Managing Partner Roundtable: Part Two

After Part One of our roundtable (with managing partners dishing on changes in the legal industry), we're bringing you the scoop on boutiques competing with big law, non-lawyer professional staff, and big real estate changes.

Here's some of our brain trust: Reed Smith DC managing partner A. Scott Bolden, Nixon Peabody DC managing partner Jeff Lesk, and Garrison & Sisson co-founder Martha Ann Sisson.

On boutique firms in competition with big law firms:

Sherry: Boutique firms are the biggest competitors moving forward. We compare a boutique to a jetski—it can turn quickly when it sees a problem. Bigger firms are more like tankers—change is much slower. I met with a boutique firm specializing in hedge fund representation, fully partnered by departures from major firms. You sign a one-year contract and if it doesn't work out, you're gone. The managing partners said they're doing it the way they think the industry will be in the future. Their profit margin is 55 percent.

Scott: There are some great boutiques out there, but I think big law firm will continue to get bigger, to be more nimble—to look ahead, to cross-sell and expand the work they have with existing clients, while working with new clients in different spaces. Big firms will always have the resources and skillset to be flexible. If they want to go into energy, for instance, they can acquire, combine, or open an office in Dallas or Houston.

Rounding out the panel: Navigant DC managing partner Steve Stanton, Bracewell & Giuliani DC managing partner Mark Lewis, Cushman & Wakefield executive director Malcolm Marshall (not pictured), and Cushman & Wakefield executive managing director Sherry Cushman.

On professional roles at law firms being staffed by non-lawyers:

Mark: I think that comes from a realization that great lawyers aren't necessarily great managers. Hiring professional staff—CMO, CFO, and the like—is a good thing, as long as the roles stay efficient. For a long time, the person with the biggest book of business became managing partner, and that has nothing to do with the ability to manage a business. 

Sherry: There are about 17 categories in the C-suite now, and they're not coming from the legal industry. The biggest challenge isn't hiring these people, it's allowing them to have the authority to effect change. Some firms let decisions go to partnership or executive committee votes; others say that a couple people will make the decision and everyone else lives with it—they're the one seeing the greatest change.

Scott: There's a balance because you're still working for equity owners, so it's a little different than the corporate model. But if you're a $500 million to $1 billion firm, you have many characteristics of a corporation, so it makes sense to have professionals do it. I don't think lawyers as a group make great managers all of the time—whether it's managing a portfolio of business or associates—and I'm not sure how much we really invest in training partners to be professional managers. The legal industry as a whole could work harder to be better in this regard. Until then, the bigger law firms get, the more likely we'll be to continue retaining professional managers to assist us in becoming more efficient and effective as business operations.

On some of the cold, hard, numbers:

Sherry: The average law firm spends 6.2 percent of gross revenue on real estate. That ranges from as low as 4 percent to as high as 12 percent. 

The average law firm nationally has 16.6 percent of its space sitting vacant.

In DC, half of the renewals in the last five years have given back space. 

The head of global real estate for one firm bought all attorneys worldwide a key swipe and tracked them for six months; globally, they weren't in the office 50 to 70 percent of the time.

On whether law firm office changes are material in laterals' decision to leave or join firms:

Martha Ann: No. Associates don't care. It hasn't been referenced. 

Steve: The partners you want aren't going to be the ones hung up on needing X square feet or custom furniture. 

On whether changes to law firm office layouts are permanent:

Martha Ann: Firms are changing their spaces and how they provide services in response to a generation of people motivated by glass offices and not having barriers. What happens if the demographic changes back?

Sherry: I think this is the new normal. 

Steve: I grew up in the public accounting world and we wrestled with all of these problems from around 1990 to 1996—associate retention, partner progression, how you build out the workspace—and here we are, many years later, and it hasn't gone back. If anything, the trend has continued. 

Jeff: You don't create a newfangled office because that's what the architect says is the "new style." You start by talking to everyone in the office and assessing what is important; then you develop a program and plan that's true to your culture, needs, assessment of the future, and resources. I'm highly focused on the concept of flexibility, because paying expensive DC prices for real estate that locks you into uses that don't allow you to operate at maximum efficiency is an irresponsible approach. We're working on designing a new office right now, and while certain things we're considering may end up changing, certain fundamental aspects won't. It's wrong to have space that projects a "closed door" mentality, isn't generous in sharing light and views, and requires you to pay for unused space and real estate that you're not using to its full efficiency.

On getting buy-in for office space changes:

Sherry: Holland & Knight's David Silver says their move was the best business decision they made in the last five years. When they moved in, he had a 60-day no-complaints rule. At the end of the 60 days, nobody complained.

Steve: We did this in our space and it was a 90-day rule. If it's something urgent that will interfere with your ability to serve clients, I said come to me and we'll deal with it, but if it's a preference issue, wait the 90 days. I didn't hear from anybody.

Malcolm: It's also leadership implementing a plan. In one firm moving its back-office functions to another state, the CFO was the first person to move, showing the senior leadership's support in backing the firm's decision. In Washington, we went to single-size offices and the first two people to do so were our regional leader and our president for the East Coast.

Jeff [whose office is soon moving to a new location]: It will be a sea change for many lawyers to experience a reduction in their personal physical space. We've attempted to manage the process with strong leadership, a lot of communication, and input from partners, associates, and staff. We've surveyed them about what's important to them as workers, integrated that into the selection and design of our offices, and been open about what's driving our decisions—especially the new economic realities. When push comes to shove, almost all partners say that the financial viability of the firm is paramount. Once you get that buy-in, you start sharing details about how expensive real estate in the city is and what managing that expense means for the economic health of the firm. Ask them to visualize every time they walk by an empty secretarial station, a conference room used once a month, or offices "on reserve" for potential future expansion that the partnership is writing big monthly checks for those un-income-producing spaces.

Scott: We're preparing to go through a reset later this year; not only is my office going to shrink, but I'm losing my balcony. The running joke is—what's Scott going to do when he can't smoke a cigar on his balcony at the end of the day? I've joked about it, but for efficiency purposes I'm going to fall in line like everybody else. I'm just going to have to go home earlier and smoke my cigar in the backyard.