 
|
|||||||||||||
              
|
Law: For the legal industry, going corporate continues
Sunday, March 25, 2001 By Stephanie Franken, Post-Gazette Staff Writer
In September, the Downtown law firm Reed Smith Shaw & McClay dropped the last two names from its corporate title.
"Everyone called us Reed Smith," said Carolyn Duronio, managing partner of Reed Smith's Pittsburgh office. "It was easier to use the name everyone else used in common practice."
Largely a practical move, the name change also was symbolic, a sign that even Pittsburgh's oldest and most-established firms are shedding excess baggage in order to convey public images as swift-footed and efficient organizations. And a firm's name alone can send a message: Who wants to type all of those forgotten lawyers' names? It takes too much time.
Indeed, Pittsburgh law firms are getting leaner and swifter as the legal industry goes corporate. Once viewed as a somewhat staid and academic profession, law in Pittsburgh has been catching up with the speed of business. "It's a new day," said David Blaner, acting executive director of the Allegheny County Bar Association. "It's not going to go back -- it's just going to go forward."
The past 12 months have seen firms market more aggressively. They're also restructuring to function more like nimble corporations as opposed to plodding institutions, often by planting nonlawyers in key management roles. And they're going to greater lengths to cater to clients' needs -- even when those needs have little to do with law. They've started to tie lawyers' pay more closely to performance, rewarding merit rather than entitlement through seniority. And as law firms function more like corporations, the lawyers in the ranks act more like corporate employees, showing more willingness to move on when the right opportunity comes along.
"I think you have to have tolerance for change" to thrive as a lawyer today, said Karl Schieneman, managing director of contract attorney firm Legal Network. "If someone is going into law because it's a noble profession and maybe they're not sure what to do with their life, I would say that they're not ready emotionally for a legal career."
The changes affecting firms are driven, in large part, by competitive pressures. Once a regional industry that revolved around Big Steel, law in Pittsburgh has become diversified, reflecting a shift in the city's economy overall. Most larger firms' client lists now extend far beyond Western Pennsylvania, so that Pittsburgh law firms are competing nationally and internationally.
"Clients are looking for a firm that can represent them over a much broader geographic area," said Jeffrey Wiley, managing partner of Downtown firm Dickie McCamey & Chilcote.
The good news is a number of local firms are holding their own -- and they're not just the giants.
The city's largest firms have expanded to regions far beyond Pennsylvania and the East Coast. In the past year, for instance, Kirkpatrick & Lockhart opened an office in Dallas, and Reed Smith and Buchanan Ingersoll both opened law practices in London. And as growth and acquisitions have become common survival strategies and "bigger is better" becomes the modus operandi, some fear that only the biggest firms will fare well.
But lawyers at midsize and small firms say it's possible to stay strong, too, by honing their strengths and sloughing off the rest. "The way we compete is to continue to develop very strong practice groups and not try to be all things to all people," said Douglas E. Gilbert, managing director of Thorp Reed & Armstrong. A 105-lawyer firm, Thorp Reed & Armstrong is large by Pittsburgh's standards but midsize compared with some of the nation's largest firms.
It has offices in four cities and probably will grow further, Gilbert said, but he's not racing to expand. "We're unique, we fit our geographic area very well, and we understand it. Firms about our size have great opportunities. We're big enough to do sophisticated work but we're not totally driven by a corporate structure."
Wiley agreed. Although his firm keeps an eye out for potential acquisitions, "We're looking to grow if it makes business sense to grow -- not just for growth's sake."
To Legal Network's Schieneman, such a philosophy makes sense, because growth can have its own perils. "The biggest danger is growing and not becoming the biggest -- and it's a very risky strategy. It's dangerous to not be quite big enough for the biggest clients," he said. For instance, a 200- to 400-attorney firm that isn't outstanding in any practice area might falter as sharply focused, midsize "niche" firms take away its business.
On an even smaller scale, a similar philosophy can still apply. The small Forest Hills law firm Andrews & Price, for example, focuses exclusively on representing schools and municipalities. "We felt there was a need for a firm that primarily did that work, and that work only," said founding partner William C. Andrews.
Law has become so complex and society has become so litigious, he said, that specializing has become a near necessity. In dealing with schools alone, issues ranging from civil rights violations to teacher contracts to special education requirements keep his firm busy. "You don't see too many generalists anymore," Andrews said.
Although small firms are succumbing to pressure to join larger ones, Andrews is confident that his firm will do well independently. "Economy of scale is one thing, but economics is another," Andrews said. His firm charges less than the city's biggest firms and strives for efficiency, and it stays afloat as a result, he said.
In the past year, more large, national firms based in other cities have established offices in Pittsburgh -- often by gobbling up smaller firms -- to compete against the locals and take advantage of what is perceived as a thriving market for lawyers. "For years, Pittsburgh didn't look like a market people wanted to get into. Now, people have discovered this is a good legal market," said Blaner.
Among the outside firms recently making investments in Pittsburgh are Richmond, Va.-based McGuireWoods, which acquired the firm Sable Pusateri Rosen Gordon & Adams in late December; and Littler Mendelson, a San Francisco-based employment law powerhouse that opened an office here in mid-February.
Bob Sable, the former managing partner of Sable Pusateri, said the merger of his firm into McGuireWoods offered an opportunity to tap into a huge worldwide network of lawyers and clients.
A downside of this infiltration of outside law firms is an erosion of the informal ways of getting things done in the legal community, said Blaner. "The thing that I hear form the attorneys and the judges here in Allegheny County is that attorneys in Allegheny County have a certain practice style, and that practice style has been predominant for the last 200 to 300 years," he said. "When you bring on groups from outside who aren't used to our community and the way we do business, it creates changes."
But on the plus side, new blood brings fresh ideas. "We don't view it as a threat," said Reed Smith's Duronio. "I think that a more global legal scene can only be a good thing for Pittsburgh" because it allows Pittsburgh to expand its reach and also bring new ideas back home, she said.
Among the practices that local firms are learning are ways to operate more efficiently and stretch dollars.
And law firms need to keep up because high overhead costs, incurred through painfully expensive investments in information technology and other factors such as skyrocketing starting salaries for new lawyers, are squeezing profit margins.
"One of the largest challenges is how to balance expenditures and revenues and make a firm profitable," said Dennis Veraldi, chief operating officer at Eckert Seamans Cherin & Mellott. "You can be a very large firm, and bring in a lot of money, but overhead costs can put significant pressure on a firm."
In their efforts to stick to tight budgets, firms are finding that executives with corporate experience, rather than legal backgrounds, can help them stay lean. "I see very much an opportunity for nonlawyers to have an increased influence on how things run," said Thorp Reed & Armstrong's Gilbert. At his firm, both the executive director and the human resources director have ever-increasing managerial responsibility, he said.
And like most companies, law firms have begun to aggressively market themselves, hiring highly paid marketing professionals to sell their "identities" to potential clients.
And to the consternation of some, law firms are placing more pressure on even their newest attorneys to drum up business and promote their expertise -- not just practice law.
"Attorneys are more savvy about the need to do marketing, but given commitments to clients and their expanding workloads, it sometimes does not reach the top of the agenda," said Jeanne Hammerstrom, president of the Legal Marketing Association of Pittsburgh. So full-time marketing professionals work to nudge them toward this task.
As individual lawyers get smarter about marketing, they can become so successful that they market themselves into new jobs. As law goes corporate, its workers follow; they are increasingly transient and less loyal to institutions.
"It used to be when I started the practice of law, when you went with a firm, you had chosen that firm for life. That really has changed drastically over the last several years," said Veraldi.
But it's a trend driven not as much by selfishness -- the desire to draw a bigger paycheck -- as by economics, Veraldi said.
In fairness to a group that flies the law firm nest, he added, "They're looking maybe not just at immediate compensation but also at the possibility of expanding their practice by going with a larger law firm -- for the larger markets that would be open to them."
|
||||||||||||
