Finding a foothold in the Chicago market isn’t as easy for the elite ‘big law’ firms as they might like to believe, reports Claire Bushey of Crain’s Chicago.
The article looks at three national firms that had big aspirations for growth upon their respective moves to Chicago: Paul Hastings, Ropes & Gray, and Morgan Lewis & Bockius. New York-based Paul Hastings, for example, opened its Chicago doors in 2006, initially recruiting top partner talent and reporting goals of a 100+ lawyer office. Ten years later, the office boasts of only 42 attorneys. Former managing partner of the office, Rick Chesley, says that its the tough Chicago competition that forces firms to really consider their client base: “If you haven’t thought about who your clients are, who you’re going to compete with…you’re going to fail,” he said (as quoted in Crain’s).
Similarly, Boston-based Ropes & Gray opened eight years ago with predictions of a 100-lawyer headcount within two years. The Chicago office has only 64 attorneys to date–a stark contrast to their London office, which went from 2 attorneys at their 2010 opening to 129 today.
Anthony Nasharr, Managing Partner of the Chicago office of Polsinelli, believes that firms looking to expand into Chicago need to be “chasing work characteristic to the city, like agribusiness or financial services” (as quoted in Crain’s). Polsinelli, a firm headquartered in Kansas City, has proven that they have the right approach for Chicago growth, successfully growing their six-attorney starter office to almost 100 in just eight years. Nasharr also notes that a new Chicago office requires strong support from their headquarters to help the office thrive–like supplying the funds to bring on quality lateral partners. Much Shelist Managing Partner Mitchell Roth agrees that the need for good talent is critical to success in any major market, but argues that acquiring that talent can prove difficult: “To open a five-person office and expand to 100 in one or two years, when everyone’s trying to buy the exact same talent? It’s next to impossible,” he says (as quoted in Crain’s).
Despite the difficulties, six out-of-town firms merged with Chicago firms last year–more than in any other city, Crain’s reports. However, former Kirkland & Ellis partner Steven Harper warns the newcomers not to be fooled into thinking their high-profile reputations will be their be-all, end-all for attracting clients: “These firms believe that…clients will flock to the brand. Well, maybe not. Probably not,” he cautions (as quoted in Crain’s).
The world’s largest law firms are still feeling the heat from their stagnated approaches, as discussed in last week’s post. A report released by CounselLink concluded that firms with 201 to 500 attorneys–termed “large enough” firms–are “increasingly winning the market share at the expense of the largest U.S. law firms.”
CounselLink Strategic Consulting Director Kris Satkunas suggests that the success of these ‘large enough’ firms is generally due to lower billing rates (for similar levels of service) and the increased willingness to engage in AFAs, the ‘Alternative Fee Arrangements’ widely preferred by clients today. She reports that as a result, corporate clients are “finding the same value from this size law firm for less or at least more predictable costs–and that is driving the migration of legal work into this segment of the law firm market.”
This trend is exemplified in the recent layoffs by megafirm Reed Smith, a 1750+ attorney firm who laid off 45 lawyers and a “comparable” number of administrative staff in January 2016, according to their press statement. Sandy Thomas, the global managing partner at Reed Smith who gave the statement, blamed the layoffs on the “fundamental shift in the nature of the demand for, and the delivery of, legal services in recent years.”
Another ‘big law’ firm, global giant Dentons, (now, with a 6,600 employee headcount, the largest law firm in the world), has been the subject of skepticism for its continued ‘bigger is better’ growth philosophy. Jordan Furlong of global law firm consultancy Law21 argues that since there are already many multinational firms, “having dozens of offices and thousands of lawyers isn’t enough to set you apart, and I’m not sure if 80 offices and 8,000 lawyers will do it either” (as quoted in The American Lawyer).
Time will tell if “bigger really is better” for today’s law firms, but for now, all signs seem to point to an ideal amalgamation of factors for middle market firms to flourish.