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00:01:00.780Murray, welcome to Steve's rules, periodic podcast featuring Steve Nelson, executive principal at McCormick group in the law and government affairs practice. My name is Murray Coffey, and I am the principal of M Coffey, a law firm marketing and business development Boutique. For more information, please visit my website at M coffey.net Steve has been an executive recruiter for nearly three decades, and without naming names, he is ready to spill the tea on best practices, and maybe a few not so best practices by firms and candidates that he has seen during his career, recruiting some of the most driven and successful professionals into highly profitable and growing firms. Steve is a former lawyer and journalist and is a fellow of the college of law practice management and a proud son of Wilkes Barre, Pennsylvania. Full transparency here, Steve has helped my career immensely through the years and has become something of a career shaman to me and I know many others.
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00:01:08.040Hey, Steve, welcome back.
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00:01:08.040Murray.
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00:01:11.819Good. Yeah, I'm doing.
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00:01:38.959I'm doing all right. Still recovering from, you know, from the event, most recent events that have been going on. I think we're gonna touch those on those a little bit. And I don't know if you saw this today, but Kramer 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 got some we've got a great guest today to help us get our arms around all of that and much more. Steve, you want to Yeah,
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00:02:20.960so So joining us today is Patrick Fuller, who's the chief strategist for American lawyer media. And I've known Patrick for at least, at least 15 years, probably longer. One of the things that we have in common is, as many people know, I have a side hustle in in stand up comedy. Patrick did that for for a bit after college. So we often talk about comics and comedy and so forth. So so Patrick's going to be joining us, and I thought we'd start by talking about the election and the impact of the election.
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00:04:56.740So I'll give you a couple of thoughts that I will say is that, from a business standpoint, I think that, I think that it's pretty much business as usual. I mean, I think there's going to be a lot of M A activities going to going to continue to be strong. And of course, you know, you know litigation will be litigation, and most of it has, most of it has nothing to do with the federal government. So that will just go on in Washington. Of course, it's a little different. The one thing that we're seeing, and of course, I look at it a lot from the lateral perspective, the one thing I'd say is there's certain agencies and certain practice areas where there, while they'll be changed, there's certainly going to be a lot of activity and a lot of interest in government lawyers, which is one of the things we do. We do, we do strongly and in fact, in terms of the statistics, and what we've been following in terms of the lateral hiring trends, there's been a lot, a big uptick in the government hiring the lawyers, even, you know, even when they did not know what, who was going to win the election and that, and the areas that have been particularly in focus, FTC, antitrust, those you know, everything related to antitrust, there's going to be big change no matter what happens. You know that tech companies are going to have lot of challenges, and the with the antitrust, no matter what happens, I think the international trade, you know, talking about tariffs. But beyond that, there's going to be a lot of things roll with anti boycotts and things that relate to whatever the foreign policy is going to be. So that's going to be very strong as well. And I think just the general investigations, white collar work, that's going to still be strong. You know that there, I'll tell you, we have three or four firms asking for congressional investigations help within the last three months. So we know there'll be Congressional investigations again, no matter who ends up winning the house. It doesn't matter. But whatever, whether there's going to be a lot of congressional investigations that are going to be, I can't imagine there will. There going to be some prosecutions of former government officials. You know, 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 to happen. So I think there's going to be a lot of activity on all of those fronts. But I'd like to, you know, you can chime in, Patrick, you know, talk about a little bit about what you're seeing out there.
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00:04:59.920Yeah, I think, I mean, I think you said.
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00:05:01.019A lot of it right there.
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00:05:35.120Look, I think we're going to see that. We know, we've known that there's a lot of dry powder that'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 think antitrust is, you know, I think that that's going to continue to, I mean, it's, it's, I think it's a hot topic to discuss right now, the question I have is, is it good? Is demand going to soften that? Is it going to lessen under a Trump presidency, or is, or is it going to increase?
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00:06:49.240Same thing with regard to regulatory we know that there's going to be significant regulatory change. Um, change. I think what it comes down to is going to be the clarity and the lack of ambiguity. If, if they make it to where it is, there's very little ambiguity with regard to their policies, and it's definitive, then I think we're probably not going to see as much action there. But you know, if there is levels of ambiguity, as there have been in the past, then I think it's going to continue to be a strong area for a lot of firms. Yeah, I think this also may be the beginning of the state turbo charge, possibly again, it goes to your regulatory discussion there, Patrick, but the Chevron deference, that that sort of got blown out of the water with the last in the last Supreme Court term. You know that that's been a that's been a slow roll so far about what the impact that's going to be, but it does change the administrative law structure in this country substantially, and with the change in administration, I think we're going to see, possibly see some, some pretty significant changes coming up in
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00:07:29.300some of the major regulatory bodies in the United States. And so I'm watching that. I've clients of mine are watching, you know, they're watching all of that. Plus, you know, they're saying, hey, you know, if, if, if, if, if, RFK Jr actually gets in, you know, gets into this role that they're talking about getting them into, there's a lot changes in, you know, in Food and Drug Administration and and, you know, 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.
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00:07:47.329We haven't seen changes in food labeling, which sounds like a obscure area, but it's real, and it's it's massive, and we haven't seen a change in in food labeling in decades, you know, Berkey, not since, not since Berkey, exactly I was gonna say, because people might, might know who are listening. That was given to us by our friend.
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00:07:54.860Parted Berkey, late, late, great. Berkey. Belzer, yeah, I think, yeah, yeah. No, that's a Yeah, go ahead.
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00:09:33.559No, I was gonna say, a lot of this stuff is connected, right? So we can't, right? If we're gonna talk about healthcare, well, we're also gonna have to talk about immigration, right? Because there's going to be, I think, a significant impact that immigration reform or their immigration policies have on health care, given the high percentage of foreign medical grads that are active physicians in the US, and then if we factor into that, as well researchers and pharmaceutical organizations, you know. What does this mean, you know. And Steve, I'd love your take on this, you know. What does it mean from a, you know, from a firm's corporate immigration perspective, is, are we expecting that that work is going to increase? To your point about health care, you know, I've heard, you know, the President Elect say a number of different things that are conflicting with regard to the Affordable Care Act and what his ultimate plans are. Now, it may not be him as much as it is the people that he surrounds himself with inside his cabinet and what they want to do with regard to the Affordable Care Act. But, you know, there's a lot of people, people who know me that are listening to this. Know, I live in Oklahoma City, and although I pretty much live in airports, but I actually have a house in Oklahoma City. And you know, one of the things that's that's kind of interesting, and Murray, you lived in Texas for a while, and you're familiar with this, you start getting into the rural areas in the plain states and the Midwest, and there is a significant issue with access to health care and and facilities.
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00:09:59.919And you know, we already have a shortage of qualified professionals as it is. And so if we start getting into issues with regard to immigration, and it cuts off supply, then we're going to have, we're going to have a bigger crisis in our hand. Then if you compare that, then if you add to that, any changes, especially some of the things that have come out of RFK press conferences and his talking points, we could be looking at a very significant healthcare issue.
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00:10:11.460To in this country worse than we currently have, which is, I think, you know, the implications for that, then, from the from an economic perspective, are mind boggling, scary.
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00:10:31.279Yeah. And interestingly enough, you know what RFK is talking about is a hyper regulatory environment. So in other words, instead of being, you know, deregulation, that's not, that's not in the cards if he plays a major role. And so that's a whole different thing.
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00:11:08.940And then the other thing that's kind of ironic is the chevron case, you know, again, the this new government, this new administration, is going to be deregulating things or changing the policy, you know, pro business and but the deference of the courts are going to change. Now, granted Supreme Court's there. You know, we know where, where they're at in terms of the majority, but the lower courts play a big role. And if the lower courts say, No, we're not going to give you deference on this deregulatory issue, could be really interesting. So there's a lot of things going on and will be going on with this, with this environment. So stay tuned.
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00:12:30.019Alright, so what? No, I was gonna say it's sorry. I mean to cut you out there. I think, you know, we hit on a couple of things, but you know, the the trade you know, trade policies, I think are going to have a significant impact. I think, you know, I think insurance is going to be really interesting moving forward as well too. I think that if we run into immigration issues, you know, again, given where Murray and I live, one of the largest expenses we have every year, every month, is homeowners insurance, regardless of whether or not we are filing claims. And some of that is related to the weather and the risk models that the insurance companies have, but the rest of it's related to the cost of, you know, the replacement cost of of structures. And you've got replacement costs that is far outpacing the cost of the resale value and the valuation of homes, in part because of the tariffs that were enacted in 2017 and the lack of skilled labor and in manual labor, like with roof repairs and roof replacement and things along those lines. So I think, you know, given how much that insurance companies spend every every year in outside council fees, I think that we're, you know, we could probably see an uptick in that type of work.
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00:12:36.200It's not sexy work, and by any way, shape or form, but it is something that I think we're going to see an uptick in.
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00:12:44.559I think part of that's going to be driven by some of the economic decisions that are going to be made by this by this administration,
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00:12:46.120right?
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00:12:57.340Well, very good point. So we've got a lot to look forward to, with regard to the first few months of the Trump administration, too.
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00:13:03.779So want to talk more with Patrick about what Patrick does.
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00:13:31.039Why don't why don't you start Patrick, explain what your role is at ALM with regard to data and analytics, I think everybody would like to hear you know what? What your Well, yeah. I mean, Thanks, Steve. For a number of years, I've been there since 2017 and up until realignment in when we realign some of the operating, operating structure of the organization. I ran the intelligence business that's now moved under under product. And my friend Richard Caruso,
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00:13:53.500and you know, Richard's a lot of people you know, know Richard. He's been around for a long time, and is a really good guy. I work very closely with Richard. Still, I work very closely with Gina Passarella, who is now the head of all content for Alm and Dave gianella, who is the editor of the American lawyer. I spend a lot of time playing with data.
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00:14:59.919Still, I don't have the teams reporting up to me and don't have the day to day responsibilities for the intelligence business that I had, but I spend a lot of time playing with data and a lot of time speaking to law firm leaders. And so a lot of my conversations are with mid size firm leaders in large law firm leaders. And then ALM obviously has a platform that allows 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, which is, I think, critical for what I do, to be able to get perspectives from General Counsel and in house legal departments around what they are looking for, and outside counsel the trends that they're seeing, the things that they would like to see from from their outside counsel. So basically, I spend a lot of time talking, I probably spend more time listening, and then a lot of time just playing with data and trying to kind.
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00:15:11.269The data in ways that yield something actionable, that but yet, is fairly unique in terms of of what people are seeing and and what they've seen in the past, right?
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00:16:03.200So one of the things that as as a legal recruiter, that I see is that the that the candidates and even the firms when they are when they are pursuing communities, there's a huge focus on the profits per equity partner metric. It's the one thing that people talk about they know and and nine times out of 10, if I bring in things like RPL and compensation all partners, they don't even know what that is. So I know Patrick that you you feel that there's a lot, lot better data that you should be looking at as as as anyone involved with a law firm, whether you're, you know, considering a move, or whether you're a COO or a CMO at a law firm. So I'd love to hear your thoughts on sort of what, what the metrics that people ought to be looking at?
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00:16:28.340Yeah, look, I mean profits for equity partner is has been around as long as the amlaw rankings have been around since, since 1985 and you know, the point that I will often make is that when you know the rankings, when Steve Brill first did the rankings in 1985 most of the partnerships were single tier partnerships, and so it made profits per equity partner, a fairly straightforward metric.
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00:17:26.660And over the years, as we've seen, you know, there's been a greater shift to adding that non equity tier. In fact, I think next year will be the first year that we've had more non equity partners, especially amongst the amlaw 50, but in the AMLO 100 am law, non equity partners will will be a higher percentage of equity partners in the am law 100 and that's been a steady shift since about 2000 we've seen that that move kind of coming in. And with that, you know, the definition that we've always used with regard to, you know, more than half of your income coming from not coming from a fixed from, from fixed income on the Schedule k1 is, you know, I think it, you know, there's some firms that have, you know, maybe single tiers structures. But because of the Comp structure, you know, it kind of calls into question a little bit how they should classify certain lawyers.
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00:17:49.900And so I think the metric itself is fine. I think it can be a little bit misleading, though, in terms of true profitability, which is why I look more at profit per lawyer. Profit per lawyer, to me, is a much better indication of how firms are doing relative to their profitability and and how it relates to their head count growth and and everything else.
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00:18:12.599So yes, I look at RPL, but I don't I look at RPL in conjunction with headcount growth. I generally look at when I look at profits for equity partner, I look at it in conjunction with changes to the leverage model, for example. So in other words, if we see a firm that has grown profits for equity partner, let's say 15% in a year, they've only grown profit per lawyer 3% in a year.
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00:19:33.680And then you look at their leverage model, and he's like, Well, you know, they've they've boosted up non equity partners by X percent, and they've declined, you know, or they've decreased in their percentage of of equity partners, you can sort of see where you know why that number is as high as it is. So I tend to look more at profit per lawyer, and then within that I adjusted, I adjust prior years for inflation. And part of what I want to be able to see from firms is, is there profit per lawyer keeping pace and exceeding inflationary growth, because we know that firms have to continue to invest in growth initiatives, and if they're going to do that, then they've got to be delivering levels of profitability that enable them to do that. And you know, a lot of firms right now, when I go back and I look at the metrics, even if I adjusted for for back to five years. You know, when you look at the AMWA 50, you know, their RPL, for example, over the last five years, adjusted for inflation, is a little over 1% compound annual growth rate. But when you look at the am law, second 50 and the second 100, they're both, you know, they're both negative, you know, over the last five years, right? So our rates not growing as fast as they should. Well, for the AMWA 50, we know that they are for the second 100, I don't think rates are keeping up with inflationary growth at all.
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00:19:48.759Ironically, profits per equity partner is even when you adjust it for inflation over the last five years. It's up for all segments, but it's up 5% on a on a CAGR for the amlaw 50. It's up 1% for the second 50. You know, it's up 1% for the second 100.
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00:19:59.920Profit per lawyer, you know, ironically, is up 2.6% 2.6 Yeah, 2.6% for for the amlaw 50. And again, probably.
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00:20:06.900Profits per equity partner is up 5% profits per lawyer is only up 2.6% so you see the disconnect between those two things.
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00:20:19.920And for the second 100, believe it or not, profit per lawyer is actually over the last five years when you adjusted for inflation. And I use, just for everybody out there, I utilize the GDP implicit price deflator.
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00:21:48.099When you adjust it for inflation, it's actually negative over the last five years, right? So we've got, we've got data points that I think when you look at how they're comparing to inflationary growth, and then how firms are comparing to their segment, we're seeing some firms that are definitely over or outperforming the market, but we see a number of firms in a number of segments that are not keeping pace with inflationary growth, and I think that's problematic right on just as an informational point, how long has the American lawyer been keeping the profit per lawyers metric? Because I don't That's a good question. Yeah, that's a good question. I want to say it goes back about 20 years and and I should know that off the top of my head, but the problem is, is that I've, you know, I've changed all the spreadsheets on my end to put, to put that in there, and then I put rank formulas in on all of my things so I can look at how firms rank. Because that's, that's one of the things that I look at is not just what the nut what the raw metric is, but how they rank year to year relative to the rest of the rest of the market and and part of that is, look, I mean, when we, when we talk about some of these metrics, you know, RPL is a great metric. And, you know, Murray years ago, when, when we were talking about this stuff, when you were at, hey boo, you know, we would talk about this.
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00:23:39.859And I remember a conversation we had sitting in Dallas, actually, where we where we were talking about because both you and I, and strange, I remember this stuff, but both you and I always looked outside of legal, and would read and watch and learn a lot of stuff outside of legal, and then, right, you know, use it as inspiration to say, well, this doesn't, you know, translate directly, but there's this part and this part that we can take and we can make it work for what we're doing, right, right? And, you know, but I remember, you know, kind of looking at, you know, our talking about RPLS as well. It's, you know, it's kind of a true measure of the health of an organization. And the more dug into it, the more it was like, Well, yeah, but it's kind of driven by the geographic distribution of lawyers and where 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 firms that have a lot of people in LA and San Francisco and New York and DC and Chicago, they're in higher rate markets. They're demanding higher rates, you know. So if all things are equal, the RPL is going to be higher in those in those markets, right? So I look a lot of that, you know, I try to minimize the, you know, the bias of size, because we know that that, you know, plays a role in rates and mitigate the role of the geographic distribution. So that's where the year over year growth tends to come in for me, when I look at it and then ranking the year over year growth, because I want to be able to see, okay, how are these firms actually comparing to in terms of just growing and outperforming their prior years. How are they performing against the rest of the market? And when you do that, you start to see pockets of firms that are really having good stretches, you know, 345, year stretches of really strong performance, where they're outperforming the market. And you know, they're not, you know, they're often not. Am law 50 You know, there's a few that that are that have gone through firms.
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00:23:47.579incredible, you know, stretches.
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00:24:15.900But, you know, Murray capes, case in point, your old firm has had a great stretch over the last five years. They have, you know, the numbers are phenomenal. And, you know, it's, I think it kind of falls beneath, you know, or kind of doesn't fall beneath the wayside, but it's just not as as common and as talked about as much as some of the other large firms are. And I think it's important, even when we get into the mid sized firms, to highlight these firms that are just absolutely crushing it, even though they may not be getting the fanfare that other firms are.
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00:24:59.920I could not agree more with that's that last statement, especially I since I've been running my own shop, working a lot more with with, with some firms that are there am alone, one for sure, but firms that are that are that are either bubbling under the surface or even a little bit lower down, that that that that numbers. But when you start to talk to those managing partners and those coos, and you start to you start to hear the numbers that they're posting up and, and they're, you know, they're experiencing, and this is, you know, this is what I would say, the lateral, you know, lateral partner candidates that are out there, there are, there is very real. And I really would like to find the numbers on this. Maybe you can help me with this. It's.
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00:25:44.500The point, Patrick, but the fee migration that's going on from the larger firms to the some of these high quality smaller firms. There's a firm that I'm working 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 all the all the work of a certain kind, very profitable, highly profitable kind of work of a certain kind that just shift has just shifted in the last five years from these large firms to this smaller firm. And the large firms are, in many cases, very happy to send that work, because they're there's they're sending it to a high quality firm.
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00:25:59.019They're keeping their clients really happy, because the clients are saying, I can't pay$1,500 for you. You know Gibson Dunn partner, but, but I still need Gibson Dunn partner, quality work being done on this.
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00:26:31.220How can you? How can you help me? And they're doing it, and the work is moving and and if you're a, if you're a lateral partner out there right now, and you're trying to think creatively about where your where your practice could go, take a look at some of these other firms that are out there, as you said, Patrick, that aren't getting, you know, aren't getting the headlines. We're saying, Wow, they're they're doing, they're doing great, and they're getting great work in, and they're profitable on it, and, and guess what? They're not working 100 hours a week,
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00:28:10.259no. And I think that, I think data, you know, I said this years ago, when I was working with, with legal departments, you know, data that is available, especially to the buy side now, and it's, it's been available, you know, largely since about 2007 2008 I mean, we talk a lot about the, you know, the financial reset in 2008 and I think it was kind of interesting, because there's sort of three things, you know, that perfect storm when things come together, because you had the financial reset, but you also had the ACC value challenge that was happening, right? Susan Hackett and those guys were putting that together, right, you know? And that just happened to coincide with with the financial crisis. But, and then you had the E billing companies started giving back all that data that they'd been collecting to their clients, which are the legal departments. So you started getting some legal departments that were sort of first in getting out and utilizing data to evaluate their outside counsel, and, you know, potential outside counsel, because then, you know, they're getting data from not just their clients, but also the market as a whole. And what's interesting is, I think that combined with websites, and you know, we saw what 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 and as well. But we saw the rise of websites and the ability for these firms to present their story the way that they wanted to tell it. And you combine that with the fact that now the buy side has far much more data to be able to pull and analyze, and so you shorten basically the universe, and that's out there.
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00:28:38.359And now I think for a lot of these firms, the cya component that we've talked about for so much and the brand equity of such larger firms, kind of goes away a little bit for some of these specialized areas, and allows them to generate higher fees. It allows them to be seen and to be hired more by some of these firms that ordinarily may not know who this lawyer is or who this firm is. And I think that that's going to have a long I think that's going to continue going down over the next five to 10 years.
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00:28:41.200I don't see that changing. And in fact, I think it's going to be better for a lot of mid sized firms.
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00:28:57.460So Patrick, when you meet with law firm managing partners and chairs and practice group heads, etc, what you know? What? What? What do they tend to bring you in for?
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00:29:00.579What do you tend to talk about with them? What are the subjects on their mounts?
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00:29:03.539Oh, it's always data.
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00:29:16.079It's not for the jokes, and it's not for my personality. It's usually for the it's usually for the data. It's, it's a lot of market analysis and market assessment. They want to be able to sort of see a state of the industry.
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00:29:25.819And so it's in one of the challenges with that is, you know, we put out, you know, an American lawyer always has, you know, the financial information comes out once a year.
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00:29:30.440You know, the lateral movement.
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00:29:35.539Lateral information is published monthly in on law.com compass.
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00:29:42.579But it's, you know, that's also not a tool that a lot of managing partners generally log into and use. They have other people inside the firm that are giving them that information.
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00:29:59.920So a lot of what I'm doing is trying to cut the data and slice it and present it in ways, and segment it in ways that gives them something a little bit unique to look at. And plus, there's always data that we collect as part of the AMWA and National Law Journal.
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00:30:26.480Survey. So just for everybody out there, American lawyer and the amlaw rankings rank firms on on gross revenue and the National Law Journal, or the NLJ, so the NLJ 500 ranks firms based on FTE head count. And so those two surveys, or those two, you know, those two surveys actually emanate from the same survey that goes out to about 750 or 800 law firms every year.
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00:32:22.279And there's a lot of questions that we ask in that that are not on the Excel spreadsheet. So we'll ask questions around rates, around Did you raise your rates? And if so, what range Did you raise your rates? Total number of billable hours. What percentage of your total revenue came from anything other than, you know, variation of the hourly fee arrangements, basically asking about AFAS total square footage. That's allowed me in the past to create some metrics around revenue per square foot per lawyer, and those types of things to look at it, which was, which was interesting as well. I created one one time, which really made a very certain firm really mad, which was profit per lawyer, per office and and, you know, this is one of the firms that had a lot of offices and very low profitability. And it was, you know, it was, let's just say, less than $1,000 in a year per lawyer. And, you know, but again, it allows me to sort of cut these, create these metrics that look at the market a little bit differently. Credit lines is always an interesting one. We'll ask the question about half the firms will reply to us on that whether or not they're utilizing lines of credit, and if so, we'll ask them, sort of, what are the areas that you're utilizing it for? Technology, overwhelmingly, is one of the areas that pops up there in terms of lines of credit. But I think one of the more interesting ones recently has just been rates. You know, there's obviously a lot of talk in the news about rates and, you know, the the way that, you know, we've got four digit, you know, associates, especially second you know, something came out a few weeks ago about first and second year associates being four digits at a couple of firms. You know, we've got 2000 hour plus partners now. We're going to have a $3,000 an hour partner here pretty soon as well.
00:32:23.299 -->
00:33:12.059But what's been interesting about that is to then look at the unranked firms and be able to see, you know, a lot of them, over the last five years, have not been raising their rates at a minimum of 3% and you can sort of see this stair step of, you know, firms from 30% of them to 50% to 60% to 80% to 90% over the last five years, raising rates 3% or more. Meanwhile, you look at the AMWA 100 and it's 90% 95% 93% 92% in part because they've institutionalized that function inside their firm, they sort of taking it away from the lawyers and said, No, no, we're going to set the rates for you, whereas in a lot of the more mid sized firms, you're still going to the lawyer and saying, Hey, we you know, we're going to, we want to raise your rates to XYZ client.
00:33:08.819 -->
00:33:15.900And of course, they're pushing back and saying, No, you know, my client's already getting enough pressure as it is.
00:33:17.220 -->
00:33:51.339And so a lot of these firms have not been raising their rates in a way that's keeping pace with with inflationary growth and operational increases, and it's really starting to impact their their numbers. And so that's been one of the big ahas that usually generates discussion. And then most of the questions that I get you guys get when you do retreats as well too, which is, how do we talk to our clients about rates, and then separately, and I end up talking to firm leadership about, how do we sell our lawyers on, on having, on raising their rates?
00:33:51.579 -->
00:34:59.920Because the bulk of you know the discussions that the managing partners are having, they're basically internal sales discussions and persuasion discussions. And how do we get people to to go in this direction that we know we need to get them to go in and so that usually is what drives a lot of the discussions. And then the other thing, you know, obviously, we do a lot of work with, with the buy side, and so a lot of impressions from, from frustrations that are coming from in house counsel. And to be fair, I really I could probably have the same slide and use it for the last 15 years, because it hasn't changed a lot, as you guys know, I mean, it's the same issues or the same ones that are that continue to come up. But every once in a while, there's some new wrinkles that come up with their their frustrations, and most of them are not rate related, right? As you guys know, like they're not related to cost, they're related more to the perceived value that they're getting for the cost, right? And a lot of it is the client experience and the service level and the communication, and, you know, the forecasting, the budgeting and things that can be solved by better processes inside, inside.
00:35:00.000 -->
00:35:09.300Firms, and so generally, that's a lot of what the discussions are. And then it's more of an AMA, and you don't ask me anything afterwards.
00:35:11.099 -->
00:35:34.820Can I just tell you as as somebody who was who spent a lot of his career as a legal marketer, wrestling with the AMWA 100 survey, but that what that experience was like inside, being inside the firm. It was, I mean, we always knew that there were certain things that we were going to answer, but there's a lot of debate about, what do we answer, what don't we answer?
00:35:34.820 -->
00:36:01.920How do we answer this? Because I had to convince the CFOs like to just chop in their numbers and then hand it off. And I would say, really, this is a marketing document, guys, this is a marketing document. It's a it's a recruiting tool. It's a this is we gotta, we gotta be thinking very carefully, and we have to answer it with, with candor and but, but you know, do we answer every question?
00:35:58.119 -->
00:36:10.139Because you know the I know you guys, you know you asked the question somebody's gonna answer. You said, 50% of the firms are giving you answers to questions. I know we never gave answers to Yeah, you know
00:36:11.219 -->
00:39:05.340it was, but I think it's but I think that's a good observation. I mean, I think this, I think the data and how it comes out. And for some look for some firms, and you guys know this, for some firms, they they have a little bit of a fear of even though everybody knows what their numbers are when they see them compared to other people, other firms, who they they feel are competitors or peers. And you got, you know, and I had a buddy of mine tell me this, you know, he said, you know, we, we've got a three year strategic plan in place, and I don't want to short circuit it, because somebody wants to start making, you know, sort of cutting things off because they want to solve for the here and now and not staying true to the, you know, the strategy that we put in place. And I think that there's a lot of validity to that 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 into into ALM was the care and feeding that goes into all of that behind the scenes, because that's largely driven, and it's technically owned, not by what was intelligence, but by the editorial team. And you know, so I came in when I started. It coincided with Gina pastor Ella beginning her tenure as the editor in chief of the American lawyer. And, you know, the one thing I will always say is that she just cared about getting it right, and so the care and the feeding and the approach and the stuff that went on behind the scenes in terms of the discussions and the decisions and everything else was always rooted in what's accurate. You know, what are we going to do that 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's entitled to those. I know what I saw behind the scenes, and so I've got a high level of confidence in what we're putting out there because of the approach that was taken and a lot of that, like in every other organization, it's sort of set at the top. And Gina, did you know, she was a phenomenal advocate for this is going to be right? Like, we're not putting it out there. If it's incorrect, we're going to make sure that it's right. So there's a lot of vetting that went on. There was one reporter, and now an editor in particular, that would go through and catalog all the deals on a couple of firms to sort of vet the numbers, to make, you know, deal heavy firms, 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't think a lot of people actually, actually saw and and realized what's going on. And so I think I know it's one of the debates that we had every year. Murray was okay, at what point does this become so onerous that people stop responding? And so we're always eliminating questions and tweaking questions to make sure that it's, it's topical, and it's it's relevant.
00:39:01.559 -->
00:39:59.920But then part of my role, even now is, if you guys are going to take the time to do this, and you're going to take the time to give us this information and do it thoughtfully, then I need part of what I want to do is take the time to give you guys something back that's going to be actionable, that's going to be that's something that you can actually do something with, not just what you're reading in, you know, the charts that are published in law.com but actually some of the insight and combining it with some of the other metrics, and even stuff that doesn't come from ALM, with regard to, you know, maybe, you know, some different industry, you know, data points that we can combine and and actually put something together that's meaningful. Because if you guys are going to take the time to do that, then we owe it to you to be able to give you something back that's going to be useful for the firm. And that's, that's kind of the approach that we always took, yeah, because just just being able to cough up numbers is one thing, but to be able to provide some insights, we used to, used to have a reported.
00:40:00.000 -->
00:40:46.119Called the numbers that matter, and that was, we could take all the numbers at the firm for a given quarter that we were tracking, give the numbers, but I said, but here's what that means, here's here's what that's telling us about our firm right now. Here's what's telling us about the health of the firm, where our revenues are coming from, and those that that got good conversations going, because it was, you know, was it just plopping out numbers. It was taking it, and it was using the firm'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 can tell you that we always trusted ALM. We always trusted you. We always trusted Gina. Gina has a high degree of credibility, as you know, just it was just like hand wringing about what happens.
00:40:48.460 -->
00:41:54.340I'll tell you, she's one of the best colleagues I've ever had, and there's no drop off whatsoever. In fact, Dave gianella is probably more focused on certain things. Dave is, he's a new editor of the American lawyer. He's an interesting guy because he's got both a Masters in laws from Pritzker and a and his Masters in Journalism from Northwestern which is, I'm drawing a link on the school Kellogg's business. Good. Medill, yeah, right. Medill School journalism there, and David's exceedingly sharp, but yeah, Gina was, you know, again, it comes down to trust, right? And our role always in the intelligence business was, you know, we had no margin for error to be wrong, because if we were wrong and the editorial team was utilizing some of our data, then it undercut there, you know, you undercut them as well. And so I, you know, we took that stuff, and we continue to do it.
00:41:51.400 -->
00:42:48.099I take that very, very seriously. And I've been in, we all have, and we've seen people in this business, and we're not going to mention any names, but people that don't put the same care and feeding to some of that. And the last thing that I want to see is any leader of any business, whether it's a law firm or a service provider or whomever it is, make the right decision off of the data, but have the data be flawed, right? And that's not something that I can, I can live with. So we preach it a lot internally. We can, we can control what we can control, and we can, you know, this is the one thing that we can control, is our care and feeding in the approach that we take to making sure that this is right, and then how we bring it out to the market and that I spend more. I mean, I joke around all the time that I got this body the hard way by sitting down and looking at spreadsheets.
00:42:49.300 -->
00:42:59.260But you know, I am more freaked out about being wrong than I ever am happy about being right.
00:42:54.639 -->
00:43:10.679I am literally a walking version of the behavioral economics principle of loss aversion, right, the pain from being wrong is far worse than any pleasure from ever being right about anything, and that's the nature of the business that we live in.
00:43:13.139 -->
00:43:34.880All right, so let's, let's do an exit question here, which is, let's look at like next year. I mean the remainder this year, what's, what's, what do you think this year is going to look like? But also any other trends that are happening, where you see, you know, the data changing, you know, for some of these firms, you know, over the next 12 months,
00:43:36.019 -->
00:44:16.559look, I think complexity is always a lawyer's best friend. We know that. And so I think that we're going to, it's going to be the next the rest of this this year has been strong for a lot of firms. I think we're going to continue to see that into next year. I don't know if I want to go out on the limb for the year after yet, but I think we can, we can kind of look at the next 18 months and say that they're going to be, with relative certainty that they're going to be, they're going to be strong. I think we're going to see, you know, more expansion. I mean, you guys mentioned earlier the news that came down today about Kramer 11 and and Herbert Smith green hills and what that looks like.
00:44:17.880 -->
00:44:59.920I think that's, that's kind of fascinating. I mean, first of all, Kramer 11 likely won't be in the am law anymore because of the plurality rule, because the bulk of their lawyers are going to be over, are going to be, will be outside of the US. But if that firm, I looked at this earlier, because we have a little thing to do to look at merger assessments that that firm were to be in the am law Kramer 11 would go from an am law 104 firm to an am law 20 firm with that. And so right now that's gonna you know that merger is creating an am law 20, or a global 25 firm. And we know just from history that.
00:45:00.000 -->
00:45:35.599One of these moves is going to trigger another one, right? So we saw A and O and Shearman. Now we have Herbert Smith three hills and Kramer 11. So we're likely going to see another couple of moves come from that we are going to see more consolidation in the US and domestically, and I think we're going to see more mid market law firm mergers, I think for two reasons. One, I think, you know, the age old reason that a lot of firms don't have a good mid sized firms don't have a good succession plan. So I think that that's going to drive, it's going to drive some of the combinations.
00:45:36.019 -->
00:47:42.760But also, I think that there's internal pressure from partners and attorneys saying, what are we doing in response to x? And we need to do something. And I think that we're going to continue to see more more consolidation in the market. And so the consultants doing that work are going to be busy over the next 18 months, right? In addition to not having a succession plan, I see a lot of firms not having a good ejection plan. In other words, partners that need to be need to be removed from the partnership, or de equitized, or whatever. So the merger is always a really good excuse for that. So the question I always have with with especially firms with the HL policies, is, I would love to know, I would love to see the metric on the number of exceptions, exceptions per lawyer, relative to to those firms, because how many firms are looking at somebody that's coming up on their age out, and they're saying, You know 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 that's really jumped out to me is they don't have a there's not a huge challenge with the people nearing that level. It's the people that are 5758 that are not producing, Steve, to your point that they don't have the attraction plan for that. They have to look at somebody that's 66 and 67 years old. And by the way, the older I get, the more that that number seems real to me. But you know, you know, they're looking at this and they're going, man, these guys are doing everything right? But here's this guy, you know, here's this attorney that's 57 years old. We can't get him to do squat. Why is this guy staying and this other one leaving? And then, of course, then there's the impact on morale, and there's the impact on everything else as it comes, you know, with regard to the firm. So, yeah, I think having an injection plan. I mean, actually, Steve, you just found your next retreat speaking gig.
00:47:45.699 -->
00:47:45.940That's
00:47:47.500 -->
00:49:18.360the promise. That's why they go to merger, because they don't have the answer. Yeah. You know, I know we're a little long on time here, but you know, Steve, you were thinking the ejection plan and the 57 year old lawyers, etc, you know, I think about when I first started working in large law firms, which is now going back couple of, you know, that's 2023, 24 years now. And wasn't it the first one that you were, I was Jenner, was the first really big firm that I worked at. And, you know, at that time you made partner, because you could bill the hell out of, out of your files, right? You're, you're a good biller. And a lot of those partners who got became partners because they were great billers are now getting into that 5758 year old range, and they didn't have and you'll find there's kind of a donut hole, because you find the ones who are coming into partnership now are much more focused on business generation than, than, than the ones who are, who are, you know, 1010, or 12 years older, and then the ones who are in the 60s and 70s, some of those are still founders, or worked with the founders and and, you know, they help build the firm. So there is this, there is that. There's this donut hole that's that's going on, and I it is interesting to see how the firms are going to deal with that, because some of the firms are looking at how, what percentage of their high, you know, sort of, sort of their their high, high growth clients, are being managed by people who are over 65 and the number is kind of scary.
00:49:19.800 -->
00:49:24.980I know, I know we're long on time, but that's a couple one. We don't talk enough about.
00:49:22.340 -->
00:49:59.920We talk a lot about law firm succession. We don't talk about legal department succession, and we don't talk about the fact that, you know, there's a significant generational shift that's going on there on the buy side as well. And you know, we're getting guys that are younger than us now, that are in positions of relative power. And I think that that's to me, that that's something that that is kind of interesting. And I think the other part, Steve, this goes to a lot of the work that you do, is, and I ask, you know, talent officers in firms, this quite a bit, and especially in Murray BD, people, Murray, you, I know that you, you took part of betting. You.
00:49:59.869 -->
00:50:11.150Your firms, right? And you sat there with laterals and you interviewed them, but at some point we have to come up with some sort of metric, or some way of evaluating whether or not a this person has the skills.
00:50:08.809 -->
00:50:26.360Let's say they're, you know, I'm 53 so let's say they're my age, 5354 and they've got another 15 years left, or whatever it might be. But do they have the skill to be able to rebuild that book of business that we know is not going to transfer the way that they think it's going to transfer. But the second part is, do they have the desire?
00:50:26.960 -->
00:50:54.769Right? I mean, I think about it like with my house. I mean, I've, this is what my fifth house, or sixth house that I've been on my my first one, of course, it was in the age of Trading Spaces. And, you know, we can HGTV, and we can do everything in a weekend. You know, we started doing all that stuff ourselves right now. We can lay this tile, or we could put the wood floors in. We can do all this. By the time I got to my fourth house, I'm like, the heck with this. I'm going to hire somebody to do it. I don't want to do this anymore, like I want nothing to do with with doing this, this type of work.
00:50:55.070 -->
00:51:30.980And so I we know that going out and developing new business is not easy, right? And it's not something that is native to a lot of lawyers as well. And so I think that, to me, that's going to be one of the questions with laterals moving forward, is not just do they have the skills be able to rebuild this book of business, especially amid a generational shift with a lot of the buy side, but do they have the desire to be able to do it, especially with guarantees getting as high as they are in certain areas. Now, that's, I think that's going to be a story for the next couple of years.
00:51:31.460 -->
00:51:59.989Yeah, 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 we know that even if it comes over seven 30% is going to disappear in a year or two anyway, and and so there's nothing they're not really looking at. I know that Murray's old firm was one of the few firms that actually did some metric testing, profile assessment of laterals.
00:51:56.659 -->
00:52:08.210And most firms don't do it and are running scared of it. And, I mean, I think that, you know, it would be definitely something on their rate, should be on their radar screen.
00:52:08.809 -->
00:52:20.119You know, one, one thing we've talked for years now about the, you know, the supposed record day of reckoning from the Big Four and the multidisciplinary service providers and the MBB consultants and everything else.
00:52:20.510 -->
00:52:31.610The one thing that law firms have 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.
00:52:28.340 -->
00:53:07.670We started building the client experience around, you know, as a firm client experience, not an individual lawyer client experience, in a part, because we wanted to minimize, mini minimize portability of business that, again, kind of comes into direct conflict and contradicts now, well, we're going to give somebody 15 million a year or six year guarantee, and now we got to hope that they have the desire and the skills, and we have the infrastructure within our firm, and this is the other part, right? We have the onboarding and the infrastructure and the processes to be able to commit to helping this person rebuild this book of business. If not, we're doubling down on a significant loss.
00:53:09.369 -->
00:53:12.190I know we keep doing this forever. We could go for another.
00:53:12.519 -->
00:53:18.610We got another, we got another couple of podcasts to go with you here, Patrick, I think so, but, but, but I don't know.
00:53:18.639 -->
00:53:39.969I always enjoy you know, Patrick, you and I've spent lots of time together, you know, both in conference rooms and maybe on a few bar stools over, over the over the years, but, but always, always enjoyable. And it's been way too long, and you and I are going to catch up on this is when we, when we close here, but, but thank you.
00:53:39.969 -->
00:53:50.469Thank you for this. We, I can't tell you absolutely this is, it's been great having this conversation. Patrick, guys, I appreciate it as you know, I've never been a microphone that I don't like, so
00:53:50.000 -->
00:53:54.440same with us, really. I mean, you're, you know, that's,
00:53:50.000 -->
00:54:37.789Well, you know, as as, as we've noted, we're on like, that's the, it's a yak fest. I do want to just one plug for the McCormick, McCormick group. If you are, you know there is, their third month of doing ERISA. ERISA moves nationwide.
00:54:02.809 -->
00:54:28.610there is some critical intelligence that that Steve and his colleagues are compiling every month. There's some new data that's coming out. If you haven't subscribed, look in the show notes, contact Steve, get on their mailing list. Great stuff coming up, Steve, what's, what's, what's coming up that people should know about, not the data, because I know you guys are still going through it, but what are the, what are the topics, right?
00:54:38.179 -->
00:55:00.019We've got something else in the work. It's a little too early to talk about, but we've, we've got another one planned. And, you know, I think the big thing right now is the is the government laterals. I mean, it's going to be a lot. It's going to be really, I didn't mention this before, but it's going to be challenging, because how many people are going to leave firms to go into this administration? Right?
00:55:00.019 -->
00:55:12.440We just don't know what the appetite will be, you know, because I think at least in Washington, the vast majority of lawyers didn't vote for Trump.
00:55:07.730 -->
00:55:31.280So you have to see how that works out. And I think that may be an issue for people coming out of government, is there just might not be spaces for them, unless they have, unless they have, like that key practice niche that they can sell. If it's they're just great lawyers, really tough. So that's a little bit of marketing to tell you.
00:55:31.280 -->
00:56:03.650Can I give you a plug real quick too? Because I do take, I have taken your lateral market reports 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 hire down there with them, basically with the line, don't overpay for lesser talent. And read this, and I think that it's it's critical, because you have a lot of firms, especially in markets right now, Florida, Texas, that are going to continue to see expansion and growth, that you are going the the demand index is going to go through the roof.
00:56:03.769 -->
00:56:14.389And so if you are not careful and not working with the right people, you are going to overpay for talent that you shouldn't be overpaying for in certain areas.
00:56:10.219 -->
00:56:14.389So absolutely, I'll throw that.
00:56:14.420 -->
00:56:19.070I'll throw I'll throw that. That plug over to you as well, my friend. Well, thank you so much.
00:56:20.880 -->
00:56:32.300All 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 with that, we'll close.
00:56:33.619 -->
00:56:34.820Thanks, guys. Thanks.
