THE BUSINESS OF LAW: A Roundtable Discussion
On May 5th, the South Florida Legal Guide invited six managing partners to participate in a roundtable discussion on “The Business of Law” at the Viceroy Hotel’s Club 50 in downtown Miami. Publisher Jacob Safdeye introduced the managing partners to an audience of accounting and financial professionals. Editor Richard Westlund moderated the two-hour discussion. Here is an edited transcript of that roundtable with the following managing partners:
Q. Tell us a little about your firm.
Kluger: We are a litigation-only shop. That is our model and that’s what we do. Everyone on this panel has sent work to us and we’ve sent work to them in their areas of expertise. We are now at 24 attorneys and plan to be at 30 in six to ten months. We don’t compete with our colleagues but consider them as resources for our clients.
Berger: Our firm has four offices with about 68 lawyers. We don’t try to be everything to all clients, and are very targeted in what we do. We do have a diverse practice, including a bankruptcy and restructuring practice that has been valuable in this recent economic cycle. We have a business finance and tax team, a government relations and a dispute resolution team. Our business model has been to be balanced so we’ve been able to stay busy in the down cycle. We have a strong transaction group in corporate real estate and tax assistance, so we are positioned to do well in an up cycle or steady cycle. Because we don’t compete with the national and international firms, we can be a good referral source from attorneys outside the state.
Cole: We have two offices with 55 attorneys. We are a focused firm that represents governments and people who deal with governments. Our firm has been around for 19 years and I have been managing director since Jan. 1, 2008. Notwithstanding the economy, we have grown by 15 to 20 percent since then. We plan to continue to grow, and we are still focused on Miami-Dade and Broward Counties.
Zumpano: We are a midsized international law firm that is very selective about our clientele. Our two flagship practices are international work and complex healthcare matters. We have achieved substantial recoveries against the government of Cuba and pierced a Bahamian trust on behalf of our clients. We estimate that our international footprint is responsible for 25 to 30 percent of our revenue. We also take pride in our diversity and cultural competency. That helps us in targeting streams of commerce between South Florida and other jurisdictions.
Schuster: I have served as managing director for 22 years now. The last two have been much more difficult. We have downsized a bit lately, and now have 100 lawyers. Our strong area of practice has always been real estate, including land use, litigation and tax disputes. Over the last few years, the real estate industry has had a difficult time. Now, we see it beginning to bloom again. We represent a number of banking entities that have acquired property, but don’t know how to be a developer. We are able to help them out in that regard. Our other strong practice areas include energy, estate planning and healthcare. And contrary to what my colleagues have said, we do try to be everything for our clients. They like the idea of coming to one firm to get all their work done.
Zelek: As the managing partner of the Miami office of an international law firm, I work in a very different setting. We have 1,300 lawyers spread around the world and our firm represents half of the Fortune 100. That has been very helpful for our Miami office, because we are less dependent on local work than other firms. We have about 30 lawyers in Miami, with strong practices in commercial litigation, securities litigation and labor and employment. We also have smaller business, finance and real estate practices in Miami. Our concentration in litigation and labor and employment has allowed us to keep humming during the recession. We are continuing to build the firm in our strong areas and we are always looking for good talent.
Q. What is the biggest challenge you and your firm face today?
Zelek: Because we have been able to keep our people busy through the recession, our biggest challenge is keeping up their morale. We have been extraordinarily busy for the last few years without attorney layoffs. Our goal is to keep everyone humming along.
Schuster: The practice of law continues to change. Clearly, law has become a business and firms have to be run like businesses. That’s one of our profession’s biggest challenges. The second challenge is how we can add value to our clients. That’s the key, because clients are looking for value. They are paying us nice fees to handle their matters and we have to do a better job of providing value to them.
Zumpano: I look at both the external and internal challenges. Externally, as a law firm based in South Florida, we have to understand this is not the largest legal market in the world. How can you expand the firm in a pool that’s not as large as other jurisdictions? Our solution has been to try to capture streams of commerce inbound or outbound from this market. The next challenge is asymmetrical competition. We have seen more competition from other professions, such as consultants, doing work that traditionally has been done by lawyers. Internally, the continual challenge is policing intake. This is the critical moment for setting up a relationship. Teaching younger lawyers how to price their services, set client expectations and determine the scope of a matter — that is an internal challenge for law firms. Finally, I would say longevity is a challenge. All of us need at some point to become irrelevant to our firms so they can survive us. So we have to empower others and make ourselves less relevant over time.
Cole: Because we have grown so much, our biggest challenge is maintaining the firm’s culture. Eleven years ago, when I joined, we were a 15-lawyer firm. Now we have 55 attorneys. It’s been steady growth, adding a few people at a time. Our core identity has been representing governments and people who deal with governments. We also handle some commercial litigation and non-governmental real estate, but everyone touches government at some point. So, when two people at our firm go to lunch they have something in common. In many firms with different profit centers, one group of attorneys may move together to another firm. I believe you need to have some theme or collegiality that keeps people together, and maintaining that identity has been our biggest challenge.
Berger: The challenge all of us face is becoming more nimble as a profession in how we respond to clients. When I started as managing partner in 1986, you came to work and could schedule your day. Now, our lawyers have to respond to clients as quickly as possible, from answering emails to returning voice messages. We also have to be more nimble internally, spreading work around so our people stay constantly busy. If I see one thing that’s different from 10 years ago, it’s the need to be as nimble as possible
Kluger: I agree that our challenges are both internal and external. One thing we all need to do is manage client expectations. Some lawyers will tell the client it’s a great case, and then three months before trial find out the case is not as good as they thought. You have to tell them on day one how things will go. In the past, the most important thing was bringing in the case. Today, you should reject a client who has unrealistic expectations. In the long haul, that client will not be good for the firm.
The second challenge is marketing. We’re in the paper every day because the people who engage lawyers want to know who you are. The third thing is the culture in your firm. We started as a new firm, although many of us were litigators in the old firm. To create that culture, our entire staff, from the file clerks to me, were requested to dress like professionals and treat each other professionally. That’s what we want in the office, and what it’s done is remarkable. The final piece is technology. We saved hundreds of thousands of dollars by buying new phones, computers and copiers. It’s remarkable how cheap this technology is now.
Q. On the internal side, what steps have you taken to help your firm be more nimble and responsive to your clients?
Kluger: The most important thing was creating our new culture. We had a lot of people who were mourning the loss of the old firm, and we had to get them past that point. So we engaged all our people in the process of forming the new firm. We brought them in on every decision, including technology. Now our firm is not a democracy by any means, but the issue was getting consensus. We wanted a buy in from our professionals, because if you don’t create loyalty, people won’t stay. People usually don’t leave a firm for money — it’s all about the culture. As for the technology side, we changed from a big phone system at the old firm to a new system with IP [Internet protocol] phones. Every lawyer has an IP phone at home with the same extension as the office. This is an inexpensive solution that allows them to work at home if something happens in the family, for instance. We also went in and changed the entire copying and scanning system to new technology, which is smaller, faster, cheaper and easier to maintain. We saved a fortune and that’s money we can use on marketing instead.
Berger: In terms of managing internally, you have to lead from the top down. You also have to give your folks the tools to compete. All our lawyers carry laptops and BlackBerrys and they can access their work from anywhere in the world. You have to be mobile and keep up with the work load. Also, the world is changing and we have to train our lawyers in how to deal with the changing marketplace — how to be successful in business as well as the law.
Cole: We’ve changed a lot of our technology, including deploying a whole new practice management system. When I started practicing 20-plus years ago, things were slower. Now, clients send you an email and expect an answer right away. They ask for a letter and want it out right away. Everything is scanned and emailed, and that fast pace puts more pressure on attorneys. One of our challenges is helping attorneys deal with that stress. Another issue is the loss of personal interaction and relationship building with other attorneys. In the past, if something came up in a litigation matter, you’d have coffee, go to lunch or talk about it on the phone. Now, everything is more impersonal. People aren’t developing those relationships, even with a law office. I tell all our attorneys to go to the client’s offices. There’s nothing better for getting an understanding of your client than actually being there. And it seems like every time I go there I get more business. I also tell our lawyers to talk to the opposing attorneys and go to lunch. If you need an extension for some reason, it’s better to have a relationship in place. And these attorneys can also be referral sources over time. Although we have to embrace technology, the human side has to be emphasized as well.
Zumpano: Alan hit it right on the head. Technology and culture are the basic elements for being responsive to clients. The firm’s culture determines your approach to solving a problem and technology is a tool to solve that problem. We feel it is essential for our firm to have a set of core values and couple those values with the principle of responsiveness. If someone calls the law firm, they should be called back the same day, and we try to embed that responsiveness in the millennial generation. We also look for attorneys who have the right personality or character to succeed in our firm. One of the cultural issues is teaching a young lawyer about pricing and fees, educating them about the value of their services. It’s a matter of helping the young attorney understand that they have a skill set the client needs to purchase, and then being proactive toward selecting and servicing those clients. Technology is very important in that regard. We are on the bleeding edge of technology, and it’s saved us tons of money, especially with our heavy international phone calling. Clients today don’t want to pay for antiquated technology.
Schuster: I believe nimbleness and responsiveness are related to fee structures. When I joined our firm 48 years ago, the four of us worked out all kinds of fee arrangements, including bartering. Over the years, we converted them to an hourly rate structure. Now, the general counsels of major corporations want something different — a fee structure that shows a partnership. That often means a lower fee if the firm is unsuccessful and a higher fee if we succeed. So, we are being nimble in keeping with our clients’ economic needs. Today, we handle contingency cases, and cases at a lower hourly rate with a premium at the end, as well as traditional hourly work. In the final analysis, we’re all here today because of our clients providing legal work for us to do.
Zelek: To be more responsive, we are taking advantage of technology and our firm’s size —1,300 excellent lawyers. If a client comes to our labor and employment group with an issue, we send emails to the entire practice area to see if anyone has work product or expertise on that issue. Usually, there is an attorney somewhere who has prepared a similar brief or dealt with the issue. That allows our clients to get the best possible legal advice at the least possible expense. As a result, we have an extensive data base available for any of our lawyers. It’s a wonderful advantage for our clients. We are also encouraging our lawyers to go online and learn as much as possible about the client’s business. As trusted advisors, the more we know about the client’s business, the more valuable our advice will be. So we encourage our lawyers to learn the latest developments so they can effectively partner with our clients.
Q. Now, let’s turn to marketing. Do you market the firm, promote individual attorneys or use other types of strategies to attract new clients?
Kluger: We have a Facebook page and are on Twitter, so we use the social media sites. We represent a number of high-profile athletes and celebrities, and that’s how they communicate. However, some of our corporate clients never go there, so that’s only a part of our marketing mix. The next element for us is having an award-winning interactive website. We have found that the new generation lives on the Internet and that’s how they know us. We get a lot of comments that our site is different from a normal firm’s that just says “Here’s what we do.” We try to engage people online. From a firm-wide perspective, we took 3 percent of our projected gross and set it aside for marketing. We market the firm more electronically. We also ask individual lawyers to prepare their own marketing plans. We explain how to cross-sell other lawyers at the firm. And we explain that an attorney’s ability to make it as a lawyer depends on having a following — and we’re trying to help them do that. We believe that those marketing plans are invaluable. They create a culture of sharing — a sense that everyone is rowing the same boat. We also have moved to shared sure that production is captured in an origination concept. That helps to grow the firm and creates a culture where attorneys want to stay because they’re making more money.
Berger: We’ve had shared origination for 15 years and it remarkably changed the attitude of our attorneys. In 2009, one of five of our lawyers were million-dollar producers. In many cases, we have two people working on the same client to enhance that relationship. We find there are immense benefits to shared origination. The lawyers are more enthusiastic about working together and everyone is motivated to deliver better service. Historically, firms had rainmakers and workers. We tell everyone that bringing in clients is a shared responsibility, and we train them and provide tools to do that. How do we market ourselves? We brand our firm electronically and do promotions at different events. Every one of our lawyers has the same access to marketing dollars if they have a good idea.
Cole: At least 80 percent of our new business comes from our current clients and relationships. So we try to focus on referrals. We want to build relationships where our clients become our marketing department. Our firm has a strong website, and we have engaged a PR company to try to get us in the paper as much as possible. If one of our clients says, “Weiss Serota is great at this,” the prospect will look at our website. Any money we spend is focused on building our name, so people know who we are. While we get emails from our website from people who need a lawyer, they do not become our clients. So, our focus is getting our name out in the community.
Zumpano: We get about 80 to 90 percent of our new clients from having done a good job for existing clients. We also get work from national law firms that don’t have a presence in South Florida. That means our best marketing practice is to treat our existing clients very well. I believe the era of “Rambo” lawyering is over — you cannot sustain practices or people that are offensive to others. I have also found that the concept of selling other attorneys is very powerful. So, we have promoted the idea of “our client,” rather than “my client,” and we include the concept of cross selling into the evaluation process for each lawyer. It’s a powerful way to reinforce that culture and bring our people together while going after new business.
Schuster: It used to be that lawyers marketed themselves by virtue of their work products. If you won a case, the losing party might hire you the next time. It was word of mouth and what you had to do was show everyone you were a competent lawyer and the firm was competent. Now, lawyers can advertise in many ways, and we’ve had to learn a new way to market in terms of the electronic media. We also continue to do what we’ve always done — belonging to civic and charitable organizations and being involved in the Bar. We believe those are important marketing tools as well as a way to help pay back our communities for supporting us.
Zelek: We have media professionals on our staff that look for opportunities to spread the word about our firm’s expertise and successes. However, we are very sensitive to the needs and interests of our clients, so we have to pass on media opportunities if they are not in our client’s best interests.
Q. In today’s economic climate, it’s important to diversify and grow new practice areas. What steps would you take after identifying a need in the marketplace?
Zelek: We would build on the existing strengths of our firm. That means having a clear focus and bringing in top people in those practice areas where the firm is strong
Schuster: Looking at the opportunities, we felt it was important for our firm to create an energy practice. There is a great deal of interest in alternative energy sources and concerns about oil today. Since we did not have people within our firm with that expertise, we hired experienced people to help us develop that practice. That strategy is starting to work now. That’s just one example of how our firm is keeping up with local, national and global trends.
Zumpano: The question of growth goes to the heart of the role of the managing partner or management committee. First, you have to have a vision of where the firm is going. You can’t just react to the marketplace. It would be an error for a firm like ours to try to go into high-volume, low-margin work like foreclosures, since we have been targeting selective legal work. Second, you have to affirmatively state the scope of your firm: Who is your target? In our case, we don’t care if our firm is known by 100 percent of the population. Instead, we want to be known by the population we target, which might be only 5 percent of the total. This is one of the most expensive times in history to build brand, so you need to be selective about your target audience. Third is profitability. As a managing partner, you will be responsible for the net income figure of the law firm. That is a measure of judgment, and taking responsibility for growing new practice areas is part of that. To sum it all up, you have to be clear on the vision, scope and profitability — and then connect those three dots.
Cole: If you analyze those criteria and decide to enter a new practice area, there are two strategies to pursue — internal and external. You can take an attorney and make that person a specialist in the new area. For example, an attorney might be interested in being the firm’s expert on housing authorities. Then, we would come up with a marketing plan and try to get more work. The other way to do that is through a lateral hire. When we wanted to add an environmental practice and expand our private land use practice, we hired an attorney from a major national law firm. The other type of diversification for a law firm is geographic — adding a new office. We have pondered that question ourselves. Again, there are two ways to do that — hire a new attorney with a following in that area or move a higher-level attorney to a new location.
Berger: One thing you’re hearing today is that one size doesn’t fit all. You have to consider your firm, your existing expertise and your ability to drive profitability. For our firm, most expansion has been synergistic. For instance, we have a very talented transactional team, and we recently brought in an experienced attorney to be our “brand name” in securities. We want to be well positioned for a shift in the market from reorganizations to transactional practice.
Kluger: When we saw the downturn in the real estate market, we thought about what that might mean in terms of legal work. So we went to national seminars and workshops, and became a source of information, for free, to mezzanine lenders. We spent tens of thousands of dollars on the effort to get ahead of the curve, and it worked. Now, we represent three of the largest mezz lenders in the country. We also realized that there would be an increasing number of licensee violations. We identified three potential clients in this area, called their general counsel and told them to expect this problem. As a result, we are now working with them. You have to be nimble, think ahead and move quickly in this market.
Questions from the audience:
Q: How do you balance your marketing budgets between promoting the firm or individual attorneys?
Kluger: We picked various partners with specialties and made them the brand for the firm in those practice areas. They are subject matter experts who are quoted regularly in the media.
Zumpano: I think the best solution is to be a smart marketer. For instance, I would probably derive more benefit by going to lunch with you as a financial expert, and learning about each other’s firm, rather than spending money on printed brochures that are one size fits all. After all, we are in the people business, and sometimes the best marketing is getting to know key people in the community.
Q: How is the management of receivables changed in the new economy?
Schuster: We represent many real estate developers who are having financial difficulties. We try to work with them and help keep them afloat so they will continue to be our clients. Therefore, we analyze our receivables to see which clients want to pay, but just don’t have the resources at this point. We did that back in the 1980s downturn and many of those clients are still with us today. You have to look at each account on an individual basis before deciding what strategy to take.
Cole: We have found that an accounts receivable problem is almost always the result of an intake problem. Either we shouldn’t have taken the client or the cost was more than the client expected. To solve the problem, we are focusing on the intake side, and that means saying no to some potential clients.
Q: How do you manage the abuse of the firm’s technology by our employees in terms of their time?
Cole: That’s an issue we have discussed over and over. We have policies that say our employees shouldn’t go to porn sites or spend time on Facebook. We have also banned certain websites. But it’s an ongoing issue. We will send out emails reminding everyone or our policies, and things get better — at least for a while.
Q: Where do you see opportunities for economic growth here or around the state?
Zelek: From an economic perspective, our clients are expressing an interest in building stronger ties with Europe.
Berger: From the standpoint of a local firm like ours, we like it when major international law firms are expanding their footprint in the U.S. We get a number of inbound referrals from other law firms, and it works out great for both of our business models. Personally, I think there will be a continued trend for law firms to expand their footprint within the state. We ourselves are handling more matters in Tampa and Orlando.
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