The Business of Law

the business of law by jack cashill
Woody Cozad, Morrison & Hecker, (Panel Chair) Irv Belzer, Bryan Cave, (Event Host) Herb Kohn, Bryan Cave, (Event Host) Patrick McLarney, Shook, Hardy & Bacon David Fenley, Blackwell Sanders Peper Martin Jerry Riffel, Lathrop & Gage Brian Gardner, Morrison & Hecker Russell Welsh, Polsinelli Shalton & Welte Frank Ross, Polsinelli Shalton & Welte Jack Kilroy Jr., Shugart Thomson & Kilroy Mark McKinzie, Wallace, Saunders, Austin, Brown & Enochs Mark Foster, Stinson Mag & Fizzell John Granda, Stinson Mag & Fizzell Norman Fretwell, Spencer Fane Britt & Browne Lynn Hursh, Armstrong Teasdale Peter Brown, Husch & Eppenburger Gary Brouillette, Seigfreid, Bingham, Levy, Selzer & Gee Pete Smith, McDowell, Rice, Smith & Gaar Gerald Gorman, Slagle, Bernard & Gorman Roger Hershey, King Hershey Ken Dean, MU Interim Dean of Law School Burnele Powell, UMKC Dean of Law School Dennis Honabach, Washburn University Dean of Law School Jack Cashill, Executive Editor, Ingram's (Moderator) On the drizzly but otherwise cheerful morning of Aug. 15, Woody Cozad of Morrison & Hecker convened 22 of his fellow attorneys in the stately offices of Bryan Cave, 36 floors above downtown Kansas City. The subject at hand in this particular Ingram’s Industry Outlook forum was the “business” of law as it is practiced in Kansas City. At the table were partners of influence from virtually all major Kansas City law firms and the law school deans from three area universities. ALTERNATIVE LIFE STYLES Never one to shy from controversy, Cozad launched the proceedings by asking what Kansas City law firms were doing not only to attract women and minorities but also to retain them to the point where “their hair turns gray and they sit at this table.” He did not have to wait long for a response. “It’s not a big secret,” claimed Pat McLarney of Shook, Hardy & Bacon, “that we have no trouble recruiting women, we have trouble retaining them.” By “we” he meant all those gathered. He cited “alternative life-style choices” as the source of the problem, which is a lawyerly way of saying “raising a family.” For the record, this proved to be the first Industry Outlook forum in which participants jumped in without raising a hand or asking for recognition, and this they did with an impressive degree of orderliness. “We are trying as hard as we can to find ways to increase women and minorities,” Norm Fretwell of Spencer Fane Britt & Browne lamented. He, too, cited, “alternative life styles” as the impediment to seeing more women as partners. The failure to assimilate women fully within the corporate culture would seem to present a more urgent problem than that of minorities. As Dean Burnele Powell of the UMKC Law School noted, 47 percent of the most recent class at UMKC Law School were female. At KU, the figure is higher still. Peter Brown of Husch & Eppenburger observed that of the nine associates in his department, eight were women.
	As Brown observed, however, the idea of taking women with families and expecting them to “crank” the same kind of hours as those without obligations is “plain not going to work.” At the same time, Brown argued, firms can’t afford to write these women out of the system. “I think,” he summarized, “we’re going to have to change.” Looking at the “brighter side,” Jerry Riffel of Lathrop & Gage contended that gender dynamics “will change fast,” largely out of their own momentum. When he came out of law school, he recalled, there were only about three or four women in his class. As those numbers have risen, he implied, so too will the number of women partners.
Roger Hershey of King Hershey contended that it was not only women who opt out of the partner track. More and more, he sees young men doing the same. Looking down the road 50 years, Hershey predicted that “you will see bright young attorneys and old attorneys looking for alternative ways to organize firms.” With salaries for new associates “through the roof” at about $85,000, Spencer Fane gave new associates the option of performing at a very high level to justify that salary or accepting a lower salary and lower expectations. “To our surprise,” noted Norm Fretwell, “half of the associates we hired last year chose the lesser level.” Irv Belzer claimed that Bryan Cave has already had “some modest success” arranging flex time for people who want to make life style changes and stay on the partnership track. The firm has also created a staff attorney position for those who choose to avoid the rigors of the partnership track altogether.
	All well and good, countered Russell Welsh of Polsinelli Shalton & Welte, but, as he observed without rebuttal, “A flex-time lawyer is not going to be sitting at this table 10 years from now” and this is “part of the dilemma, too.” Frank Ross of Polsinelli was likewise skeptical. “You can’t have a part-time owner,” he argued. An owner is expected to do many things: bill hours, recruit clients, train associates, manage the business. In his opinion, flex-time arrangements put added pressure on full-time owners. And, as Ross noted, “If you don’t take care of those folks, they are going to leave.”
Dean Powell of UMKC served as sounding board throughout this part of the discussion. Law may be an “industry,” he said in reference to Ingram’s “Industry Outlook,” but he argued that law is also a profession and that “we have to do things differently.” He urged those gathered to look beyond the bottom line and consider “some sort of business disarmament.” By this, Powell meant a collective decision to set aside perhaps two percent of revenues to invest in the health and diversity of the profession. Brian Gardner of Morrison & Hecker wondered whether the law firms and the law schools might work together to create a program in which new recruits who desire flexible arrangements gain an “appreciation . . . of the economics of the practice.” Dean Powell thought that a worthy idea.
	AN HOLISTIC LOOK AT CANDIDATES Before segueing to recruitment in general, the issue of minority recruitment and retention revealed a high level of frustration around the room. As to minorities, Pat McLarney argued that there were not enough in the marketplace and those that are there are “in such great demand” that they are constantly being recruited away. “They have been picked off,” said Norm Fretwell of the five minorities who have left Spencer Fane in the five years he has been there. Dean Powell attributed the relative shortage of the undefined “minorities” to the way law firms choose new associates. As eager as these firms might be to attract minorities, their focus on the top 20 or 25 percent of a given class means that recruiters and minorities become like “two ships passing in the night.” Added Powell, “There have been tremendous people who have been passed over.”
Said Russ Welsh, “The salary pressures that we face at 80 or 90K limit the risk that we are willing to make.” Students deemed “a project” must perform quickly or the firm loses money. Roger Hershey agreed. “The pressure to produce” works counter to the kind of mentoring that he and other attorneys enjoy. Dave Fenley of Blackwell Sanders Peper Martin spoke of the “Sword of Damocles” hanging over the head of all new associates to develop business. And as Pat McLarney observed, “We’re fearful of recruiting minorities that we think are going to fail. We’d rather have non-minorities fail, frankly, unfortunately.” Jack Kilroy of Shugart Thomson & Kilroy wondered if “we are asking the right questions when we hire people, irrespective of background.” He argued that “other characteristics make a difference” like sincerity, loyalty and dedication. Dean Powell also questioned whether the criteria used to select new associates were the appropriate ones. He lobbied for a “a portfolio approach,” one in which grades mean something, but one which also sought to determine whether recruits have good interpersonal skills, whether they are articulate and hard working, whether they can become passionate about something and show leadership skills.
	Gary Brouillette agreed that “we miss a lot of people. Look around Kansas City.” But as he suggested, the criteria used for class ranking are determined not by the law firms but by the law schools. Law firms ultimately need a “practical way” to make a cut. “There has got to be,” he asked, “some way you on the academic side can project a more holistic view of the candidates.” LATERALISM AND ITS DISCONTENTS Woody Cozad told the story of his father whose job it was to recruit and hire Hallmark’s sales staff. After much study, he discovered that “some huge proportion” of people hired right out of college change jobs within three years. So he fixed upon a strategy of waiting until young people “were disillusioned by some other employer” before hiring anyone.
In the past, law firms would never think of such a strategy. Cozad admitted that when he and a colleague changed firms and came to Morrison & Hecker 18 years ago, it was “almost unheard of.” Herb Kohn of Bryan Cave reflected on this shift from the management side, recalling the first few times a partner or associate was going to leave as a “stay-up-all-night kind of event.” The fact that Kohn’s remark was met with a round of knowing laughter suggests just how much the situation has changed. As Gary Brouillette affirmed, “The evolution since 1969 is just dramatic.” Gerald Gorman of Slagle, Bernard & Gorman added the coup de grace, admitting that several of his women partners were lured away to larger firms, including his “own daughter.” Acknowledging the change, Cozad asked whether it was good for the attorney, good for the firms, and ultimately good for the clients.
	On the positive side, Kohn argued that the threat of lateral movement has caused law firms to develop methods to keep associates more involved and more satisfied with their lifestyle. “We are all working harder to make sure fewer people leave.” Kohn believed lateralism good for firms, young people, and for clients. When asked if there were an ethic involved in wooing away an attorney from another firm, Kohn mused, again to laughter, “There used to be.” David Fenley was likewise bullish on the phenomenon. He called the introduction of a new lateral partner “a breath of fresh air.” There was a time, he admitted, when internal worries about “pecking-order issues” would often temper internal enthusiasm, but over time these issues tend to dissipate. Partners now understand that laterals often “think of things you didn’t think about.” Internal dynamics still matter, Fenley contended, and to succeed a lateral move “has to mean more than just the business (the new partners) bring.”
“I think laterals have helped my firm a lot,” added Jerry Riffel of Lathrop & Gage. He cautioned, however, that such movement makes some clients anxious. He told the story of one such client who, rattled by past experiences, insisted on interviewing the associate assigned to his case to make sure that he had no intentions of leaving in the middle of it. Dean Dennis Honabach of Washburn University queried his colleagues as to how such moves “affect the way you groom associates?” He wondered what form of self-protection law firms employ to prevent raiding. For Frank Ross, the answer to ethical questions on the practice was all in the beholder’s eyes. The lawyer who is leaving argues that it is good for the client because the new firm has the depth and talent. The firm that he’s leaving argues that the client will suffer. “In the ultimate analysis,” contended Ross, “it is the client’s choice.”
ON THE GROWTH OF GROWTH That law firms are growing larger and spreading laterally is beyond dispute. The question Woody Cozad raised is whether the trend was being driven by the need to survive or by the desire to perform better and increase profitability. David Fenley contended that firms would face the choice of growing very large or staying fairly small. “Big clients,” he argued, “are impressed with breadth, depth and frankly geographical presence.” Growing large is not something firms necessarily “want to do.” But to compete for large clients, they “don’t have a lot of choice.” Jerry Riffel agreed, “If you’re going to compete for national business, you’re going to have to be big.” In terms of survival, Riffel argued that the most important variable is geographic. “The smartest firms in terms of growth are going to look for geographical diversty.” Bryan Cave, with its significant international presence, already has some experience with the phenomenon. What holds the firm together, observed Irv Belzer, is the “cultural rule” that “we are one firm,” that if someone from inside the firm calls a colleague, that colleague becomes “one of your most important clients.” Although Belzer has been pleasantly surprised at how well the rule works, he acknowledged that “it takes a constant effort.” Without that effort, Riffel agreed, “Some consolidations will become unglued.” He noted that size often has negative side effects and that firms “have to be careful” about how they grow in a market like Kansas City. “You don’t want to be the biggest general litigation firm in town.” Norm Fretwell agreed that there was no point in expanding “for the reason of just getting bigger.” Survival issues don’t concern him. Despite its middling size, Spencer Fane has grown more profitable each of the five years Fretwell has been there. Still, the firm would consider a more aggressive growth pattern but only if there were “a compelling strategic reason.” “I don’t think survival is the question,” added Mark Foster of Stinson Mag & Fizzell. The real question, as he saw it, is whether a firm can “continue to practice law in a way the bulk of your people want to practice.” Frank Ross of Polsinelli concurred that “the challenge of the work helps retain work” and that a growing firm tends to present its attorneys with new challenges. John Granda of Stinson Mag agreed that a “driving force” in decision making is how to retain the best talent. He contended, though, that a lot of the intangibles that young attorneys seek could be found in a big firm as well as a small. Pete Smith of McDowell, Rice, Smith & Gaar had another take on this subject altogether. His is a 30-lawyer shop that was a 50-lawyer shop six years ago “before you big boys started picking off our great partners.” What Smith has found, however, is that the firm is now more profitable, more fun, more collegial, and “our secretaries don’t have to wear name tags.” Smith argued that there is plenty of business for law firms “small enough to make a client feel comfortable but big enough to do most of the jobs.” Gerald Gorman couldn’t agree more. Although Slagle, Bernard & Gorman was the smallest firm at the table, Gorman had no regrets. “There are hundreds of businesses that need something less than five lawyers for every project.” And as Roger Hershey contended, there are many “bright young lawyers” looking for these smaller law firms. ON THE ACCOUNTANTS MUSCLING IN Woody Cozad introduced an unannounced subject that proved to be of great interest, that is the decision by huge accounting firms to practice law. Cozad called this a “cloud on the horizon” before catching himself and asking whether it might not be, for some at least, “a ray of sunshine.” “We could see this coming five years ago,” said Peter Brown, whose tax practice is more sensitive to such developments. The only way he could see to compete was “to get big” and “virtually ignore the ABA (American Bar Association) rules on this.” As testament, six or seven of his colleagues at the firm are now CPA attorneys. Dean Powell confessed to being on the ABA panel in question. “This is an issue,” he admitted, that the ABA “does not want to take a stand on.” “A lot of people,” contended Pat McLarney, “say that what the ABA thinks is almost irrelevant as to what happens in the competitive marketplace.” Powell did not disagree. The problem, he noted, is that the rest of the world and Canada, as well as several western states, have already come to grips with the issue. “The reality is that the practice of law has become multidisciplinary.” “One of my concerns,” added McLarney, “is that we as private practitioners have handcuffed ourselves.” But the accountants, as he sees it, don’t feel similarly constrained. Woody Cozad asked how the legal profession was going to respond to the challenge in a “formal and legal” way or does anyone even care? David Fenley contended that the accounting firms don’t seem to care. “They have been at it five years, announced.” And as he noted from his own experience, they infiltrated the law business decades before without much fanfare. “They package services,” he noted. “They homogenize things as well as they can.” To compete, Fenley argued, law firms have “got to do that sort of thing.” “Let’s get it on,” enthused Herb Kohn. If it is true that law firms have historically followed accounting firms, it is not too late to turn that around. Like Fenley, Kohn saw the need to streamline management practices and to work on new products which can be sold “on some other basis than time.” John Granda concurred that “if we are going to compete with accounting firms, we have got to have scale.” This would mean more specialization and a sharper focus. On the down side, Granda admitted that a given attorney would have to “give up the fun of being a generalist.” Dean Powell acknowledged the trends of history and the persistence of the accounting firms, but he also reminded his colleagues of the one great advantage law firms hold: “We are the only ones who can go to court.” Jerry Riffel was similarly optimistic. “We’re in a pretty good position to survive this and thrive.” In his opinion, competition among law firms has forced an incredible degree of sophistication. “We’re tough, flexible and really as a group, capable of getting a lot of things done.” THE KANSAS CITY FACTOR Finally, Woody Cozad asked his colleagues the final question of all the Industry Outlook sessions, “What are the advantages and disadvantages of calling Kansas City home?” The responses were impressively positive. “It’s a great place to be and seek national business,” offered Irv Belzer. From his perspective, Kansas City has “top quality lawyers” and a relatively low cost of doing business. “I would echo that,” added David Fenley. “You can get top-quality legal work (here) and pay $50 to $100 less (an hour). Corporate America is pretty sophisticated.” Peter Brown noted that the rate differential between himself and his peers in Connecticut and San Francisco is more than $200 an hour. Gary Brouillette argued that the Kansas City advantage “goes beyond economics.” He told the story of offering his home phone number to an out-of-state client who expressed shock and wonderment at the gesture. In Brouilette’s opinion, clients value this “Midwest ethic.” Although Norm Fretwell agreed with all that had been said, he contended that Kansas City has “a distinct disadvantage” because of the relatively small number of large firms headquartered here. Woody Cozad agreed that although St. Louis has been among the top six of corporate headquarter cities, Kansas City is “not on the chart for Fortune 500 companies.” “In a competitive environment,” said Fretwell, “it gets worse and worse.” That is why he believes law firms should commit themselves to bringing and keeping business here.
	For Jerry Riffel this led to discussion of light rail, the leadership for which came largely from law firms. “We’re finally waking up to the fact that we’ve got to create business if we’re going to stay in business.” Russ Welsh spoke passionately about just how much quiet civic leadership the law firms do provide. “I don’t think the public understands how professional the profession really is.” Yet for all the challenges facing the law profession in Kansas City, not the least of which is the state line as Dean Powell observed, the city has a stronger emotional grip on its attorneys than it does perhaps on any other profession. Once established here, they rarely leave. “It is such a good feeling to come back to Kansas City,” said Herb Kohn, “and know this is where you live.”
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