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The 10 Habits of Highly Successful Law Firms


By John O. Cunningham           

What separates successful law firms from those that struggle?
This article looks at common habits that leading law firms
use to carve out space in a brave new legal services marketplace.
For large firms as well as small, here are 10 institutional traits
that seem to be the seeds of success.

successful law firms

Every managing partner and chief marketing officer would love to have a magic formula for success. There is no such thing, of course, but there are certain common threads to the fabric of those law firms that have successfully woven together acquisitions, internal development and external marketing — and that pattern of prosperity can be put to use.

A study of The American Lawyer's published reports for the five-year period following the opening of the new millennium (2000 to 2005) reveals that just a few dozen of the top 200 law firms in the country could boast of growing in size while simultaneously bolstering the revenue generating capacity of their individual lawyers beyond inflationary measures. The vast majority of all firms were hard-pressed to show an increase in revenue-per-lawyer (RPL) beyond the average increase in billing rates for that period (which fluctuated between 5 and 9 percent per year — an average of roughly 35 percent for five years); and many of the firms that substantially grew their RPL did so by lopping off their least successful partners — not a formula for long-term success.

The question of how to grow your marketing platform most effectively is a tricky conundrum with a double-bind. Most firms that have grown through acquisitions have stumbled on issues relating to cultural integration, lawyer and client conflicts, and shifting loyalties, causing their RPL numbers to periodically dip or stagnate; but firms that have focused purely on internal, organic growth have often lost key partners and clients to bigger competitors that are claiming more market share. In fact, the simultaneous execution of successful acquisitions, internal growth and RPL enhancement has become the legal equivalent of producing a triple-crown race horse.

So how do you grow your marketing platform while enhancing the efficiency and revenue generating capacity of your existing base? You might try following the habits of those who have done it most successfully in this brave new legal world.

There are many habits of success that one could identify, but I have set out in this summary 10 steps that many of the leading-edge firms have taken to enhance their performance. Some of these habits are not directly grounded in marketing and business development disciplines, but they are all linked to long-term success in revenue generation and client relations, according to managing partners and CMOs.

Below are the 10 habits that successful law firms are using to win "the triple crown," of the competitive law firm marketplace.

1. Selecting a Managing Partner to Manage.

Too many firms still pass the management baton like a hot potato that nobody wants. The problem is that firm managers who really focus on growing and managing their firms have little time for their own clients and may lose their own practices entirely. They also can lose the respect of many partners who believe that you need to maintain a substantial practice to be credible as a manager.

But many of the firms that are the best business developers and client pleasers rely on professional management anchored by managing partners and executive teams that devote at least the majority of their time to management. "It would be nuts not to have full-time management of a $700 million business," says Jay S. Zimmerman, managing partner at Bingham McCutchen, a firm that nearly tripled in size within five years while raising RPL nearly 50 percent.

Regina Pisa of Goodwin Procter, Greg Jordan of Reed Smith, Bruce McLean of Akin Gump, and Paul Perlman of Kramer Levin also devote all or the vast bulk of their time to managing their firms and to making sure that CMOs and other professionals have the resources and cooperation necessary to advance the firm forward. Harry Trueheart of Nixon Peabody has an advanced degree in business administration and still spends more than half his time on management issues, applying the principles of the total quality revolution launched by the late Dr. Edwards Deming.

And what is the performance record of those firms that rely on focused, tenured and consistent leadership at the top? For the six firms mentioned, the average growth in lawyers was more than 70 percent, and the average RPL increase was more than 55 percent from 2000 to 2005.

2. Being a "Best Place to Work."

Companies that have the best "people development" cultures have the best track records of superior, sustained financial performance and stability. That was the conclusion of a study by McKinsey & Co., and it appears to be as true in the legal world as in the corporate world. In 2005-2006, the following firms ranked among the best 100 places to work in America, according to studies of employees conducted by Forbes magazine: Atlanta-based Alston Bird; Boston-based Bingham McCutchen; Rochester-based Nixon Peabody; and Seattle-based Perkins Coie. Furthermore, Alston Bird has more than once appeared in the top 10 in rankings.

This is not an accident, but part of a design. The leaders at these firms have consciously sought to transform their environments so that lawyers AND other key professionals are respected, empowered and incorporated into the team. These firms recognize that most of their employees are not in fact lawyers, but are indeed critical to success. As Nixon Peabody's Harry Trueheart once said, "Better job satisfaction means better client satisfaction... and all employees must be well-served to serve your clients the very best."

And again, you might ask, "What is the payoff for this?" For the four firms mentioned, the average growth in numbers of lawyers was more than 60 percent while the growth in RPL was near 45 percent from 2000 to 2005.

3. Institutionalizing Client Service.

The most successful firms, again and again, have adopted a variety of programs to insure that their clients get the most consistent and best possible service experience they can. Most of these leading-edge firms have also adopted specific mission and values statements that keep employees focused on the institutional values associated with service to clients.

At McGuire Woods, there is careful study of client retention, client growth and estimated "share of wallet" (the amount of business coming from a client as a percentage of that client's total budget). The firm has also hired independent third-party professionals to conduct client satisfaction surveys as well, and clients apparently like it (the firm rang up more than a 45 percent increase in RPL and a 30 percent jump in lawyer growth in five years).

Client surveys are also conducted by successful firms such as Reed Smith, Nixon Peabody, and Alston Bird. Reed Smith has an in-house pro, a former General Counsel for a major company, who focuses all of her time on surveying clients and getting closer to them; Alston Bird has hired a former CEO to perform a similar function outside the firm; and Nixon Peabody surveys the quality of "internal service" provided by each department, as well as "external service," following the notions of the quality management movement, which emphasizes internal as well as external service measurement.

Many firms have also followed the lead of corporate titans, such as IBM, which have developed "service teams" dedicated to serving specific clients or specific industries so that they become experts on those they serve. Nixon Peabody, Reed Smith, Alston Bird, and Holland Hart all do this to varying degrees, but nobody places more emphasis on it than Akin Gump (a firm that registered a whopping 75 percent increase in RPL with modest lawyer growth in just five years).

All of the aforementioned firms have, to one degree or another, also attempted to formalize in-house training on service delivery, but Gibson Dunn and Sidley Austin might have the longest running programs and Alston Bird the most unique (they have hired former Ritz Carlton executive Leonardo Inghilleri to train lawyers how to make clients feel special).

So what is the payoff for all this? Many of the firms with institutional service training have registered strongly in national surveys of service delivery perceptions held by in-house counsel (as done by BTI Consulting Co.).  Sidley Austin and Gibson Dunn both ranked in the top 5 for 2005; Reed Smith and McGuire Woods were just several spots back; and several others made the BTI roster of service provider "all stars."

4. Living With Your Clients.

Many leading-edge firms don't just make greater efforts to "understand" their clients; they actually find ways to live with them. Kramer Levin often sends lawyers to reside in client quarters, and McGuire Woods holds team meetings that include clients as speakers and as sounding boards.

Reed Smith does both, and has even "acquired" the in-house legal department of a major client in a unique deal that yields greater expertise for the firm and beneficial cost management for the client. The firm also incorporates the knowledge of its clients into the Reed Smith University program for business training skills — a program developed in conjunction with Wharton Business School that benefits lawyers and staffers in the firm.

But perhaps the most unique approach was adopted by Alston Bird, which has even taken the step of learning a major client's business by working there. Firm employees have worked at UPS, riding on trucks along their delivery routes or sorting through materials at warehouse-distribution centers.

5. Emphasizing that Clients Belong to the Firm and NOT the Lawyers.

More and more leading-edge firms follow subjective compensation schemes that are placing greater emphasis on things such as client satisfaction, quality work product, and doing what is needed for the team.

Holland Hart is just one example of many firms that are running away from "eat what you kill" compensation schemes, attempting to assess "overall contributions to the firm's success" rather than specific rainmaking awards.

At Schulte Roth (a New York firm that gained 60 percent in RPL in five years while growing its lawyer base from within by more than 50 percent), the firm does not even track originations, and it literally forbids the use of the phrase, "my client." Any partner can raise any issue about serving a firm client better and the team solves the issues raised - not a single client lawyer.

Those previously mentioned firms that have launched service team initiatives — to better serve specific clients or industries with dedicated teams of professionals — also understand the importance of seeing clients as valued assets of a firm to be maintained and protected. All of them, in different ways, encourage lawyers to shift away from thinking of clients as "individual turf."

6. Using Technology to Improve Your Marketing and Client Relations.

It would be hard to gain any advantage over competitors in this era without making use of technology as a tactical weapon in your arsenal. Thus, it is not surprising that leading-edge firms are using technology to stand out above the crowd in a variety of ways.

At Bingham McCutchen, managers and practice leaders have desktop "dashboards" that provide instantaneous institutional readings on key metrics such as billable hours, unbilled time, realization on collections, and cash receipts by client or by matter. They also have access to client-relationship-management software to track key relationship links among clients, lawyers, staff and alumni.

Furthermore, all Bingham lawyers have access to proprietary knowledge management tools, such as CaseTracker and DealTracker, which archive the knowledge and experience of the firm pertinent to an industry or subject matter.

Similar knowledge management tools have been developed at Goodwin Procter, Akin Gump and Quinn Emanuel (a firm that had a handful of lawyers in 1985 but now has more than 200 generating more than $800,000 per lawyer).

Quinn Emanuel and Reed Smith also invested heavily in developing state-of-the-art Web sites that provide regularly updated news and information in formats that clients like to use.

Reed Smith's CMO, David S. Egan, says that his firm studied "how clients access biographical data, how they connect to our site, and how they navigate for links to other information." He adds that "we tried to make it easy for them to access the information they want as quickly as possible." Egan and other leading-edge CMOs also have realized that the busiest users of a large firm's site are non-clients - internal staff or lawyers looking for cross-selling information about partners; media looking for sources or information; and potential employment candidates looking for career opportunities.

Electronic data mining for "share of wallet" information and other key metrics pertinent to specific clients and industries is also utilized at several leading firms.

7. Cultivating Transparency and Trust.

The fast advancing firms realize that coordinated growth cannot occur without generous sharing of information with all of the employees who help to foster that growth.

Lawyers and other professionals at Bingham confess to being "shocked" at how much information the firm shares, even in the recruiting process. The words "open" and "transparent" and "honest" come up over and over again when employees are asked to describe the firm culture.

Similarly, Reed Smith's Egan views his job as largely one of "building trust" among lawyers, staff and firm clients. "I am just a catalyst for connections that need to occur among our lawyers and clients," he says, asserting that all of the firm's social events have "trust-building themes" to them.

Quinn Emanuel is similarly "up front" about who they are and what they stand for, not only in Web site disclosures but in interviews with clients and recruits. The firm is so generous in sharing information that it created a feature on its Web site called "Peruse Our Files." And those are just some of the many examples of sharing and trust that come from leading firms.

8. Treating Your Alumni Like Members of Your Firm.

Some dinosaur firms operate like a cult, shunning members who leave and maintaining an insular focus and belief that the "best and the brightest" never escape the walls of their compounds. But the majority of leading-edge firms take a very different cultural approach toward their alumni, realizing that they are a rich source of referrals and eventual in-house contacts at large corporations.

Hale and Dorr, a predecessor to the successful Wilmer Hale, was long notorious for its annual party for alumni and for its stated position that "you are always part of this firm." Similarly, Bingham McCutchen, Gibson Dunn, and Schulte Roth have all maintained active and creative alumni programs.

Gibson Dunn, for example, maintains an "alumni buddy program" that pairs lawyers at the firm with alumni who have left the firm, getting them to stay in touch and attend firm functions.

These programs always result in better relationship building with more targets and clients, but this is nowhere better illustrated than at Schulte Roth. As the Wall Street Journal has documented, this firm has spawned an incredible number of alumni who have taken leading positions at hedge funds and other financial service firms that form the bulk of the firm's money center practice.

9. Knowing and Promoting Your Core Focus.

The days of full-service firms getting by with a "we do it all" message are over. "You can't honestly say you are the best at everything," Zimmerman explains, noting that his firm is built on core strengths in the corporate, finance, public and private equity, and high stakes litigation areas of practice.

Reed Smith, perhaps the fastest growing firm in the world, has expanded quickly not by focusing on the services it offers, but by emphasizing its experience in serving specific industries, such as: manufacturing; international trade; health services and life sciences; technology; and finance.

For Quinn Emanuel, the core identity is not centered on being a "trial boutique," but on actually "going to trial." This firm's lawyers are well-trained and well-prepared for doing battle, and it prides itself on getting into court and producing results. This is a big "selling" plus for clients and targets that are tired of some large firm litigators with big resumes and little desire to roll the dice in the courtroom.

Schulte Roth has shown you can develop a national identity from a strong base in one city. It has defined itself as a "money center" firm with a strong record in financial services, structured finance, asset-based lending, real estate syndication, mergers and acquisitions. The point is not that a firm must take a "boutique" approach, but it must define its core strengths, build on them, and advertise its success in those areas.

10. Being Involved in Charity and Community.

Leaders at the fast-rising firms understandably reject any notion of doing good in order to do well. But it just so happens that almost all of the fast-rising firms seem to have an emphasis on community service and participation that is much more than cosmetic. In fact, some law firm managing partners have told me they would not consider acquiring a firm that had no sense of community citizenship.

As one former CMO for a leading firm has said, "lawyers and clients get particularly energized about working together to solve bigger problems." Those problems may relate to social justice, the environment, public health or any number of community issues, but they all bring people together to form bonds that last.

Some firms even attempt to tie the bulk of their social events into larger community objectives or charitable goals. Holland Hart is a particularly good example of this. The firm not only gets people involved in charitable service by making it fun and sociable, but it has created its own Holland Hart Foundation for charity. The foundation serves literally hundreds of charities, and the firm ranked first in pro bono participation in American Lawyer's 2005 pro bono report with more than 85 percent of lawyers putting in more than 20 pro bono hours per year.

Developing these 10 habits of success is not a short-term program, however, and a note of caution is warranted. Organizational habits take time to develop and they are not truly effective until they become a basic part of a firm's DNA. But for those firms which have leaders with the patience and the willingness to follow through on execution, the results can be very rewarding.

October 2007.

© 2007 John O. Cunningham. All rights reserved. Do not reproduce or disseminate without permission of the author.

Also by John O. Cunningham: Law Firm Change Agent: Do You Have What It Takes?


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