I am at the ALM / Incisive Law Firm Leaders Conference. This session is the Growth Strategies for Success. Here are real-time notes. 

– Aric Press, Editor in Chief, The American Lawyer [moderator]
– Francis Burch, Jr., Joint Chief Executive Officer, DLA Piper, LLP
– Steven Nataupsky, Managing Partner, Knobbe Martens
– Greg Nitzkowski, Managing Partner, Paul, Hastings, Janofsky & Walker LLP

Francis Burch remarks

  • Easier to grow by mergers than by acquisitions of groups, and less expensive
  • DLA has been “following the money”
  • DLA pay attention to what clients do and what they are likely to do and position the firm to the evolving client. This is different than listening to what they do because what they say and what they do is different.
  • Lawyers don’t want to take risk until they have to; once they get to this point, the risk – return trade-off is not good. We are therefore very direct about risks and rewards. “The time to trade is when the currency is high.” Heller Ehrman is the example – it could have been part of a very powerful law firm. Not clear why they did not move when the value of their currency was high.
  • We have 120 lawyers in Mideast today; zero two years ago. This is most dynamic market in world right now. If we were still just Piper Marbury, we would be reading about Mideast, not operating there right now.
  • Pre-merger, Piper assessed itself. Had an uncharacteristically good corporate practice for a firm of its size and had anchor client in Alex Brown & Co. Being at bottom of AmLaw 100 was good for a Baltimore firm. But we did not think we could continue to play the same game successfully. Maryland companies were being acquired and we could not compete up for the work with the new parents. Being a regional firm would not allow success in future. Technology was driving much growth. Looking at these trends, we decided we had to change dramatically and that we had to move before everyone else figured it out. We understood that incremental change was not enough. Is skeptical of idea of “vision” but firm articulated the position the firm would like to occupy. Wanted a credible but aspirational plan. Firm outlined a 2-page plan that the firm still follows today. In this process, we are very explicit with partners about risk.
  • We think that with global scale and scope of many transaction, only large firms will get the representation. We have achieved the scale we need to serve global clients. Our goal was not size for its own sake but because it’s required to serve global clients and remain competitive. AmLaw 100 data show that the biggest firms have done best. Plus, our diversification mitigates the risks of changing market conditions and provides better stability in revenue base.
  • Thinks that having multiple related legal entities under one brand is necessary and inevitable in global law firms, so long as they are operationally integrated.

Steven Nataupsky

  • We have prospered and grown by keeping our focus on IP only. Within this sphere, there is a lot of diversification across industries. Plus prosecution and litigation do not move together.
  • We offer a structure dramatically different than other partnerships: we are lock-step for partners. We don’t track originations, we don’t track office profitability. We track only that lawyers bill at least 1640 hours. That’s the only metric. So how do we keep our stars? We need to keep people who believe in our systems. So we hire only a lateral every couple of years. We lose less than one partner per year. So we mainly grow organically.
  • Our new lawyers are older on average because they have advanced degrees beyond JD. We can select out those that do not fit with our culture. For example, we have a large group of lawyers who meet 530am every morning to surf. So lifestyle helps sell our brand.
  • At five years, lawyers became equity partners. All partners meet monthly and vote on a range of issues regularly. This instills a sense of ownership, engagement, and pride. This helps retain people. Our attrition is typically 4%.
  • We intentionally keep our starting salary at $10k below market. This helps us make sure lawyers who join us buy into our vision. This helps self-select for the balance we want.

Audience Q&A

  • How should firms match structure to their vision? Burch of DLA thinks law firm structure needs to change materially in near future. “Look out the window” and it’s clear. We need to borrow less, have more paid-in capital, retain more earnings, have a more equity focused partnership, have a smaller base of pyramid, use more contract lawyers [he may mean staff lawyers?]. Clients will demand that we disaggregate services. All the basic work needs to be done by people other than our core lawyers. We will see a radically different business model. This means big change.
  • Given size of US law firms, why are US law firms smaller than their peers in UK. Why aren’t US law firms bigger? Ansers: consolidations is occurring now.