November 20, 2024 • 56 mins
Get ready to uncover the dynamic shifts in the legal landscape with our esteemed guest, Patrick Fuller, Chief Strategist for American Lawyer Media. First, we discussed the ripple effects of recent elections on antitrust, international trade, and white-collar investigations, and even in mergers and acquisitions. Then Patrick provides a deep dive into the data that is being produced by ALM regarding law firm profitability and growth, dispelling some misconceptions about what are the signs of law firm health.
Here are some of the highlights:
- PPL Over PPEP
Patrick breaks down why Profit Per Lawyer (PPL) is a better indicator of a firm’s financial health than the traditional Profit Per Equity Partner (PPEP). It’s not just about the big numbers—tracking PPL alongside headcount and inflation gives a more realistic picture of growth and success. - A New Wave of Legal Leadership
With younger leaders stepping into corporate legal roles, expectations are changing. Law firms need to adjust how they build relationships and deliver services to keep up with these fresh perspectives. - Succession Planning is a Must
Planning for leadership transitions and addressing underperformance in senior partners is something many firms are still figuring out. Patrick and the team dig into why this is such a critical—and often overlooked—area for long-term success. - The Buzz Around Lateral Hiring
Steve shares insights on the hot topic of lateral hires, especially from government roles. He explains why it’s important to look beyond just the skills on paper and think about whether these hires are ready to rebuild their client relationships. - Making Clients Stickier
The group talks about how firms are focusing on institutionalizing client relationships. It’s all about making clients feel connected to the firm, not just an individual partner, to reduce risk and improve stability.
This episode is packed with practical insights and real-world examples for senior law firm leaders looking to stay ahead in a fast-changing market.
A big thanks to Pat Fuller for joining us and sharing his knowledge.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Murray (00:00):
Murray, welcome to Steve's rules,
(00:07):
periodic podcast featuring SteveNelson, executive principal at
McCormick group in the law andgovernment affairs practice. My
name is Murray Coffey, and I amthe principal of M Coffey, a law
firm marketing and businessdevelopment Boutique. For more
information, please visit mywebsite at M coffey.net Steve
has been an executive recruiterfor nearly three decades, and
without naming names, he isready to spill the tea on best
(00:30):
practices, and maybe a few notso best practices by firms and
candidates that he has seenduring his career, recruiting
some of the most driven andsuccessful professionals into
highly profitable and growingfirms. Steve is a former lawyer
and journalist and is a fellowof the college of law practice
management and a proud son ofWilkes Barre, Pennsylvania. Full
(00:50):
transparency here, Steve hashelped my career immensely
through the years and has becomesomething of a career shaman to
me and I know many others.
Steve (01:05):
Hey, Steve, welcome back.
Murray.
Murray (01:09):
Good. Yeah, I'm doing.
I'm doing all right. Stillrecovering from, you know, from
the event, most recent eventsthat have been going on. I think
we're gonna touch those on thosea little bit. And I don't know
if you saw this today, butKramer 11 is now merging with a
across the Atlantic. So lots of,lots of stuff going on in our in
our space, and I think we've gotsome we've got a great guest
(01:29):
today to help us get our armsaround all of that and much
more. Steve, you want to Yeah,
Steve (01:40):
so So joining us today is Patrick Fuller, who's the chief
strategist for American lawyermedia. And I've known Patrick
for at least, at least 15 years,probably longer. One of the
things that we have in commonis, as many people know, I have
a side hustle in in stand upcomedy. Patrick did that for for
(02:05):
a bit after college. So we oftentalk about comics and comedy and
so forth. So so Patrick's goingto be joining us,
and I thought we'd startby talking about the election
and the impact of the election.
So I'll give you a couple ofthoughts that I will say is
(02:26):
that,from a business standpoint, I
think that, I think that it'spretty much business as usual. I
mean, I think there's going tobe a lot of M A activities going
to going to continue to bestrong. And of course, you know,
you know litigation will belitigation, and most of it has,
most of it has nothing to dowith the federal government. So
(02:47):
that will just go onin Washington. Of course, it's a
little different. The one thingthat we're seeing, and of
course, I look at it a lot fromthe lateral perspective, the one
thing I'd say is there's certainagencies and certain practice
areas where there, while they'llbe changed, there's certainly
going to be a lot of activityand a lot of interest in
(03:08):
government lawyers, which is oneof the things we do. We do, we
do stronglyand in fact, in terms of the
statistics, and what we've beenfollowing in terms of the
lateral hiring trends, there'sbeen a lot, a big uptick in the
government hiring the lawyers,even, you know, even when they
(03:30):
did not know what, who was goingto win the election and that,
and the areas that have beenparticularly in focus, FTC,
antitrust, those you know,everything related to antitrust,
there's going to be big changeno matter what happens. You know
that tech companies are going tohave lot of challenges, and the
with the antitrust, no matterwhat happens, I think the
(03:52):
international trade, you know,talking about tariffs. But
beyond that, there's going to bea lot of things roll with anti
boycotts and things that relateto whatever the foreign policy
is going to be. So that's goingto be very strong as well. And I
think just the generalinvestigations, white collar
work, that's going to still bestrong. You know that there,
(04:15):
I'll tell you, we have three orfour firms asking for
congressional investigationshelp within the last three
months. So we know there'll beCongressional investigations
again, no matter who ends upwinning the house. It doesn't
matter. But whatever, whetherthere's going to be a lot of
congressional investigationsthat are going to be, I can't
imagine there will. There goingto be some prosecutions of
(04:36):
former government officials. Youknow, just, it's just going to
happen. We don't know, you know,the nature of those right now,
but I think it's going tohappen. So I think there's going
to be a lot of activity on allof those fronts. But I'd like
to, you know, you can chime in,Patrick, you know, talk about a
little bit about what you'reseeing out there.
Pat (04:58):
Yeah, I think, I mean, I think you said.
A lot of it right there.
Look, I think we're going to seethat. We know, we've known that
there's a lot of dry powderthat's been sitting there with
regard to M and A in funding,and I think you're going to see
an uptick in that work. I thinkantitrust is, you know, I think
(05:18):
that that's going to continueto, I mean, it's, it's, I think
it's a hot topic to discussright now, the question I have
is, is it good? Is demand goingto soften that? Is it going to
lessen under a Trump presidency,or is, or is it going to
increase?
Same thing with regard toregulatory we know that there's
(05:40):
going to be significantregulatory change. Um, change. I
think what it comes down to isgoing to be the clarity and the
lack of ambiguity. If, if theymake it to where it is, there's
very little ambiguity withregard to their policies, and
it's definitive, then I thinkwe're probably not going to see
as much action there. But youknow, if there is levels of
(06:02):
ambiguity, as there have been inthe past, then I think it's
going to continue to be a strongarea for a lot of firms. Yeah, I
think this also may be thebeginning of the state turbo
charge, possibly again, it goesto your regulatory discussion
there, Patrick, but the Chevrondeference, that that sort of got
(06:23):
blown out of the water with thelast in the last Supreme Court
term. You know that that's beena that's been a slow roll so far
about what the impact that'sgoing to be, but it does change
the administrative law structurein this country substantially,
and with the change inadministration, I think we're
going to see, possibly see some,some pretty significant changes
(06:48):
coming up in
Murray (06:50):
some of the major regulatory bodies in the United
States. And so I'm watchingthat. I've clients of mine are
watching, you know, they'rewatching
all of that. Plus, you know,they're saying, hey, you know,
if, if, if, if, if, RFK Jractually gets in, you know, gets
into this role that they'retalking about getting them into,
(07:13):
there's a lot changes in, youknow, in Food and Drug
Administration and and, youknow, even labeling on, you
know, on on, you know, on foods,you know, and and what that's,
what that's going to look like.
We haven't seen changes in foodlabeling, which sounds like a
obscure area, but it's real, andit's it's massive, and we
haven't seen a change in in foodlabeling in decades, you know,
(07:37):
Berkey, not since, not sinceBerkey, exactly I was gonna say,
because people might, might knowwho are listening. That was
given to us by our friend.
Parted Berkey, late, late,great. Berkey. Belzer, yeah, I
think, yeah, yeah. No, that's aYeah, go ahead.
Pat (07:55):
No, I was gonna say, a lot of this stuff is connected,
right? So we can't, right? Ifwe're gonna talk about
healthcare, well, we're alsogonna have to talk about
immigration, right? Becausethere's going to be, I think, a
significant impact thatimmigration reform or their
immigration policies have onhealth care, given the high
percentage of foreign medicalgrads that are active physicians
(08:15):
in the US, and then if we factorinto that, as well researchers
and pharmaceuticalorganizations, you know. What
does this mean, you know. AndSteve, I'd love your take on
this, you know. What does itmean from a,
you know, from a firm'scorporate immigration
perspective, is, are weexpecting that that work is
going to increase? To your pointabout health care, you know,
(08:37):
I've heard, you know, thePresident Elect say a number of
different things that areconflicting with regard to the
Affordable Care Act and what hisultimate plans are. Now, it may
not be him as much as it is thepeople that he surrounds himself
with inside his cabinet and whatthey want to do with regard to
(08:59):
the Affordable Care Act. But,you know, there's a lot of
people, people who know me thatare listening to this. Know, I
live in Oklahoma City, andalthough I pretty much live in
airports, but I actually have ahouse in Oklahoma City. And you
know, one of the things that'sthat's kind of interesting, and
Murray, you lived in Texas for awhile, and you're familiar with
this, you start getting into therural areas in the plain states
(09:24):
and the Midwest, and there is asignificant issue with access to
health care and and facilities.
And you know, we already have ashortage of qualified
professionals as it is. And soif we start getting into issues
with regard to immigration, andit cuts off supply, then we're
going to have, we're going tohave a bigger crisis in our
(09:45):
hand. Then if you compare that,then if you add to that, any
changes, especially some of thethings that have come out of RFK
press conferences and histalking points, we could be
looking at a very significanthealthcare issue.
To in this country worse than wecurrently have, which is, I
think, you know, theimplications for that, then,
(10:07):
from the from an economicperspective, are mind boggling,
scary.
Steve (10:12):
Yeah. And interestingly enough, you know what RFK is
talking about is a hyperregulatory environment. So in
other words, instead of being,you know, deregulation, that's
not, that's not in the cards ifhe plays a major role. And so
that's a whole different thing.
And then the other thing that'skind of ironic is the chevron
case, you know, again, the thisnew government, this new
(10:35):
administration, is going to bederegulating things or changing
the policy, you know, probusiness and but the deference
of the courts are going tochange. Now, granted Supreme
Court's there. You know, we knowwhere, where they're at in terms
of the majority, but the lowercourts play a big role. And if
the lower courts say, No, we'renot going to give you deference
on this deregulatory issue,could be really interesting. So
(10:59):
there's a lot of things going onand will be going on with this,
with this environment. So staytuned.
Pat (11:14):
Alright, so what? No, I was gonna say it's sorry. I mean to
cut you out there. I think, youknow, we hit on a couple of
things, but you know, thethe trade you know, trade
policies, I think are going tohave
a significant impact. I think,you know, I think insurance is
going to be really interestingmoving forward as well too. I
think that if we run intoimmigration issues, you know,
(11:35):
again, given where Murray and Ilive, one of the largest
expenses we have every year,every month, is homeowners
insurance, regardless of whetheror not we are filing claims. And
some of that is related to theweather and the risk models that
the insurance companies have,but the rest of it's related to
the cost of, you know, thereplacement cost of of
structures. And you've gotreplacement costs that is far
(11:59):
outpacing the cost of the resalevalue and the valuation of
homes, in part because of thetariffs that were enacted in
2017and the lack of skilled labor
and in manual labor, like withroof repairs and roof
replacement and things alongthose lines. So I think, you
(12:20):
know, given how much thatinsurance companies spend every
every year in outside councilfees, I think that we're, you
know, we could probably see anuptick in that type of work.
It's not sexy work, and by anyway, shape or form, but it is
something that I think we'regoing to see an uptick in.
I think part of that's going tobe driven by some of the
economic decisions that aregoing to be made by this by this
(12:43):
administration,
Unknown (12:45):
right?
Steve (12:47):
Well, very good point. So we've got a lot to look forward
to, with regard to the first fewmonths of the Trump
administration, too.
So want to talk more withPatrick about what Patrick does.
Why don't why don't you startPatrick, explain what your role
is at ALM with regard to dataand analytics, I think everybody
(13:11):
would like to hear you knowwhat? What your Well, yeah. I
mean, Thanks, Steve. For anumber of years, I've been there
since 2017 and up untilrealignment in when we realign
some of the operating, operatingstructure of the organization. I
ran the intelligence businessthat's now moved under under
product. And my friend RichardCaruso,
Pat (13:32):
and you know, Richard's a lot of people you know, know
Richard. He's been around for along time, and is a really good
guy. I work very closely withRichard. Still, I work very
closely with Gina Passarella,who is now the head of all
content for Alm and Davegianella, who is the editor of
the American lawyer. I spend alot of time playing with data.
(13:53):
Still, I don't have the teamsreporting up to me and don't
have the day to dayresponsibilities for the
intelligence business that Ihad, but I spend a lot of time
playing with data and a lot oftime speaking to law firm
leaders. And so a lot of myconversations are with mid size
firm leaders in large law firmleaders. And then ALM
(14:19):
obviously has a platform thatallows me to connect to the buy
side as well, too. And you know,I did that work years ago with
with Wilder's core,and it still allows me to
connect to the buy side, whichis, I think, critical for what I
do, to be able to getperspectives
from General Counsel and inhouse legal departments around
(14:42):
what they are looking for, andoutside counsel the trends that
they're seeing, the things thatthey would like to see from from
their outside counsel. Sobasically, I spend a lot of time
talking, I probably spend moretime listening, and then a lot
of time just playing with dataand trying to kind.
The data in ways that yieldsomething actionable, that but
(15:03):
yet, is fairly unique in termsof of what people are seeing and
and what they've seen in thepast, right?
Steve (15:11):
So one of the things that as as a legal recruiter, that I
see is that the that thecandidates and even the firms
when they are when they arepursuing communities, there's a
huge focus on the profits perequity partner metric. It's the
one thing that people talk aboutthey know and and nine times out
(15:32):
of 10, if I bring in things likeRPL and compensation all
partners, they don't even knowwhat that is. So I know Patrick
that you you feel that there's alot, lot better data that you
should be looking at as as asanyone involved with a law firm,
whether you're, you know,considering a move, or whether
(15:53):
you're a COO or a CMO at a lawfirm. So I'd love to hear your
thoughts on sort of what, whatthe metrics that people ought to
be looking at?
Pat (16:04):
Yeah, look, I mean profits for equity partner is has been
around as long as the amlawrankings have been around since,
since 1985 and you know, thepoint that I will often make is
that when you know the rankings,when Steve Brill first did the
rankings in 1985 most of thepartnerships were single tier
partnerships, and so it madeprofits per equity partner, a
(16:24):
fairly straightforward metric.
And over the years, as we'veseen, you know, there's been a
greater shift to adding that nonequity tier. In fact, I think
next year will be the first yearthat we've had more non equity
partners, especially amongst theamlaw 50, but in the AMLO 100
am law, non equity partners willwill be a higher percentage of
(16:46):
equity partners in the am law100 and that's been a steady
shift since about 2000 we'veseen that that move kind of
coming in. And with that, youknow, the definition that we've
always used with regard to, youknow, more than half of your
income coming fromnot coming from a fixed from,
from fixed income on theSchedule k1 is, you know, I
(17:07):
think it, you know, there's somefirms that have, you know, maybe
single tiers structures. Butbecause of the Comp structure,
you know, it kind of calls intoquestion a little bit how they
should classify certain lawyers.
And so I think the metric itselfis fine. I think it can be a
(17:31):
little bit misleading, though,in terms of true profitability,
which is why I look more atprofit per lawyer. Profit per
lawyer, to me, is a much betterindication of how firms are
doing relative to theirprofitability and and how it
relates to their head countgrowth and and everything else.
So yes, I look at RPL, but Idon't I look at RPL in
(17:53):
conjunction with headcountgrowth. I generally look at when
I look at profits for equitypartner, I look at it in
conjunction with changes to theleverage model, for example. So
in other words, if we see a firmthat has grown profits for
equity partner, let's say 15% ina year, they've only grown
profit per lawyer 3% in a year.
And then you look at theirleverage model, and he's like,
Well, you know, they've they'veboosted up non equity partners
(18:15):
by X percent, and they'vedeclined, you know, or they've
decreased in their percentage ofof equity partners, you can sort
of see where you know why thatnumber is as high as it is. So I
tend to look more at profit perlawyer, and then within that I
adjusted, I adjust prior yearsfor inflation. And part of what
I want to be able to see fromfirms is, is there profit per
(18:37):
lawyer keeping pace andexceeding inflationary growth,
because we know that firms haveto continue to invest in growth
initiatives, and if they'regoing to do that, then they've
got to be delivering levels ofprofitability that enable them
to do that. And you know, a lotof firms right now, when I go
back and I look at the metrics,even if I adjusted for for back
(19:02):
to five years. You know, whenyou look at the AMWA 50, you
know, their RPL, for example,over the last five years,
adjusted for inflation, is alittle over 1% compound annual
growth rate. But when you lookat the am law, second 50 and the
second 100, they're both, youknow, they're both negative, you
know, over the last five years,right? So our rates not growing
(19:23):
as fast as they should. Well,for the AMWA 50, we know that
they are for the second 100, Idon't think rates are keeping up
with inflationary growth at all.
Ironically, profits per equitypartner is even when you adjust
it for inflation over the lastfive years. It's up for all
segments, but it's up 5% on a ona CAGR for the amlaw 50. It's up
1% for the second 50. You know,it's up 1% for the second 100.
(19:50):
Profit per lawyer, you know,ironically, is up 2.6% 2.6 Yeah,
2.6% forfor the amlaw 50. And again,
probably.
Profits per equity partner is up5% profits per lawyer is only up
2.6% so you see the disconnectbetween those two things.
And for the second 100, believeit or not, profit per lawyer is
(20:12):
actually over the last fiveyears when you adjusted for
inflation. And I use, just foreverybody out there, I utilize
the GDP implicit price deflator.
When you adjust it forinflation, it's actually
negative over the last fiveyears, right? So we've got,
we've got data points that Ithink when you look at how
they're comparing toinflationary growth, and then
how firms are comparing to theirsegment, we're seeing some firms
(20:33):
that are definitely overor outperforming the market, but
we see a number of firms in anumber of segments that are not
keeping pace with inflationarygrowth, and I think that's
problematic right on just as aninformational point, how long
has the American lawyer beenkeeping the profit per lawyers
metric? Because I don't That's agood question. Yeah, that's a
(20:55):
good question. I want to say itgoes back about 20 years and and
I should know that off the topof my head, but the problem is,
is that I've,you know, I've changed all the
spreadsheets on my endto put, to put that in there,
and then I put rank formulas inon all of my things so I can
(21:15):
look at how firms rank. Becausethat's, that's one of the things
that I look at isnot just what the nut what the
raw metric is, but how they rankyear to year relative to the
rest of therest of the market and and part
of that is, look, I mean, whenwe, when we talk about some of
these metrics, you know, RPL isa great metric. And, you know,
(21:37):
Murray years ago, when, when wewere talking about this stuff,
when you were at, hey boo, youknow, we would talk about this.
And I remember a conversation wehad sitting in Dallas, actually,
where we where we were talkingabout because both you and I,
and strange, I remember thisstuff, but both you and I
always looked outside of legal,and would read and watch and
(22:00):
learn a lot of stuff outside oflegal, and then, right, you
know, use it as inspiration tosay, well, this doesn't, you
know, translate directly, butthere's this part and this part
that we can take and we can makeit work for what we're doing,
right, right? And,you know, but I remember, you
know, kind of looking at, youknow, our talking about RPLS as
well. It's, you know, it's kindof a true measure of the health
of an organization. And the moredug into it, the more it was
(22:23):
like, Well, yeah, but it's kindof driven by the geographic
distribution of lawyers andwhere they're at, right? So you
know, if you've got, you know,your old firm, if you've got a
bunch of guys sitting in Texas,and you know, that's great, but
if you're competing with firmsthat have a lot of people in LA
and San Francisco and New Yorkand DC and Chicago, they're in
(22:45):
higher rate markets. They'redemanding higher rates, you
know. So if all things areequal, the RPL is going to be
higher in those in thosemarkets, right? So I look a lot
of that, you know, I try tominimize the, you know, the bias
of size, because we know thatthat, you know, plays a role in
rates and mitigate the role ofthe geographic distribution. So
(23:06):
that's where the year over yeargrowth
tends to come in for me, when Ilook at it and then ranking the
year over year growth, because Iwant to be able to see, okay,
how are these firms actuallycomparing to in terms of just
growing and outperforming theirprior years. How are they
performing against the rest ofthe market? And when you do
that, you start to see pocketsof firms that are really having
(23:29):
good stretches, you know, 345,year stretches of really strong
performance, where they'reoutperforming the market. And
you know, they're not, you know,they're often not. Am law 50
You know, there's a few thatthat are that have gone through
firms.
incredible, you know, stretches.
But, you know, Murray capes,case in point, your old firm has
had a great stretch over thelast five years. They have, you
(23:50):
know, the numbers arephenomenal. And, you know, it's,
I think it kind of fallsbeneath, you know, or kind of
doesn't fall beneath thewayside, but it's just not as as
common and as talked about asmuch as some of the other large
firms are. And I think it'simportant, even when we get into
the mid sized firms, tohighlight these firms that are
just absolutely crushing it,even though they may not be
(24:12):
getting the fanfare that otherfirms are.
Murray (24:16):
I could not agree more with that's that last statement,
especially I since I've beenrunning my own shop, working a
lot more with with, with somefirms that are there am alone,
one for sure, but firms that arethat are that are either
bubbling under the surface oreven a little bit lower down,
that that that that numbers. Butwhen you start to talk to those
(24:37):
managing partners and thosecoos, and you start to you start
to hear the numbers that they'reposting up and, and they're, you
know, they're experiencing, andthis is, you know, this is what
I would say, the lateral, youknow, lateral partner candidates
that areout there, there are, there is
very real. And I really wouldlike to find the numbers on
this. Maybe you can help me withthis. It's.
(25:00):
The point, Patrick, but the feemigration that's going on from
the larger firms to the some ofthese high quality smaller
firms. There's a firm that I'mworking with right now where
they they are getting, you know,they're getting, I won't talk
about the specific practices,but there's a specific practice
at that firm that's getting allthe all the work of a certain
(25:25):
kind, very profitable, highlyprofitable kind of work of a
certain kind that just shift hasjust shifted in the last five
years from these large firms tothis smaller firm. And the large
firms are, in many cases, veryhappy to send that work, because
they're there's they're sendingit to a high quality firm.
They're keeping their clientsreally happy, because the
(25:47):
clients are saying, I can't pay$1,500 for you. You know Gibson
Dunn partner, but, but I stillneed Gibson Dunn partner,
quality work being done on this.
How can you? How can you helpme? And they're doing it, and
the work is moving and andif you're a, if you're a lateral
partner out there right now, andyou're trying to think
(26:08):
creatively about where yourwhere your practice could go,
take a look at some of theseother firms that are out there,
as you said, Patrick, thataren't getting, you know, aren't
getting the headlines. We'resaying, Wow, they're they're
doing, they're doing great, andthey're getting great work in,
and they're profitable on it,and, and guess what? They're not
working 100 hours a week,
Pat (26:32):
no. And I think that, I think data, you know, I said
this years ago, when I wasworking with, with legal
departments, you know, data thatis available, especially to the
buy side now, and it's, it'sbeen available, you know,
largely since about 2007 2008 Imean, we talk a lot about the,
you know, the financial reset in2008 and I think it was kind of
interesting, because there'ssort of three things, you know,
(26:53):
that perfect storm when thingscome together, because you had
the financial reset, but youalso had the ACC value challenge
that was happening, right? SusanHackett and those guys were
putting that together, right,you know? And that just happened
to coincide with with thefinancial crisis. But, and then
you had the E billing companiesstarted giving back all that
data that they'd been collectingto their clients, which are the
(27:16):
legal departments. So youstarted getting some legal
departments that were sort offirst in getting out and
utilizing data to evaluate theiroutside counsel, and, you know,
potential outside counsel,because then, you know, they're
getting data from not just theirclients, but also the market as
a whole. And what's interestingis, I think that combined with
(27:37):
websites, and you know, we sawwhat happened in the early 2000s
is, you know, my old company,Martindale, Hubble, kind of went
Bye, bye. Our old company,Hubbard, one ended up going out
to, you know, somebody else andas well. But we saw the rise of
websites and the ability forthese firms to present their
story the way that they wantedto tell it. And you combine that
with the fact that now the buyside has far much more data to
(28:01):
be able to pull and analyze, andso you shorten basically the
universe, and that's out there.
And now I think for a lot ofthese firms, the cya component
that we've talked about for somuch and the brand equity of
such larger firms, kind of goesaway a little bit for some of
these specialized areas, andallows them to generate higher
fees. It allows them to be seenand to be hired more by some of
(28:23):
these firms that ordinarily maynot know who this lawyer is or
who this firm is. And I thinkthat that's going to have a long
I think that's going to continuegoing down
over the next five to 10 years.
I don't see that changing. Andin fact, I think it's going to
be better for a lot of mid sizedfirms.
Steve (28:44):
So Patrick, when you meet with law firm
managing partners and chairs andpractice group heads, etc, what
you know? What? What? What dothey tend to bring you in for?
What do you tend to talk aboutwith them? What are the subjects
on their mounts?
Pat (29:02):
Oh, it's always data.
It's not for the jokes, and it'snot for my personality. It's
usually for the it's usually forthe data. It's, it's a lot of
market analysis and marketassessment. They want to be able
to sort of see a state of theindustry.
And so it's in one of thechallenges with that is, you
know, we put out, you know, anAmerican lawyer always has, you
(29:23):
know, the financial informationcomes out once a year.
You know, the lateral movement.
Lateral information is publishedmonthly in on law.com compass.
But it's, you know, that's alsonot a tool that a lot of
managing partners generally loginto and use. They have other
people inside the firm that aregiving them that information.
(29:43):
So a lot of what I'm doing istrying to cut the data and slice
it and present it in ways, andsegment it in ways that gives
them something a little bitunique to look at. And plus,
there's always data that wecollect as part of the AMWA and
National Law Journal.
Survey. So just for everybodyout there, American lawyer and
(30:04):
the amlaw rankings rank firms onon gross revenue and the
National Law Journal, or theNLJ, so the NLJ 500 ranks firms
based on FTE head count. And sothose two surveys, or those two,
you know, those two surveysactually emanate from the same
survey that goes out to about750 or 800 law firms every year.
(30:26):
And there's a lot of questionsthat we ask in that that are not
on the Excel spreadsheet. Sowe'll ask questions around
rates, around Did you raise yourrates? And if so, what range Did
you raise your rates? Totalnumber of billable hours. What
percentage of your total revenuecame from anything other than,
(30:48):
you know, variation of thehourly fee arrangements,
basically asking about AFAStotal square footage. That's
allowed me in the past to createsome metrics around revenue per
square foot per lawyer, andthose types of things to look at
it, which was, which wasinteresting as well. I created
one one time, which really madea very certain firm really mad,
(31:12):
which was profit per lawyer,per office and
and, you know, this is one ofthe firms that had a lot of
offices and very lowprofitability. And it was, you
know, it was, let's just say,less than $1,000 in a year per
lawyer. And, you know, butagain, it allows me to sort of
cut these, create these metricsthat look at the market a little
(31:35):
bit differently. Credit lines isalways an interesting one. We'll
ask the question about half thefirms will reply to us on that
whether or not they're utilizinglines of credit, and if so,
we'll ask them, sort of, whatare the areas that you're
utilizing it for? Technology,overwhelmingly, is one of the
areas that pops up there interms of lines of credit. But I
(31:56):
think one of the moreinteresting ones recently has
just been rates. You know,there's obviously a lot of talk
in the news about rates and, youknow, the the way that, you
know, we've got four digit, youknow, associates, especially
second you know, something cameout a few weeks ago about first
and second year associates beingfour digits at a couple of
firms. You know, we've got 2000hour plus partners now. We're
(32:18):
going to have a $3,000 an hourpartner here pretty soon as
well.
But what's been interestingabout that is to then look at
the unranked firms and be ableto see, you know, a lot of them,
over the last five years, havenot been raising their rates at
a minimum of 3% and you can sortof see this stair step of, you
(32:39):
know, firms from 30% of them to50% to 60% to 80% to 90% over
the last five years, raisingrates 3% or more. Meanwhile, you
look at the AMWA 100 and it's90% 95% 93% 92%
in part because they'veinstitutionalized that function
inside their firm, they sort oftaking it away from the lawyers
(33:01):
and said, No, no, we're going toset the rates for you, whereas
in a lot of the more mid sizedfirms, you're still going to the
lawyer and saying, Hey, we youknow, we're going to, we want to
raise your rates to XYZ client.
And of course, they're pushingback and saying, No, you know,
my client's already gettingenough pressure as it is.
And so a lot of these firms havenot been raising their rates in
a way that's keeping pace withwith inflationary growth and
(33:24):
operational increases, and it'sreally starting to impact their
their numbers. And so that'sbeen one of the big ahas that
usuallygenerates discussion. And then
most of the questions that I getyou guys get when you do
retreats as well too, which is,how do we talk to our clients
about rates, and thenseparately, and I end up talking
to firm leadership about, how dowe sell our lawyers on, on
(33:46):
having, on raising their rates?
Because the bulk of you know thediscussions that the managing
partners are having, they'rebasically internal sales
discussions and persuasiondiscussions. And how do we get
people to to go in thisdirection that we know we need
to get them to go in and so thatusually is what drives a lot of
(34:08):
thediscussions. And then the other
thing, you know, obviously, wedo a lot of work with, with the
buy side, and so a lot ofimpressions from, from
frustrations that are comingfrom in house counsel. And to be
fair, I really I could probablyhave the same slide and use it
for the last 15 years, becauseit hasn't changed a lot, as you
guys know, I mean, it's the sameissues or the same ones that are
(34:31):
that continue to come up. Butevery once in a while, there's
some new wrinkles that come upwith their their frustrations,
and most of them are not raterelated, right? As you guys
know, like they're not relatedto cost, they're related more to
the perceived value that they'regetting for the cost, right? And
a lot of it is the clientexperience and the service level
and the communication, and, youknow, the forecasting, the
(34:53):
budgeting and things that can besolved by better processes
inside, inside.
Firms, and so generally, that'sa lot of what the discussions
are. And then it's more of anAMA, and you don't ask me
anything afterwards.
Murray (35:11):
Can I just tell you as as somebody who was who spent a
lot of his career as a legalmarketer, wrestling with the
AMWA 100 survey,but that what that experience
was like inside, being insidethe firm. It was, I mean, we
always knew that there werecertain things that we were
going to answer, but there's alot of debate about, what do we
(35:32):
answer, what don't we answer?
How do we answer this? Because Ihad to convince the CFOs like to
just chop in their numbers andthen hand it off. And I would
say, really, this is a marketingdocument, guys, this is a
marketing document. It's a it'sa recruiting tool. It's a this
is we gotta, we gotta bethinking very carefully, and we
(35:52):
have to answer it with, withcandor and but, but you know,
do we answer every question?
Because you know the I know youguys, you know you asked the
question somebody's gonnaanswer. You said, 50% of the
firms are giving you answers toquestions. I know we never gave
answers to Yeah, you know
Pat (36:11):
it was, but I think it's but I think that's a good
observation. I mean, I thinkthis, I think the data and how
it comes out. And for some lookfor some firms, and you guys
know this, for some firms, theythey have a little bit of a fear
of even though everybody knowswhat their numbers are when they
see them compared to otherpeople, other firms, who they
(36:33):
they feel are competitors orpeers. And you got, you know,
and I had a buddy of mine tellme this, you know, he said, you
know, we, we've got a three yearstrategic plan in place, and I
don't want to short circuit it,because somebody wants to start
making, you know, sort ofcutting things off because they
want to solve for the here andnow and not staying true to the,
you know, the strategy that weput in place. And I think that
(36:55):
there's a lot of validity tothat and and so I one thing I
can tell you is my colleagues,and one of the things I was very
impressed about when I came intointo ALM was the care and
feeding that goes into all ofthat behind the scenes, because
that's largely driven, and it'stechnically owned, not by what
(37:17):
was intelligence, but by theeditorial team. And you know, so
I came in when I started. Itcoincided with Gina pastor Ella
beginning her tenure as theeditor in chief of the American
lawyer. And, you know, the onething I will always say is that
she just cared about getting itright, and so the care and the
feeding and the approach and thestuff that went on behind the
(37:40):
scenes in terms of thediscussions and the decisions
and everything else was alwaysrooted in what's accurate. You
know, what are we going to dothat that's accurate, and
that's, you know? So, you know,I know people have different
opinions and perspectives, and,you know, that's, that's what
everybody, you know, everybody'sentitled to those. I know what I
(38:02):
saw behind the scenes, and soI've got a high level of
confidence in what we're puttingout there because of the
approach that was taken and alot of that, like in every other
organization, it's sort of setat the top. And Gina, did you
know, she was a phenomenaladvocate for this is going to be
right? Like, we're not puttingit out there. If it's incorrect,
we're going to make sure thatit's right. So there's a lot of
(38:24):
vetting that went on. There wasone reporter, and now an editor
in particular, that would gothrough and catalog all the
deals on a couple of firms tosort of vet the numbers, to
make, you know, deal heavyfirms, to make sure that, you
know they aligned, and you know,just, there's a lot of that
stuff that went on that I don'tthink a lot of people actually,
actually saw and and realizedwhat's going on. And so I think
(38:47):
I know it's one of the debatesthat we had every year. Murray
was okay, at what point doesthis become so onerous that
people stop responding? And sowe're always eliminating
questions and tweaking questionsto make sure that it's, it's
topical, and it's it's relevant.
But then part of my role, evennow is, if you guys are going to
take the time to do this, andyou're going to take the time to
(39:08):
give us this information and doit thoughtfully, then I need
part of what I want to do istake the time to give you guys
something back that's going tobe actionable, that's going to
be that's something that you canactually do something with, not
just what you're reading in, youknow, the charts that are
published in law.com butactually some of the insight and
combining it with some of theother metrics, and even stuff
(39:29):
that doesn't come from ALM, withregard to, you know, maybe, you
know, some different industry,you know, data points that we
can combine and and actually putsomething together that's
meaningful. Because if you guysare going to take the time to do
that, then we owe it to you tobe able to give you something
back that's going to be usefulfor the firm. And that's, that's
kind of the approach that wealways took, yeah, because just
(39:50):
just being able to cough upnumbers is one thing, but to be
able to provide some insights,we used to, used to have a
reported.
Murray (40:00):
Called the numbers that matter, and that was, we could
take all the numbers at the firmfor a given quarter that we were
tracking, give the numbers, butI said, but here's what that
means, here's here's what that'stelling us about our firm right
now. Here's what's telling usabout the health of the firm,
where our revenues are comingfrom, and those that that got
(40:21):
good conversations going,because it was, you know, was it
just plopping out numbers. Itwas
taking it, and it was using thefirm's own internal numbers,
right? It was so it was, it was,it's it was, it was critical to
be able to do that. And I cantell you that we always trusted
ALM. We always trusted you. Wealways trusted Gina. Gina has a
high degree of credibility, asyou know,
(40:43):
just it was just like handwringing about what happens.
Pat (40:48):
I'll tell you, she's one of the best colleagues I've ever
had, and there's no drop offwhatsoever. In fact, Dave
gianella is probably morefocused on certain things. Dave
is, he's a new editor of theAmerican lawyer. He's an
interesting guy because he's gotboth a Masters in laws from
Pritzker and a and his Mastersin Journalism from Northwestern
(41:15):
which is, I'm drawing a link onthe school Kellogg's
business. Good. Medill, yeah,right. Medill School journalism
there, and David's exceedinglysharp, but yeah, Gina was, you
know, again, it comes down totrust, right? And our role
always in the intelligencebusiness was, you know, we had
(41:35):
no margin for error to be wrong,because if we were wrong and the
editorial team was utilizingsome of our data, then it
undercut there, you know,you undercut them as well. And
so I, you know, we took thatstuff, and we continue to do it.
I take that very, veryseriously. And I've been in, we
all have, and we've seen peoplein this business, and we're not
(41:58):
going to mention any names, butpeople that don't put the same
care and feeding to some ofthat. And the last thing that I
want to see is any leader of anybusiness, whether it's a law
firm or a service provider orwhomever it is,
make the right decision off ofthe data, but have the data be
flawed, right? And that's notsomething that I can, I can live
(42:23):
with. So we preach it a lotinternally. We can, we can
control what we can control, andwe can, you know, this is the
one thing that we can control,is our care and feeding in the
approach that we take to makingsure that this is right, and
then how we bring it out to themarket and that I spend more. I
mean, I joke around all the timethat I got this body the hard
(42:45):
way by sitting down and lookingat spreadsheets.
But you know, I am more freakedout about being wrong than I
ever am happy about being right.
I am literally a walking versionof the behavioral economics
principle of loss aversion,right, the pain from being wrong
is far worse than any pleasurefrom ever being right about
(43:06):
anything, and that's the natureof the business that we live in.
Steve (43:13):
All right, so let's, let's do an exit question here,
which is, let's look at likenext year. I mean the remainder
this year, what's, what's, whatdo you think this year is going
to look like? But also any othertrends that are happening, where
you see, you know, the datachanging, you know, for some of
these firms, you know, over thenext 12 months,
Pat (43:36):
look, I think complexity is always a lawyer's
best friend. We know that. Andso I think that we're going to,
it's going to be the next therest of this this year has been
strong for a lot of firms. Ithink we're going to continue to
see that into next year. I don'tknow if I want to go out on the
limb for the year after yet, butI think we can, we can kind of
look at the next 18 months andsay that they're going to be,
(43:58):
with relative certainty thatthey're going to be, they're
going to be strong. I thinkwe're going to see, you know,
more expansion. I mean, you guysmentioned earlier the news that
came down today about Kramer 11and and Herbert Smith green
hills and what that looks like.
I think that's, that's kind offascinating. I mean, first of
(44:21):
all, Kramer 11 likely won't bein the am law anymore because of
the plurality rule, because thebulk of their lawyers are going
to be over,are going to be, will be outside
of the US. But if that firm, Ilooked at this earlier, because
we have a little thing to do tolook at merger assessments that
that firm were to be in the amlaw Kramer 11 would go from an
(44:42):
am law 104 firm to an am law 20firm with that. And so right now
that's gonna you know thatmerger is creating an am law 20,
or a global 25firm. And we know just from
history that.
One of these moves is going totrigger another one, right? So
(45:03):
we saw A and O and Shearman. Nowwe have Herbert Smith three
hills and Kramer 11. So we'relikely going to see another
couple of moves come from thatwe are going to see more
consolidation in the US anddomestically, and I think we're
going to see more mid market lawfirm mergers,
(45:24):
I think for two reasons. One, Ithink, you know, the age old
reason that a lot of firms don'thave a good mid sized firms
don't have a good successionplan. So I think that that's
going to drive, it's going todrive some of the combinations.
But also, I think that there'sinternal pressure from partners
and attorneys saying, what arewe doing in response to x? And
(45:45):
we need to do something. And Ithink that we're going to
continue to see more moreconsolidation in the market. And
so the consultants doing thatwork are going to be busy over
the next 18 months, right? Inaddition to not having a
succession plan, I see a lot offirms not having a good ejection
plan. In other words, partnersthat need to be need to be
(46:07):
removed from the partnership, orde equitized, or whatever. So
the merger is always a reallygood excuse for that. So
the question I always have withwith especially firms with the
HL policies, is, I would love toknow, I would love to see the
metric on the number ofexceptions, exceptions per
lawyer, relative to tothose firms, because how many
(46:29):
firms are looking at somebodythat's coming up on their age
out, and they're saying, Youknow what? We just, yeah, we'll
grant the exception for a year,and we'll, we'll grant, you
know, our waiver for a year,we'll grant another one for
another year. You know, we,we've done a number of round
tables with managing partners,and I think mid sized managing
partners around succession. And,you know, one of the things
(46:51):
that's really jumped out to meis they don't have a there's not
a huge challenge with the peoplenearing that level. It's the
people that are 5758 that arenot producing, Steve, to your
point that they don't have theattraction plan for that. They
have to look at somebody that's66 and 67 years old. And by the
way, the older I get, the morethat that number seems real to
(47:11):
me. But you know, you know,they're looking at this and
they're going, man, these guysare doing everything right? But
here's this guy, you know,here's this attorney that's 57
years old. We can't get him todo squat. Why is this guy
staying and this other oneleaving? And then, of course,
then there's the impact onmorale, and there's the impact
on everything else as it comes,you know, with regard to the
(47:32):
firm. So, yeah, I think havingan injection plan. I mean,
actually, Steve, you just foundyour next retreat speaking gig.
That's
Murray (47:47):
the promise. That's why they go to merger, because they
don't have the answer. Yeah. Youknow, I know we're a little long
on time here, but you know,Steve, you were thinking the
ejection plan and the 57 yearold lawyers, etc, you know, I
think about when I first startedworking in large law firms,
which is now going back coupleof, you know, that's 2023, 24
(48:10):
years now. And wasn't it thefirst one that you were, I was
Jenner, was the first really bigfirm that I worked at. And, you
know, at that time you madepartner, because you could bill
the hell out of, out of yourfiles, right? You're, you're a
good biller. And a lot of thosepartners who got became partners
because they were great billersare now getting into that 5758
(48:34):
year old range, and they didn'thave and you'll find there's
kind of a donut hole, becauseyou find the ones who are coming
into partnership now are muchmore focused on business
generation than, than, than theones who are, who are, you know,
1010, or 12 years older, andthen the ones who are in the 60s
and 70s, some of those are stillfounders, or worked with the
(48:56):
founders and and, you know, theyhelp build the firm. So there is
this, there is that. There'sthis donut hole that's that's
going on, and I it isinteresting to see how the firms
are going to deal with that,because some of the firms are
looking at how, what percentageof their high, you know, sort
of, sort of their their high,high growth clients, are being
managed by people who are over65 and the number is kind of
(49:17):
scary.
Pat (49:19):
I know, I know we're long on time, but that's a couple
one. We don't talk enough about.
We talk a lot about law firmsuccession. We don't talk about
legal department succession, andwe don't talk about the fact
that, you know, there's asignificant generational shift
that's going on there on the buyside as well. And you know,
we're getting guys that areyounger than us now, that are in
positions of relative power. AndI think that that's to me, that
(49:42):
that's something that that iskind of interesting. And I think
the other part, Steve, this goesto a lot of the work that you
do, is, and I ask,you know, talent officers in
firms, this quite a bit, andespecially in Murray BD, people,
Murray, you, I know that you,you took part of betting. You.
Your firms, right? And you satthere with laterals and you
interviewed them, but at somepoint we have to come up with
(50:05):
some sort of metric, or some wayof evaluating whether or not a
this person has the skills.
Let's say they're, you know, I'm53 so let's say they're my age,
5354 and they've got another 15years left, or whatever it might
be. But do they have the skillto be able to rebuild that book
of business that we know is notgoing to transfer the way that
they think it's going totransfer. But the second part
is, do they have the desire?
(50:26):
Right? I mean, I think about itlike with my house. I mean,
I've, this is what my fifthhouse, or sixth house that I've
been on my my first one, ofcourse, it was in the age of
Trading Spaces. And, you know,we can HGTV, and we can do
everything in a weekend. Youknow, we started doing all that
stuff ourselves right now. Wecan lay this tile, or we could
put the wood floors in. We cando all this. By the time I got
(50:47):
to my fourth house, I'm like,the heck with this. I'm going to
hire somebody to do it. I don'twant to do this anymore, like I
want nothing to do with withdoing this, this type of work.
And so I we know that going outand developing new business is
not easy, right? And it's notsomething that is native to a
lot of lawyers as well. And so Ithink that, to me, that's going
(51:09):
to be one of the questions withlaterals moving forward, is not
just do they have the skills beable to rebuild this book of
business, especially amid agenerational shift with a lot of
the buy side, but do they havethe desire to be able to do it,
especially with guaranteesgetting as high as they are in
certain areas. Now, that's, Ithink that's going to be a story
(51:29):
for the next couple of years.
Steve (51:31):
Yeah, it's amazing. How little the firms do with regard
to that question. You know,there's, it's all based on, does
the business come over? And weknow that even if it comes over
seven 30% is going to disappearin a year or two anyway, and and
so there's nothing they're notreally looking at. I know that
Murray's old firm was one of thefew firms that actually did some
(51:54):
metric testing,profile assessment of laterals.
And most firms don't do it andare running scared of it. And, I
mean, I think that, you know, itwould be
definitely something on theirrate, should be on their radar
screen.
Pat (52:08):
You know, one, one thing we've talked for years now about
the, you know, the supposedrecord day of reckoning from the
Big Four and themultidisciplinary service
providers and the MBBconsultants and everything else.
The one thing that law firmshave actually taken from them
and have started to do really,really well is
institutionalizing key clients,right? We started doing that
years ago with key client teams.
We started building the clientexperience around, you know, as
(52:31):
a firm client experience, not anindividual lawyer client
experience, in a part, becausewe wanted to minimize, mini
minimize portability of businessthat, again, kind of comes into
direct conflict and contradictsnow, well, we're going to give
somebody 15 million a year orsix year guarantee, and now we
got to hope that they have thedesire and the skills, and we
(52:52):
have the infrastructure withinour firm, and this is the other
part, right? We have theonboarding and the
infrastructure and the processesto be able to commit to helping
this person rebuild this book ofbusiness. If not, we're doubling
down on a significant loss.
I know we keep doing thisforever. We could go for
another.
Murray (53:12):
We got another, we got another couple of podcasts to go
with you here, Patrick, I thinkso, but, but, but I don't know.
I always enjoy you know,Patrick, you and I've spent lots
of time together, you know, bothin conference rooms and maybe on
a few bar stools over, over theover the years, but, but always,
always enjoyable. And it's beenway too long, and you and I are
(53:36):
going to catch up on this iswhen we, when we close here,
but, but thank you.
Steve (53:39):
Thank you for this. We, I can't tell you absolutely this
is, it's been great having thisconversation. Patrick, guys, I
appreciate it as you know, I'venever been a microphone that I
don't like, so
Murray (53:50):
same with us, really. I mean, you're, you know, that's,
Steve (53:50):
Well, you know, as as, as we've noted, we're on like,
that's the, it's a yak fest. Ido want to just one plug for the
McCormick, McCormick group. Ifyou are, you know there is,
their third month of doingERISA. ERISA moves nationwide.
there is some criticalintelligence that that Steve and
his colleagues are compilingevery month. There's some new
(54:11):
data that's coming out. If youhaven't subscribed, look in the
show notes, contact Steve, geton their mailing list. Great
stuff coming up, Steve, what's,what's, what's coming up that
people should know about, notthe data, because I know you
guys are still going through it,but what are the, what are the
topics, right?
(54:38):
We've got something else in thework. It's a little too early to
talk about, but we've, we've gotanother one planned. And, you
know, I think the big thingright now is the is the
government laterals. I mean,it's going to be a lot. It's
going to be really, I didn'tmention this before, but it's
going to be challenging, becausehow many people are going to
leave firms to go into thisadministration? Right?
(55:00):
We just don't know what theappetite will be, you know,
because I think at least inWashington, the vast majority of
lawyers didn't vote for Trump.
So you have to see how thatworks out. And I think that may
be an issue for people comingout of government, is there just
might not be spaces for them,unless they have, unless they
have, like that key practiceniche that they can sell. If
(55:23):
it's they're just great lawyers,really tough. So that's a little
bit of marketing to tell you.
Pat (55:31):
Can I give you a plug real quick too? Because I do take, I
have taken your lateral marketreports Texas and a couple of
other ones that you've put out,and I forwarded it to some firms
that I know are looking to hiredown there with them, basically
with the line, don't overpay forlesser talent. And read this,
and I think that it's it'scritical, because you have a lot
(55:52):
of firms, especially in marketsright now, Florida, Texas, that
are going to continue to seeexpansion and growth, that you
are going the the demand indexis going to go through the roof.
And so if you are not carefuland not working with the right
people, you are going to overpayfor talent that you shouldn't be
overpaying for in certain areas.
So absolutely, I'll throw that.
(56:14):
I'll throw I'll throw that. Thatplug over to you as well, my
friend. Well, thank you so much.
Murray (56:20):
All right. Well, I think with that again, Patrick, thank
you, Steve, always a pleasure,and we'll get this out, turn it
around. Thanks so much. And withthat, we'll close.
Pat (56:33):
Thanks, guys. Thanks.
Murray, welcome to Steve's rules,
(00:07):
periodic podcast featuring SteveNelson, executive principal at
McCormick group in the law andgovernment affairs practice. My
name is Murray Coffey, and I amthe principal of M Coffey, a law
firm marketing and businessdevelopment Boutique. For more
information, please visit mywebsite at M coffey.net Steve
has been an executive recruiterfor nearly three decades, and
without naming names, he isready to spill the tea on best
(00:30):
practices, and maybe a few notso best practices by firms and
candidates that he has seenduring his career, recruiting
some of the most driven andsuccessful professionals into
highly profitable and growingfirms. Steve is a former lawyer
and journalist and is a fellowof the college of law practice
management and a proud son ofWilkes Barre, Pennsylvania. Full
(00:50):
transparency here, Steve hashelped my career immensely
through the years and has becomesomething of a career shaman to
me and I know many others.
Steve (01:05):
Hey, Steve, welcome back.
Murray.
Murray (01:09):
Good. Yeah, I'm doing.
I'm doing all right. Stillrecovering from, you know, from
the event, most recent eventsthat have been going on. I think
we're gonna touch those on thosea little bit. And I don't know
if you saw this today, butKramer 11 is now merging with a
across the Atlantic. So lots of,lots of stuff going on in our in
our space, and I think we've gotsome we've got a great guest
(01:29):
today to help us get our armsaround all of that and much
more. Steve, you want to Yeah,
Steve (01:40):
so So joining us today is Patrick Fuller, who's the chief
strategist for American lawyermedia. And I've known Patrick
for at least, at least 15 years,probably longer. One of the
things that we have in commonis, as many people know, I have
a side hustle in in stand upcomedy. Patrick did that for for
(02:05):
a bit after college. So we oftentalk about comics and comedy and
so forth. So so Patrick's goingto be joining us,
and I thought we'd startby talking about the election
and the impact of the election.
So I'll give you a couple ofthoughts that I will say is
(02:26):
that,from a business standpoint, I
think that, I think that it'spretty much business as usual. I
mean, I think there's going tobe a lot of M A activities going
to going to continue to bestrong. And of course, you know,
you know litigation will belitigation, and most of it has,
most of it has nothing to dowith the federal government. So
(02:47):
that will just go onin Washington. Of course, it's a
little different. The one thingthat we're seeing, and of
course, I look at it a lot fromthe lateral perspective, the one
thing I'd say is there's certainagencies and certain practice
areas where there, while they'llbe changed, there's certainly
going to be a lot of activityand a lot of interest in
(03:08):
government lawyers, which is oneof the things we do. We do, we
do stronglyand in fact, in terms of the
statistics, and what we've beenfollowing in terms of the
lateral hiring trends, there'sbeen a lot, a big uptick in the
government hiring the lawyers,even, you know, even when they
(03:30):
did not know what, who was goingto win the election and that,
and the areas that have beenparticularly in focus, FTC,
antitrust, those you know,everything related to antitrust,
there's going to be big changeno matter what happens. You know
that tech companies are going tohave lot of challenges, and the
with the antitrust, no matterwhat happens, I think the
(03:52):
international trade, you know,talking about tariffs. But
beyond that, there's going to bea lot of things roll with anti
boycotts and things that relateto whatever the foreign policy
is going to be. So that's goingto be very strong as well. And I
think just the generalinvestigations, white collar
work, that's going to still bestrong. You know that there,
(04:15):
I'll tell you, we have three orfour firms asking for
congressional investigationshelp within the last three
months. So we know there'll beCongressional investigations
again, no matter who ends upwinning the house. It doesn't
matter. But whatever, whetherthere's going to be a lot of
congressional investigationsthat are going to be, I can't
imagine there will. There goingto be some prosecutions of
(04:36):
former government officials. Youknow, just, it's just going to
happen. We don't know, you know,the nature of those right now,
but I think it's going tohappen. So I think there's going
to be a lot of activity on allof those fronts. But I'd like
to, you know, you can chime in,Patrick, you know, talk about a
little bit about what you'reseeing out there.
Pat (04:58):
Yeah, I think, I mean, I think you said.
A lot of it right there.
Look, I think we're going to seethat. We know, we've known that
there's a lot of dry powderthat's been sitting there with
regard to M and A in funding,and I think you're going to see
an uptick in that work. I thinkantitrust is, you know, I think
(05:18):
that that's going to continueto, I mean, it's, it's, I think
it's a hot topic to discussright now, the question I have
is, is it good? Is demand goingto soften that? Is it going to
lessen under a Trump presidency,or is, or is it going to
increase?
Same thing with regard toregulatory we know that there's
(05:40):
going to be significantregulatory change. Um, change. I
think what it comes down to isgoing to be the clarity and the
lack of ambiguity. If, if theymake it to where it is, there's
very little ambiguity withregard to their policies, and
it's definitive, then I thinkwe're probably not going to see
as much action there. But youknow, if there is levels of
(06:02):
ambiguity, as there have been inthe past, then I think it's
going to continue to be a strongarea for a lot of firms. Yeah, I
think this also may be thebeginning of the state turbo
charge, possibly again, it goesto your regulatory discussion
there, Patrick, but the Chevrondeference, that that sort of got
(06:23):
blown out of the water with thelast in the last Supreme Court
term. You know that that's beena that's been a slow roll so far
about what the impact that'sgoing to be, but it does change
the administrative law structurein this country substantially,
and with the change inadministration, I think we're
going to see, possibly see some,some pretty significant changes
(06:48):
coming up in
Murray (06:50):
some of the major regulatory bodies in the United
States. And so I'm watchingthat. I've clients of mine are
watching, you know, they'rewatching
all of that. Plus, you know,they're saying, hey, you know,
if, if, if, if, if, RFK Jractually gets in, you know, gets
into this role that they'retalking about getting them into,
(07:13):
there's a lot changes in, youknow, in Food and Drug
Administration and and, youknow, even labeling on, you
know, on on, you know, on foods,you know, and and what that's,
what that's going to look like.
We haven't seen changes in foodlabeling, which sounds like a
obscure area, but it's real, andit's it's massive, and we
haven't seen a change in in foodlabeling in decades, you know,
(07:37):
Berkey, not since, not sinceBerkey, exactly I was gonna say,
because people might, might knowwho are listening. That was
given to us by our friend.
Parted Berkey, late, late,great. Berkey. Belzer, yeah, I
think, yeah, yeah. No, that's aYeah, go ahead.
Pat (07:55):
No, I was gonna say, a lot of this stuff is connected,
right? So we can't, right? Ifwe're gonna talk about
healthcare, well, we're alsogonna have to talk about
immigration, right? Becausethere's going to be, I think, a
significant impact thatimmigration reform or their
immigration policies have onhealth care, given the high
percentage of foreign medicalgrads that are active physicians
(08:15):
in the US, and then if we factorinto that, as well researchers
and pharmaceuticalorganizations, you know. What
does this mean, you know. AndSteve, I'd love your take on
this, you know. What does itmean from a,
you know, from a firm'scorporate immigration
perspective, is, are weexpecting that that work is
going to increase? To your pointabout health care, you know,
(08:37):
I've heard, you know, thePresident Elect say a number of
different things that areconflicting with regard to the
Affordable Care Act and what hisultimate plans are. Now, it may
not be him as much as it is thepeople that he surrounds himself
with inside his cabinet and whatthey want to do with regard to
(08:59):
the Affordable Care Act. But,you know, there's a lot of
people, people who know me thatare listening to this. Know, I
live in Oklahoma City, andalthough I pretty much live in
airports, but I actually have ahouse in Oklahoma City. And you
know, one of the things that'sthat's kind of interesting, and
Murray, you lived in Texas for awhile, and you're familiar with
this, you start getting into therural areas in the plain states
(09:24):
and the Midwest, and there is asignificant issue with access to
health care and and facilities.
And you know, we already have ashortage of qualified
professionals as it is. And soif we start getting into issues
with regard to immigration, andit cuts off supply, then we're
going to have, we're going tohave a bigger crisis in our
(09:45):
hand. Then if you compare that,then if you add to that, any
changes, especially some of thethings that have come out of RFK
press conferences and histalking points, we could be
looking at a very significanthealthcare issue.
To in this country worse than wecurrently have, which is, I
think, you know, theimplications for that, then,
(10:07):
from the from an economicperspective, are mind boggling,
scary.
Steve (10:12):
Yeah. And interestingly enough, you know what RFK is
talking about is a hyperregulatory environment. So in
other words, instead of being,you know, deregulation, that's
not, that's not in the cards ifhe plays a major role. And so
that's a whole different thing.
And then the other thing that'skind of ironic is the chevron
case, you know, again, the thisnew government, this new
(10:35):
administration, is going to bederegulating things or changing
the policy, you know, probusiness and but the deference
of the courts are going tochange. Now, granted Supreme
Court's there. You know, we knowwhere, where they're at in terms
of the majority, but the lowercourts play a big role. And if
the lower courts say, No, we'renot going to give you deference
on this deregulatory issue,could be really interesting. So
(10:59):
there's a lot of things going onand will be going on with this,
with this environment. So staytuned.
Pat (11:14):
Alright, so what? No, I was gonna say it's sorry. I mean to
cut you out there. I think, youknow, we hit on a couple of
things, but you know, thethe trade you know, trade
policies, I think are going tohave
a significant impact. I think,you know, I think insurance is
going to be really interestingmoving forward as well too. I
think that if we run intoimmigration issues, you know,
(11:35):
again, given where Murray and Ilive, one of the largest
expenses we have every year,every month, is homeowners
insurance, regardless of whetheror not we are filing claims. And
some of that is related to theweather and the risk models that
the insurance companies have,but the rest of it's related to
the cost of, you know, thereplacement cost of of
structures. And you've gotreplacement costs that is far
(11:59):
outpacing the cost of the resalevalue and the valuation of
homes, in part because of thetariffs that were enacted in
2017and the lack of skilled labor
and in manual labor, like withroof repairs and roof
replacement and things alongthose lines. So I think, you
(12:20):
know, given how much thatinsurance companies spend every
every year in outside councilfees, I think that we're, you
know, we could probably see anuptick in that type of work.
It's not sexy work, and by anyway, shape or form, but it is
something that I think we'regoing to see an uptick in.
I think part of that's going tobe driven by some of the
economic decisions that aregoing to be made by this by this
(12:43):
administration,
Unknown (12:45):
right?
Steve (12:47):
Well, very good point. So we've got a lot to look forward
to, with regard to the first fewmonths of the Trump
administration, too.
So want to talk more withPatrick about what Patrick does.
Why don't why don't you startPatrick, explain what your role
is at ALM with regard to dataand analytics, I think everybody
(13:11):
would like to hear you knowwhat? What your Well, yeah. I
mean, Thanks, Steve. For anumber of years, I've been there
since 2017 and up untilrealignment in when we realign
some of the operating, operatingstructure of the organization. I
ran the intelligence businessthat's now moved under under
product. And my friend RichardCaruso,
Pat (13:32):
and you know, Richard's a lot of people you know, know
Richard. He's been around for along time, and is a really good
guy. I work very closely withRichard. Still, I work very
closely with Gina Passarella,who is now the head of all
content for Alm and Davegianella, who is the editor of
the American lawyer. I spend alot of time playing with data.
(13:53):
Still, I don't have the teamsreporting up to me and don't
have the day to dayresponsibilities for the
intelligence business that Ihad, but I spend a lot of time
playing with data and a lot oftime speaking to law firm
leaders. And so a lot of myconversations are with mid size
firm leaders in large law firmleaders. And then ALM
(14:19):
obviously has a platform thatallows me to connect to the buy
side as well, too. And you know,I did that work years ago with
with Wilder's core,and it still allows me to
connect to the buy side, whichis, I think, critical for what I
do, to be able to getperspectives
from General Counsel and inhouse legal departments around
(14:42):
what they are looking for, andoutside counsel the trends that
they're seeing, the things thatthey would like to see from from
their outside counsel. Sobasically, I spend a lot of time
talking, I probably spend moretime listening, and then a lot
of time just playing with dataand trying to kind.
The data in ways that yieldsomething actionable, that but
(15:03):
yet, is fairly unique in termsof of what people are seeing and
and what they've seen in thepast, right?
Steve (15:11):
So one of the things that as as a legal recruiter, that I
see is that the that thecandidates and even the firms
when they are when they arepursuing communities, there's a
huge focus on the profits perequity partner metric. It's the
one thing that people talk aboutthey know and and nine times out
(15:32):
of 10, if I bring in things likeRPL and compensation all
partners, they don't even knowwhat that is. So I know Patrick
that you you feel that there's alot, lot better data that you
should be looking at as as asanyone involved with a law firm,
whether you're, you know,considering a move, or whether
(15:53):
you're a COO or a CMO at a lawfirm. So I'd love to hear your
thoughts on sort of what, whatthe metrics that people ought to
be looking at?
Pat (16:04):
Yeah, look, I mean profits for equity partner is has been
around as long as the amlawrankings have been around since,
since 1985 and you know, thepoint that I will often make is
that when you know the rankings,when Steve Brill first did the
rankings in 1985 most of thepartnerships were single tier
partnerships, and so it madeprofits per equity partner, a
(16:24):
fairly straightforward metric.
And over the years, as we'veseen, you know, there's been a
greater shift to adding that nonequity tier. In fact, I think
next year will be the first yearthat we've had more non equity
partners, especially amongst theamlaw 50, but in the AMLO 100
am law, non equity partners willwill be a higher percentage of
(16:46):
equity partners in the am law100 and that's been a steady
shift since about 2000 we'veseen that that move kind of
coming in. And with that, youknow, the definition that we've
always used with regard to, youknow, more than half of your
income coming fromnot coming from a fixed from,
from fixed income on theSchedule k1 is, you know, I
(17:07):
think it, you know, there's somefirms that have, you know, maybe
single tiers structures. Butbecause of the Comp structure,
you know, it kind of calls intoquestion a little bit how they
should classify certain lawyers.
And so I think the metric itselfis fine. I think it can be a
(17:31):
little bit misleading, though,in terms of true profitability,
which is why I look more atprofit per lawyer. Profit per
lawyer, to me, is a much betterindication of how firms are
doing relative to theirprofitability and and how it
relates to their head countgrowth and and everything else.
So yes, I look at RPL, but Idon't I look at RPL in
(17:53):
conjunction with headcountgrowth. I generally look at when
I look at profits for equitypartner, I look at it in
conjunction with changes to theleverage model, for example. So
in other words, if we see a firmthat has grown profits for
equity partner, let's say 15% ina year, they've only grown
profit per lawyer 3% in a year.
And then you look at theirleverage model, and he's like,
Well, you know, they've they'veboosted up non equity partners
(18:15):
by X percent, and they'vedeclined, you know, or they've
decreased in their percentage ofof equity partners, you can sort
of see where you know why thatnumber is as high as it is. So I
tend to look more at profit perlawyer, and then within that I
adjusted, I adjust prior yearsfor inflation. And part of what
I want to be able to see fromfirms is, is there profit per
(18:37):
lawyer keeping pace andexceeding inflationary growth,
because we know that firms haveto continue to invest in growth
initiatives, and if they'regoing to do that, then they've
got to be delivering levels ofprofitability that enable them
to do that. And you know, a lotof firms right now, when I go
back and I look at the metrics,even if I adjusted for for back
(19:02):
to five years. You know, whenyou look at the AMWA 50, you
know, their RPL, for example,over the last five years,
adjusted for inflation, is alittle over 1% compound annual
growth rate. But when you lookat the am law, second 50 and the
second 100, they're both, youknow, they're both negative, you
know, over the last five years,right? So our rates not growing
(19:23):
as fast as they should. Well,for the AMWA 50, we know that
they are for the second 100, Idon't think rates are keeping up
with inflationary growth at all.
Ironically, profits per equitypartner is even when you adjust
it for inflation over the lastfive years. It's up for all
segments, but it's up 5% on a ona CAGR for the amlaw 50. It's up
1% for the second 50. You know,it's up 1% for the second 100.
(19:50):
Profit per lawyer, you know,ironically, is up 2.6% 2.6 Yeah,
2.6% forfor the amlaw 50. And again,
probably.
Profits per equity partner is up5% profits per lawyer is only up
2.6% so you see the disconnectbetween those two things.
And for the second 100, believeit or not, profit per lawyer is
(20:12):
actually over the last fiveyears when you adjusted for
inflation. And I use, just foreverybody out there, I utilize
the GDP implicit price deflator.
When you adjust it forinflation, it's actually
negative over the last fiveyears, right? So we've got,
we've got data points that Ithink when you look at how
they're comparing toinflationary growth, and then
how firms are comparing to theirsegment, we're seeing some firms
(20:33):
that are definitely overor outperforming the market, but
we see a number of firms in anumber of segments that are not
keeping pace with inflationarygrowth, and I think that's
problematic right on just as aninformational point, how long
has the American lawyer beenkeeping the profit per lawyers
metric? Because I don't That's agood question. Yeah, that's a
(20:55):
good question. I want to say itgoes back about 20 years and and
I should know that off the topof my head, but the problem is,
is that I've,you know, I've changed all the
spreadsheets on my endto put, to put that in there,
and then I put rank formulas inon all of my things so I can
(21:15):
look at how firms rank. Becausethat's, that's one of the things
that I look at isnot just what the nut what the
raw metric is, but how they rankyear to year relative to the
rest of therest of the market and and part
of that is, look, I mean, whenwe, when we talk about some of
these metrics, you know, RPL isa great metric. And, you know,
(21:37):
Murray years ago, when, when wewere talking about this stuff,
when you were at, hey boo, youknow, we would talk about this.
And I remember a conversation wehad sitting in Dallas, actually,
where we where we were talkingabout because both you and I,
and strange, I remember thisstuff, but both you and I
always looked outside of legal,and would read and watch and
(22:00):
learn a lot of stuff outside oflegal, and then, right, you
know, use it as inspiration tosay, well, this doesn't, you
know, translate directly, butthere's this part and this part
that we can take and we can makeit work for what we're doing,
right, right? And,you know, but I remember, you
know, kind of looking at, youknow, our talking about RPLS as
well. It's, you know, it's kindof a true measure of the health
of an organization. And the moredug into it, the more it was
(22:23):
like, Well, yeah, but it's kindof driven by the geographic
distribution of lawyers andwhere they're at, right? So you
know, if you've got, you know,your old firm, if you've got a
bunch of guys sitting in Texas,and you know, that's great, but
if you're competing with firmsthat have a lot of people in LA
and San Francisco and New Yorkand DC and Chicago, they're in
(22:45):
higher rate markets. They'redemanding higher rates, you
know. So if all things areequal, the RPL is going to be
higher in those in thosemarkets, right? So I look a lot
of that, you know, I try tominimize the, you know, the bias
of size, because we know thatthat, you know, plays a role in
rates and mitigate the role ofthe geographic distribution. So
(23:06):
that's where the year over yeargrowth
tends to come in for me, when Ilook at it and then ranking the
year over year growth, because Iwant to be able to see, okay,
how are these firms actuallycomparing to in terms of just
growing and outperforming theirprior years. How are they
performing against the rest ofthe market? And when you do
that, you start to see pocketsof firms that are really having
(23:29):
good stretches, you know, 345,year stretches of really strong
performance, where they'reoutperforming the market. And
you know, they're not, you know,they're often not. Am law 50
You know, there's a few thatthat are that have gone through
firms.
incredible, you know, stretches.
But, you know, Murray capes,case in point, your old firm has
had a great stretch over thelast five years. They have, you
(23:50):
know, the numbers arephenomenal. And, you know, it's,
I think it kind of fallsbeneath, you know, or kind of
doesn't fall beneath thewayside, but it's just not as as
common and as talked about asmuch as some of the other large
firms are. And I think it'simportant, even when we get into
the mid sized firms, tohighlight these firms that are
just absolutely crushing it,even though they may not be
(24:12):
getting the fanfare that otherfirms are.
Murray (24:16):
I could not agree more with that's that last statement,
especially I since I've beenrunning my own shop, working a
lot more with with, with somefirms that are there am alone,
one for sure, but firms that arethat are that are either
bubbling under the surface oreven a little bit lower down,
that that that that numbers. Butwhen you start to talk to those
(24:37):
managing partners and thosecoos, and you start to you start
to hear the numbers that they'reposting up and, and they're, you
know, they're experiencing, andthis is, you know, this is what
I would say, the lateral, youknow, lateral partner candidates
that areout there, there are, there is
very real. And I really wouldlike to find the numbers on
this. Maybe you can help me withthis. It's.
(25:00):
The point, Patrick, but the feemigration that's going on from
the larger firms to the some ofthese high quality smaller
firms. There's a firm that I'mworking with right now where
they they are getting, you know,they're getting, I won't talk
about the specific practices,but there's a specific practice
at that firm that's getting allthe all the work of a certain
(25:25):
kind, very profitable, highlyprofitable kind of work of a
certain kind that just shift hasjust shifted in the last five
years from these large firms tothis smaller firm. And the large
firms are, in many cases, veryhappy to send that work, because
they're there's they're sendingit to a high quality firm.
They're keeping their clientsreally happy, because the
(25:47):
clients are saying, I can't pay$1,500 for you. You know Gibson
Dunn partner, but, but I stillneed Gibson Dunn partner,
quality work being done on this.
How can you? How can you helpme? And they're doing it, and
the work is moving and andif you're a, if you're a lateral
partner out there right now, andyou're trying to think
(26:08):
creatively about where yourwhere your practice could go,
take a look at some of theseother firms that are out there,
as you said, Patrick, thataren't getting, you know, aren't
getting the headlines. We'resaying, Wow, they're they're
doing, they're doing great, andthey're getting great work in,
and they're profitable on it,and, and guess what? They're not
working 100 hours a week,
Pat (26:32):
no. And I think that, I think data, you know, I said
this years ago, when I wasworking with, with legal
departments, you know, data thatis available, especially to the
buy side now, and it's, it'sbeen available, you know,
largely since about 2007 2008 Imean, we talk a lot about the,
you know, the financial reset in2008 and I think it was kind of
interesting, because there'ssort of three things, you know,
(26:53):
that perfect storm when thingscome together, because you had
the financial reset, but youalso had the ACC value challenge
that was happening, right? SusanHackett and those guys were
putting that together, right,you know? And that just happened
to coincide with with thefinancial crisis. But, and then
you had the E billing companiesstarted giving back all that
data that they'd been collectingto their clients, which are the
(27:16):
legal departments. So youstarted getting some legal
departments that were sort offirst in getting out and
utilizing data to evaluate theiroutside counsel, and, you know,
potential outside counsel,because then, you know, they're
getting data from not just theirclients, but also the market as
a whole. And what's interestingis, I think that combined with
(27:37):
websites, and you know, we sawwhat happened in the early 2000s
is, you know, my old company,Martindale, Hubble, kind of went
Bye, bye. Our old company,Hubbard, one ended up going out
to, you know, somebody else andas well. But we saw the rise of
websites and the ability forthese firms to present their
story the way that they wantedto tell it. And you combine that
with the fact that now the buyside has far much more data to
(28:01):
be able to pull and analyze, andso you shorten basically the
universe, and that's out there.
And now I think for a lot ofthese firms, the cya component
that we've talked about for somuch and the brand equity of
such larger firms, kind of goesaway a little bit for some of
these specialized areas, andallows them to generate higher
fees. It allows them to be seenand to be hired more by some of
(28:23):
these firms that ordinarily maynot know who this lawyer is or
who this firm is. And I thinkthat that's going to have a long
I think that's going to continuegoing down
over the next five to 10 years.
I don't see that changing. Andin fact, I think it's going to
be better for a lot of mid sizedfirms.
Steve (28:44):
So Patrick, when you meet with law firm
managing partners and chairs andpractice group heads, etc, what
you know? What? What? What dothey tend to bring you in for?
What do you tend to talk aboutwith them? What are the subjects
on their mounts?
Pat (29:02):
Oh, it's always data.
It's not for the jokes, and it'snot for my personality. It's
usually for the it's usually forthe data. It's, it's a lot of
market analysis and marketassessment. They want to be able
to sort of see a state of theindustry.
And so it's in one of thechallenges with that is, you
know, we put out, you know, anAmerican lawyer always has, you
(29:23):
know, the financial informationcomes out once a year.
You know, the lateral movement.
Lateral information is publishedmonthly in on law.com compass.
But it's, you know, that's alsonot a tool that a lot of
managing partners generally loginto and use. They have other
people inside the firm that aregiving them that information.
(29:43):
So a lot of what I'm doing istrying to cut the data and slice
it and present it in ways, andsegment it in ways that gives
them something a little bitunique to look at. And plus,
there's always data that wecollect as part of the AMWA and
National Law Journal.
Survey. So just for everybodyout there, American lawyer and
(30:04):
the amlaw rankings rank firms onon gross revenue and the
National Law Journal, or theNLJ, so the NLJ 500 ranks firms
based on FTE head count. And sothose two surveys, or those two,
you know, those two surveysactually emanate from the same
survey that goes out to about750 or 800 law firms every year.
(30:26):
And there's a lot of questionsthat we ask in that that are not
on the Excel spreadsheet. Sowe'll ask questions around
rates, around Did you raise yourrates? And if so, what range Did
you raise your rates? Totalnumber of billable hours. What
percentage of your total revenuecame from anything other than,
(30:48):
you know, variation of thehourly fee arrangements,
basically asking about AFAStotal square footage. That's
allowed me in the past to createsome metrics around revenue per
square foot per lawyer, andthose types of things to look at
it, which was, which wasinteresting as well. I created
one one time, which really madea very certain firm really mad,
(31:12):
which was profit per lawyer,per office and
and, you know, this is one ofthe firms that had a lot of
offices and very lowprofitability. And it was, you
know, it was, let's just say,less than $1,000 in a year per
lawyer. And, you know, butagain, it allows me to sort of
cut these, create these metricsthat look at the market a little
(31:35):
bit differently. Credit lines isalways an interesting one. We'll
ask the question about half thefirms will reply to us on that
whether or not they're utilizinglines of credit, and if so,
we'll ask them, sort of, whatare the areas that you're
utilizing it for? Technology,overwhelmingly, is one of the
areas that pops up there interms of lines of credit. But I
(31:56):
think one of the moreinteresting ones recently has
just been rates. You know,there's obviously a lot of talk
in the news about rates and, youknow, the the way that, you
know, we've got four digit, youknow, associates, especially
second you know, something cameout a few weeks ago about first
and second year associates beingfour digits at a couple of
firms. You know, we've got 2000hour plus partners now. We're
(32:18):
going to have a $3,000 an hourpartner here pretty soon as
well.
But what's been interestingabout that is to then look at
the unranked firms and be ableto see, you know, a lot of them,
over the last five years, havenot been raising their rates at
a minimum of 3% and you can sortof see this stair step of, you
(32:39):
know, firms from 30% of them to50% to 60% to 80% to 90% over
the last five years, raisingrates 3% or more. Meanwhile, you
look at the AMWA 100 and it's90% 95% 93% 92%
in part because they'veinstitutionalized that function
inside their firm, they sort oftaking it away from the lawyers
(33:01):
and said, No, no, we're going toset the rates for you, whereas
in a lot of the more mid sizedfirms, you're still going to the
lawyer and saying, Hey, we youknow, we're going to, we want to
raise your rates to XYZ client.
And of course, they're pushingback and saying, No, you know,
my client's already gettingenough pressure as it is.
And so a lot of these firms havenot been raising their rates in
a way that's keeping pace withwith inflationary growth and
(33:24):
operational increases, and it'sreally starting to impact their
their numbers. And so that'sbeen one of the big ahas that
usuallygenerates discussion. And then
most of the questions that I getyou guys get when you do
retreats as well too, which is,how do we talk to our clients
about rates, and thenseparately, and I end up talking
to firm leadership about, how dowe sell our lawyers on, on
(33:46):
having, on raising their rates?
Because the bulk of you know thediscussions that the managing
partners are having, they'rebasically internal sales
discussions and persuasiondiscussions. And how do we get
people to to go in thisdirection that we know we need
to get them to go in and so thatusually is what drives a lot of
(34:08):
thediscussions. And then the other
thing, you know, obviously, wedo a lot of work with, with the
buy side, and so a lot ofimpressions from, from
frustrations that are comingfrom in house counsel. And to be
fair, I really I could probablyhave the same slide and use it
for the last 15 years, becauseit hasn't changed a lot, as you
guys know, I mean, it's the sameissues or the same ones that are
(34:31):
that continue to come up. Butevery once in a while, there's
some new wrinkles that come upwith their their frustrations,
and most of them are not raterelated, right? As you guys
know, like they're not relatedto cost, they're related more to
the perceived value that they'regetting for the cost, right? And
a lot of it is the clientexperience and the service level
and the communication, and, youknow, the forecasting, the
(34:53):
budgeting and things that can besolved by better processes
inside, inside.
Firms, and so generally, that'sa lot of what the discussions
are. And then it's more of anAMA, and you don't ask me
anything afterwards.
Murray (35:11):
Can I just tell you as as somebody who was who spent a
lot of his career as a legalmarketer, wrestling with the
AMWA 100 survey,but that what that experience
was like inside, being insidethe firm. It was, I mean, we
always knew that there werecertain things that we were
going to answer, but there's alot of debate about, what do we
(35:32):
answer, what don't we answer?
How do we answer this? Because Ihad to convince the CFOs like to
just chop in their numbers andthen hand it off. And I would
say, really, this is a marketingdocument, guys, this is a
marketing document. It's a it'sa recruiting tool. It's a this
is we gotta, we gotta bethinking very carefully, and we
(35:52):
have to answer it with, withcandor and but, but you know,
do we answer every question?
Because you know the I know youguys, you know you asked the
question somebody's gonnaanswer. You said, 50% of the
firms are giving you answers toquestions. I know we never gave
answers to Yeah, you know
Pat (36:11):
it was, but I think it's but I think that's a good
observation. I mean, I thinkthis, I think the data and how
it comes out. And for some lookfor some firms, and you guys
know this, for some firms, theythey have a little bit of a fear
of even though everybody knowswhat their numbers are when they
see them compared to otherpeople, other firms, who they
(36:33):
they feel are competitors orpeers. And you got, you know,
and I had a buddy of mine tellme this, you know, he said, you
know, we, we've got a three yearstrategic plan in place, and I
don't want to short circuit it,because somebody wants to start
making, you know, sort ofcutting things off because they
want to solve for the here andnow and not staying true to the,
you know, the strategy that weput in place. And I think that
(36:55):
there's a lot of validity tothat and and so I one thing I
can tell you is my colleagues,and one of the things I was very
impressed about when I came intointo ALM was the care and
feeding that goes into all ofthat behind the scenes, because
that's largely driven, and it'stechnically owned, not by what
(37:17):
was intelligence, but by theeditorial team. And you know, so
I came in when I started. Itcoincided with Gina pastor Ella
beginning her tenure as theeditor in chief of the American
lawyer. And, you know, the onething I will always say is that
she just cared about getting itright, and so the care and the
feeding and the approach and thestuff that went on behind the
(37:40):
scenes in terms of thediscussions and the decisions
and everything else was alwaysrooted in what's accurate. You
know, what are we going to dothat that's accurate, and
that's, you know? So, you know,I know people have different
opinions and perspectives, and,you know, that's, that's what
everybody, you know, everybody'sentitled to those. I know what I
(38:02):
saw behind the scenes, and soI've got a high level of
confidence in what we're puttingout there because of the
approach that was taken and alot of that, like in every other
organization, it's sort of setat the top. And Gina, did you
know, she was a phenomenaladvocate for this is going to be
right? Like, we're not puttingit out there. If it's incorrect,
we're going to make sure thatit's right. So there's a lot of
(38:24):
vetting that went on. There wasone reporter, and now an editor
in particular, that would gothrough and catalog all the
deals on a couple of firms tosort of vet the numbers, to
make, you know, deal heavyfirms, to make sure that, you
know they aligned, and you know,just, there's a lot of that
stuff that went on that I don'tthink a lot of people actually,
actually saw and and realizedwhat's going on. And so I think
(38:47):
I know it's one of the debatesthat we had every year. Murray
was okay, at what point doesthis become so onerous that
people stop responding? And sowe're always eliminating
questions and tweaking questionsto make sure that it's, it's
topical, and it's it's relevant.
But then part of my role, evennow is, if you guys are going to
take the time to do this, andyou're going to take the time to
(39:08):
give us this information and doit thoughtfully, then I need
part of what I want to do istake the time to give you guys
something back that's going tobe actionable, that's going to
be that's something that you canactually do something with, not
just what you're reading in, youknow, the charts that are
published in law.com butactually some of the insight and
combining it with some of theother metrics, and even stuff
(39:29):
that doesn't come from ALM, withregard to, you know, maybe, you
know, some different industry,you know, data points that we
can combine and and actually putsomething together that's
meaningful. Because if you guysare going to take the time to do
that, then we owe it to you tobe able to give you something
back that's going to be usefulfor the firm. And that's, that's
kind of the approach that wealways took, yeah, because just
(39:50):
just being able to cough upnumbers is one thing, but to be
able to provide some insights,we used to, used to have a
reported.
Murray (40:00):
Called the numbers that matter, and that was, we could
take all the numbers at the firmfor a given quarter that we were
tracking, give the numbers, butI said, but here's what that
means, here's here's what that'stelling us about our firm right
now. Here's what's telling usabout the health of the firm,
where our revenues are comingfrom, and those that that got
(40:21):
good conversations going,because it was, you know, was it
just plopping out numbers. Itwas
taking it, and it was using thefirm's own internal numbers,
right? It was so it was, it was,it's it was, it was critical to
be able to do that. And I cantell you that we always trusted
ALM. We always trusted you. Wealways trusted Gina. Gina has a
high degree of credibility, asyou know,
(40:43):
just it was just like handwringing about what happens.
Pat (40:48):
I'll tell you, she's one of the best colleagues I've ever
had, and there's no drop offwhatsoever. In fact, Dave
gianella is probably morefocused on certain things. Dave
is, he's a new editor of theAmerican lawyer. He's an
interesting guy because he's gotboth a Masters in laws from
Pritzker and a and his Mastersin Journalism from Northwestern
(41:15):
which is, I'm drawing a link onthe school Kellogg's
business. Good. Medill, yeah,right. Medill School journalism
there, and David's exceedinglysharp, but yeah, Gina was, you
know, again, it comes down totrust, right? And our role
always in the intelligencebusiness was, you know, we had
(41:35):
no margin for error to be wrong,because if we were wrong and the
editorial team was utilizingsome of our data, then it
undercut there, you know,you undercut them as well. And
so I, you know, we took thatstuff, and we continue to do it.
I take that very, veryseriously. And I've been in, we
all have, and we've seen peoplein this business, and we're not
(41:58):
going to mention any names, butpeople that don't put the same
care and feeding to some ofthat. And the last thing that I
want to see is any leader of anybusiness, whether it's a law
firm or a service provider orwhomever it is,
make the right decision off ofthe data, but have the data be
flawed, right? And that's notsomething that I can, I can live
(42:23):
with. So we preach it a lotinternally. We can, we can
control what we can control, andwe can, you know, this is the
one thing that we can control,is our care and feeding in the
approach that we take to makingsure that this is right, and
then how we bring it out to themarket and that I spend more. I
mean, I joke around all the timethat I got this body the hard
(42:45):
way by sitting down and lookingat spreadsheets.
But you know, I am more freakedout about being wrong than I
ever am happy about being right.
I am literally a walking versionof the behavioral economics
principle of loss aversion,right, the pain from being wrong
is far worse than any pleasurefrom ever being right about
(43:06):
anything, and that's the natureof the business that we live in.
Steve (43:13):
All right, so let's, let's do an exit question here,
which is, let's look at likenext year. I mean the remainder
this year, what's, what's, whatdo you think this year is going
to look like? But also any othertrends that are happening, where
you see, you know, the datachanging, you know, for some of
these firms, you know, over thenext 12 months,
Pat (43:36):
look, I think complexity is always a lawyer's
best friend. We know that. Andso I think that we're going to,
it's going to be the next therest of this this year has been
strong for a lot of firms. Ithink we're going to continue to
see that into next year. I don'tknow if I want to go out on the
limb for the year after yet, butI think we can, we can kind of
look at the next 18 months andsay that they're going to be,
(43:58):
with relative certainty thatthey're going to be, they're
going to be strong. I thinkwe're going to see, you know,
more expansion. I mean, you guysmentioned earlier the news that
came down today about Kramer 11and and Herbert Smith green
hills and what that looks like.
I think that's, that's kind offascinating. I mean, first of
(44:21):
all, Kramer 11 likely won't bein the am law anymore because of
the plurality rule, because thebulk of their lawyers are going
to be over,are going to be, will be outside
of the US. But if that firm, Ilooked at this earlier, because
we have a little thing to do tolook at merger assessments that
that firm were to be in the amlaw Kramer 11 would go from an
(44:42):
am law 104 firm to an am law 20firm with that. And so right now
that's gonna you know thatmerger is creating an am law 20,
or a global 25firm. And we know just from
history that.
One of these moves is going totrigger another one, right? So
(45:03):
we saw A and O and Shearman. Nowwe have Herbert Smith three
hills and Kramer 11. So we'relikely going to see another
couple of moves come from thatwe are going to see more
consolidation in the US anddomestically, and I think we're
going to see more mid market lawfirm mergers,
(45:24):
I think for two reasons. One, Ithink, you know, the age old
reason that a lot of firms don'thave a good mid sized firms
don't have a good successionplan. So I think that that's
going to drive, it's going todrive some of the combinations.
But also, I think that there'sinternal pressure from partners
and attorneys saying, what arewe doing in response to x? And
(45:45):
we need to do something. And Ithink that we're going to
continue to see more moreconsolidation in the market. And
so the consultants doing thatwork are going to be busy over
the next 18 months, right? Inaddition to not having a
succession plan, I see a lot offirms not having a good ejection
plan. In other words, partnersthat need to be need to be
(46:07):
removed from the partnership, orde equitized, or whatever. So
the merger is always a reallygood excuse for that. So
the question I always have withwith especially firms with the
HL policies, is, I would love toknow, I would love to see the
metric on the number ofexceptions, exceptions per
lawyer, relative to tothose firms, because how many
(46:29):
firms are looking at somebodythat's coming up on their age
out, and they're saying, Youknow what? We just, yeah, we'll
grant the exception for a year,and we'll, we'll grant, you
know, our waiver for a year,we'll grant another one for
another year. You know, we,we've done a number of round
tables with managing partners,and I think mid sized managing
partners around succession. And,you know, one of the things
(46:51):
that's really jumped out to meis they don't have a there's not
a huge challenge with the peoplenearing that level. It's the
people that are 5758 that arenot producing, Steve, to your
point that they don't have theattraction plan for that. They
have to look at somebody that's66 and 67 years old. And by the
way, the older I get, the morethat that number seems real to
(47:11):
me. But you know, you know,they're looking at this and
they're going, man, these guysare doing everything right? But
here's this guy, you know,here's this attorney that's 57
years old. We can't get him todo squat. Why is this guy
staying and this other oneleaving? And then, of course,
then there's the impact onmorale, and there's the impact
on everything else as it comes,you know, with regard to the
(47:32):
firm. So, yeah, I think havingan injection plan. I mean,
actually, Steve, you just foundyour next retreat speaking gig.
That's
Murray (47:47):
the promise. That's why they go to merger, because they
don't have the answer. Yeah. Youknow, I know we're a little long
on time here, but you know,Steve, you were thinking the
ejection plan and the 57 yearold lawyers, etc, you know, I
think about when I first startedworking in large law firms,
which is now going back coupleof, you know, that's 2023, 24
(48:10):
years now. And wasn't it thefirst one that you were, I was
Jenner, was the first really bigfirm that I worked at. And, you
know, at that time you madepartner, because you could bill
the hell out of, out of yourfiles, right? You're, you're a
good biller. And a lot of thosepartners who got became partners
because they were great billersare now getting into that 5758
(48:34):
year old range, and they didn'thave and you'll find there's
kind of a donut hole, becauseyou find the ones who are coming
into partnership now are muchmore focused on business
generation than, than, than theones who are, who are, you know,
1010, or 12 years older, andthen the ones who are in the 60s
and 70s, some of those are stillfounders, or worked with the
(48:56):
founders and and, you know, theyhelp build the firm. So there is
this, there is that. There'sthis donut hole that's that's
going on, and I it isinteresting to see how the firms
are going to deal with that,because some of the firms are
looking at how, what percentageof their high, you know, sort
of, sort of their their high,high growth clients, are being
managed by people who are over65 and the number is kind of
(49:17):
scary.
Pat (49:19):
I know, I know we're long on time, but that's a couple
one. We don't talk enough about.
We talk a lot about law firmsuccession. We don't talk about
legal department succession, andwe don't talk about the fact
that, you know, there's asignificant generational shift
that's going on there on the buyside as well. And you know,
we're getting guys that areyounger than us now, that are in
positions of relative power. AndI think that that's to me, that
(49:42):
that's something that that iskind of interesting. And I think
the other part, Steve, this goesto a lot of the work that you
do, is, and I ask,you know, talent officers in
firms, this quite a bit, andespecially in Murray BD, people,
Murray, you, I know that you,you took part of betting. You.
Your firms, right? And you satthere with laterals and you
interviewed them, but at somepoint we have to come up with
(50:05):
some sort of metric, or some wayof evaluating whether or not a
this person has the skills.
Let's say they're, you know, I'm53 so let's say they're my age,
5354 and they've got another 15years left, or whatever it might
be. But do they have the skillto be able to rebuild that book
of business that we know is notgoing to transfer the way that
they think it's going totransfer. But the second part
is, do they have the desire?
(50:26):
Right? I mean, I think about itlike with my house. I mean,
I've, this is what my fifthhouse, or sixth house that I've
been on my my first one, ofcourse, it was in the age of
Trading Spaces. And, you know,we can HGTV, and we can do
everything in a weekend. Youknow, we started doing all that
stuff ourselves right now. Wecan lay this tile, or we could
put the wood floors in. We cando all this. By the time I got
(50:47):
to my fourth house, I'm like,the heck with this. I'm going to
hire somebody to do it. I don'twant to do this anymore, like I
want nothing to do with withdoing this, this type of work.
And so I we know that going outand developing new business is
not easy, right? And it's notsomething that is native to a
lot of lawyers as well. And so Ithink that, to me, that's going
(51:09):
to be one of the questions withlaterals moving forward, is not
just do they have the skills beable to rebuild this book of
business, especially amid agenerational shift with a lot of
the buy side, but do they havethe desire to be able to do it,
especially with guaranteesgetting as high as they are in
certain areas. Now, that's, Ithink that's going to be a story
(51:29):
for the next couple of years.
Steve (51:31):
Yeah, it's amazing. How little the firms do with regard
to that question. You know,there's, it's all based on, does
the business come over? And weknow that even if it comes over
seven 30% is going to disappearin a year or two anyway, and and
so there's nothing they're notreally looking at. I know that
Murray's old firm was one of thefew firms that actually did some
(51:54):
metric testing,profile assessment of laterals.
And most firms don't do it andare running scared of it. And, I
mean, I think that, you know, itwould be
definitely something on theirrate, should be on their radar
screen.
Pat (52:08):
You know, one, one thing we've talked for years now about
the, you know, the supposedrecord day of reckoning from the
Big Four and themultidisciplinary service
providers and the MBBconsultants and everything else.
The one thing that law firmshave actually taken from them
and have started to do really,really well is
institutionalizing key clients,right? We started doing that
years ago with key client teams.
We started building the clientexperience around, you know, as
(52:31):
a firm client experience, not anindividual lawyer client
experience, in a part, becausewe wanted to minimize, mini
minimize portability of businessthat, again, kind of comes into
direct conflict and contradictsnow, well, we're going to give
somebody 15 million a year orsix year guarantee, and now we
got to hope that they have thedesire and the skills, and we
(52:52):
have the infrastructure withinour firm, and this is the other
part, right? We have theonboarding and the
infrastructure and the processesto be able to commit to helping
this person rebuild this book ofbusiness. If not, we're doubling
down on a significant loss.
I know we keep doing thisforever. We could go for
another.
Murray (53:12):
We got another, we got another couple of podcasts to go
with you here, Patrick, I thinkso, but, but, but I don't know.
I always enjoy you know,Patrick, you and I've spent lots
of time together, you know, bothin conference rooms and maybe on
a few bar stools over, over theover the years, but, but always,
always enjoyable. And it's beenway too long, and you and I are
(53:36):
going to catch up on this iswhen we, when we close here,
but, but thank you.
Steve (53:39):
Thank you for this. We, I can't tell you absolutely this
is, it's been great having thisconversation. Patrick, guys, I
appreciate it as you know, I'venever been a microphone that I
don't like, so
Murray (53:50):
same with us, really. I mean, you're, you know, that's,
Steve (53:50):
Well, you know, as as, as we've noted, we're on like,
that's the, it's a yak fest. Ido want to just one plug for the
McCormick, McCormick group. Ifyou are, you know there is,
their third month of doingERISA. ERISA moves nationwide.
there is some criticalintelligence that that Steve and
his colleagues are compilingevery month. There's some new
(54:11):
data that's coming out. If youhaven't subscribed, look in the
show notes, contact Steve, geton their mailing list. Great
stuff coming up, Steve, what's,what's, what's coming up that
people should know about, notthe data, because I know you
guys are still going through it,but what are the, what are the
topics, right?
(54:38):
We've got something else in thework. It's a little too early to
talk about, but we've, we've gotanother one planned. And, you
know, I think the big thingright now is the is the
government laterals. I mean,it's going to be a lot. It's
going to be really, I didn'tmention this before, but it's
going to be challenging, becausehow many people are going to
leave firms to go into thisadministration? Right?
(55:00):
We just don't know what theappetite will be, you know,
because I think at least inWashington, the vast majority of
lawyers didn't vote for Trump.
So you have to see how thatworks out. And I think that may
be an issue for people comingout of government, is there just
might not be spaces for them,unless they have, unless they
have, like that key practiceniche that they can sell. If
(55:23):
it's they're just great lawyers,really tough. So that's a little
bit of marketing to tell you.
Pat (55:31):
Can I give you a plug real quick too? Because I do take, I
have taken your lateral marketreports Texas and a couple of
other ones that you've put out,and I forwarded it to some firms
that I know are looking to hiredown there with them, basically
with the line, don't overpay forlesser talent. And read this,
and I think that it's it'scritical, because you have a lot
(55:52):
of firms, especially in marketsright now, Florida, Texas, that
are going to continue to seeexpansion and growth, that you
are going the the demand indexis going to go through the roof.
And so if you are not carefuland not working with the right
people, you are going to overpayfor talent that you shouldn't be
overpaying for in certain areas.
So absolutely, I'll throw that.
(56:14):
I'll throw I'll throw that. Thatplug over to you as well, my
friend. Well, thank you so much.
Murray (56:20):
All right. Well, I think with that again, Patrick, thank
you, Steve, always a pleasure,and we'll get this out, turn it
around. Thanks so much. And withthat, we'll close.
Pat (56:33):
Thanks, guys. Thanks.
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