Firm Bucks Industry Trend, Recognized in Chicago Law Bulletin

featuring Jeffrey D Warren

There has been no shortage of bad news about the serious problems law firms have faced recently, and the painful measures they have implemented to survive, including large-scale layoffs and withdrawals or postponements of employment offers to law school graduates. Across the industry, the number of attorneys at firms is down and billable hours are down. The go-go era of law firm mega-growth came to a screeching halt as the country entered its worst economic downturn since the Great Depression.

According to the Chicago Law Bulletin, the Chicago legal community’s daily newspaper, only three law firms with over 50 attorneys managed to buck this trend by growing in each of the last five years. Burke, Warren, MacKay & Serritella, P.C. is one of them.

In a front page article of its May 24, 2010 issue, the Chicago Law Bulletin explored why this occurred, featuring comments from the managing partners of each of the three firms, including our firm’s Jeffrey D. Warren. We were granted permission by the Chicago Law Bulletin to share the article, which appears below, with our clients and friends. Mr. Warren can be reached at 312/840-7020 or jwarren@burkelaw.com.

3 ILLINOIS FIRMS HAVE SEEN STEADY GROWTH SINCE 2006

May 24, 2010
By Jerry Crimmins, Law Bulletin staff writer

Three law firms in Illinois with 50 lawyers or more have experienced steady growth during the last five years, according to Chicago Lawyer’s 2010 Survey of the Largest Law Firms in Illinois.

The three firms say they achieved this through good times and bad with a conservative outlook, growing according to clients’ needs and lower rates. Also, they said they finance operations mostly on cash.

The three firms are:

• Barnes & Thornburg LLP, based in Indianapolis, but with an 85-lawyer office in Chicago. 
• McDonnell, Boehnen, Hulbert & Berghoff LLP with 78 lawyers in the 2010 survey. 
• Burke, Warren, MacKay, & Serritella P.C. with 62 lawyers.

“Some people have a strategy, ‘If we build it, they will come,’” said Jeffrey D. Warren, managing partner of Burke, Warren, MacKay & Serritella, P.C. “Our strategy is more towards, ‘If they come, we will build it.’”

The 2010 Survey of the Largest Law Firms in Illinois will also show which of the largest firms in Illinois with more than 200 lawyers grew despite the recession (only two), and which firms shrank the most. And it will show how the state’s top firms have grown or shrank year by year since 2006.

The survey will be available this week online at www.chicagolawyermagazine.com and in the June issue of the magazine, which comes out this week.

Barnes & Thornburg’s Chicago office — its only office in Illinois — had 61 attorneys in 2006, 65 in 2007, 72 in 2008, 75 in 2009 and 85 in 2010.

“Absolutely, it’s our plan,” said Mark E. Rust, managing partner of the Chicago office. “We adopted a strategic plan, very carefully thought-out, in early 2002,” when the firm had about 25 lawyers here.

The plan called for growth in increments “of one, or two, or three lawyers at a time, lawyers that had skill sets that created synergy with our firm as a whole.” These lawyers had to have enough portable business to keep themselves working and provide work for others.

“We wanted continuous growth and the idea of not making mistakes,” Rust said. “Don’t try to go for everything at once in a flashy way. … We pretty much know we’ll be growing anywhere from seven to 10 high-quality lawyers in the year.”

Asked how the firm avoided shrinking here in the tough year of 2009, Rust said Barnes & Thornburg had “no layoffs firmwide or in Chicago.”

Instead, the firm had a “record-breaking year” in 2009 in total revenue and is “one of the very, very few firms who beat budget significantly” among the 120 largest firms in the United States, he said.

In 2009, Barnes & Thornburg acquired a small Minneapolis firm and opened offices in Atlanta and Columbus, Ohio.

“We paid for our expansion in cash,” Rush said. “We always choose to do everything in cash.”

Regarding the Chicago office, he said, “We’re finding a lot of lawyers migrating over because it’s a better platform for their clients who are suffering sticker shock as some large firms continue to push their rates higher and higher.”

Grantland G. Drutchas, managing partner of McDonnell, Boehnen, Hulbert & Berghoff LLP, said, “Our basic theme has always been to grow based on clients’ needs.”

According to the Chicago Lawyer survey, McDonnell, Boehnen had 59 lawyers in Chicago in 2006, 71 in 2007, 74 in 2008, 76 in 2009 and 78 as of Jan. 1, the date of the survey data.

The patent law and intellectual property firm was founded in 1996 when Drutchas and four other founders left Banner & Witcoff Ltd. The original lawyers had more business than they could handle, he said, so the firm grew rapidly to about 25 lawyers by 1997.

After that, the firm decided “we really wanted to grow from our own training and recruiting efforts rather than through hiring laterals,” Drutchas said. In 1997, the firm needed more junior lawyers to handle the work it was generating, he said.

Today, the firm says its rates are cheaper than on either coast even though it does high-tech work.

Also today, the firm still grows by hiring new lawyers out of law school and by hiring technical advisers who then go to law school and stay with the firm.

Asked how the firm avoided shrinking in 2009, Drutchas said, “Clearly a part of this was luck.” And he said even in a recession, one of the last things a company cuts the budget on is protecting its patents. “We’re certainly not immune to a recession, but it’s a slower process.”

Since the survey was taken, he said McDonnell, Boehnen laid off “a couple of associates and a couple partners” this year.

“This is a very conservative firm in that we’re not willing really to wait and see what effect certain things are going to have on our bottom line before we take action,” Drutchas said. “I think a lot of firms survive on a line of credit, and we haven’t gone into a line of credit in 13 years.”

The plan at Burke, Warren, MacKay, & Serritella “is to stay as small as we can while meeting the needs of our clients …, a growing client base,” Warren said.

Since 2006, this “full-service commercial law firm,” which has one office, had 53 lawyers in 2006, 54 in 2007, 58 in 2008, 59 in 2009, and 62 in 2010.

Burke, Warren hires based on anticipated need within the next year or two, he explained, “which I call short term” as opposed to long term strategic growth.

“What’s been working for us for over 30 years” under several firm names, Warren said, “is to bring in good people starting at the law school level.

“We provide them with an environment that nurtures their marketing efforts and entrepreneurial efforts. As a result, the business base gets larger. As they mature and grow, so do we.”

Burke, Warren also makes “selective” and few lateral hires of partners or associates to fill particular needs.

The firm had “no layoffs, not one” in the recession, he said.

Burke, Warren “does not depend on leverage or using large teams of associates to render services. So we basically staff our matters with one or two people.” Thus, “we operate much more efficiently and cost effectively for the clients,” Warren said

Big firms, he said, lay off associates in downturns or cut them if they don’t make partner.

Burke, Warren has been able “to preserve our talent pool. We’ve never had excess head count. We find it’s more expensive to have to hire new people to fill needs than to keep people who are already developed.”

The firm has also not sought mergers to grow.

This “enables us to present ourselves as a clear alternative to the bigger firms that charge higher fees and depend on staffing leverage.

“We have a very small line of credit that is generally never more than half a month’s revenues.” Typically, he said, the firm uses no credit from May through December.