnership meeting. We laid out the proposed structure, partners had an opportunity to talk about it and the new management team was elected for a three-year term," he said, adding that all partners got to vote.

"This seemed to be, for our law firm, something that would work very well and made a lot of sense for us right now. Especially because we were just coming off a merger on Oct. 1. Having a team of leaders who came from several of the legacy firms was very well received by the firm."

Of the three lawyer-held management spots, Shuftan said his role of managing partner becomes the only full-time position.

The "four leaders from four cities," he said, referring to his management team, "spend a lot of time together."

Shuftan works with each manager on specific aspects of running the firm. Levin, the firm's chairman, focuses on strategic growth opportunities.

Harris, the deputy manager, focuses his time on executing firmwide strategies like practice area development.

Spreading the management throughout firm offices as opposed to keeping it centralized in one city eases communication with the firm's employees, Shuftan said.

"I think that communication and transparency of management are very important," he said.

"People want to know what's going on inside their organization and communicating with attorneys and staff and being available to them is very important."

Brennan said one of the most important aspects of law firm management and structure, no matter the economic or merger trends, remains to be a respected leader.

Term limits could be one tactic to avoid a situation where a leader doesn't receive the backing.

"I've seen too many situations where someone was appointed for life without any indication of the term and without any accountability, and those individuals often end up not being good leaders and end up being resented by others," Brennan said.