“Firms outside the Premier and Championship leagues are playing a different sport.” Thus, the winning strategies are different.
Jae Um, in her bracketing exercise for The American Lawyer magazine, arrays the 2022 AmLaw 100 based on the structure of the English football league system. At the top are 22 firms in the Premier League. Next is the Championship League, with 23 firms focused intently on getting promoted to Premier. The third group is “Everybody Else,” which includes all the corporate law firms playing in lower-tier leagues.
Yet, as Jae Um pointed out during her visit to my Law Firms class, “it’s a mistake to extend the soccer metaphor to all 300 US/UK law firms that are doing significant amounts of corporate legal work.” Jae explains that Premier and Championship League firms have some combination of practice areas (type, quality, depth), sector focus, and geographic footprint that enable them to attract price-insensitive work from the world’s largest and wealthiest clients. See Part II (332) (discussing market power of these firms).
Jae continues, “The 250+ firms outside the Premier and Championship leagues are playing a different sport.” Basically, while many if not most do bet-the-company work in particular sectors and geographies, they also handle sophisticated run-the-company legal work—too specialized and complex to insource or send to a law company, but too operational not to be subject to meaningful cost pressure. Because run-the-company is an enormous category of legal work, it’s also a significant opportunity for best-in-class providers. Cf Bruce MacEwen, “Introducing the Maroons & the Grays: Part 1,” Adam Smith Esq., June 3, 2019 (making a similar market-segmentation point).
Based upon the above analysis, I asked Jae, “What’s the best long-term strategy for these firms?” Jae replied: “First, professionalize your management. Second, optimize your operating model—because you need to produce quality and consistency at scale and pace. By the way, you need to do it in that order.”
Note that Jae’s advice applies to more than 80% of the large law firm market. Further, implicit in her advice is the need to transition from a confederation model, which was the subject of Part II (332) of this series, to an actual firm that develops and follows a unified strategy.
Obviously, this is a profoundly rich and important topic. Section 1 of this post is a concrete case study of exactly what Jae is talking about. Section 2 is a candid discussion about “Everybody Else” economics. For most of us, it’s the most important discussion we’ve never had.
1. Start with an example
An ideal example of a well-played Everybody Else hand comes from Week 4 of my Law Firms class, which featured Gene D’Aversa, Senior Director Knowledge Management &Technology Innovation at Husch Blackwell, and Gavin McGrane, CEO and Co-Founder of PacerPro.
The specific topic of Week 4 was the role of allied professionals in the law firms of the future. Yet, in the video I made and posted in preparation for class, I made a much stronger claim: the most dynamic legal service organizations of the future will have work environments in which lawyers collaborate as peers with legal professionals with expertise in various adjacent fields (data, process, technology, design, business operations). The goal of this collaboration is to build systems that can deliver better legal outcomes faster at a lower per-unit cost. Stated plainly, these systems significantly improve legal productivity, and therefore are a type of firm-specific capital that is a source of significant competitive advantage.
The majority of what was discussed during my Week 4 class was what Gene and his Husch Blackwell colleagues have done to broaden and deepen the firm’s mass torts and product liability work (an incredible story). Under Jae’s rubric, this is the optimization of the operating model for quality, cost, and pace. However, in my follow-up research for this post, I learned that Husch Blackwell is several years down the pathway of professionalizing its management (the first prong of Jae’s strategy), so let’s start there.
A. Professionalization of Husch Blackwell management
In early 2008, the St Louis-based firm of Husch & Eppenberger (ranked #136 in the NLJ 350) merged with Kansas City-based Blackwell Sanders (ranked #138). The leaders of the two firms believed that they had put together a merger of equals, hence the firm’s name was decided by a flip of a coin. According to news reports, “Husch won the toss.” See “Merged law firm will be called Husch Blackwell Sanders,” Kansas City Bus Journal, Jan 3, 2008 (quoting new firm co-chair David Fenley).
The new combined firm, however, was not done growing. Six months later, Husch Blackwell merged with Welsh & Katz, Ltd, a 45-lawyer Chicago-based intellectual property firm where Gene D’Aversa worked as Director of IT. In 2013, the firm merged with 65-lawyer Brown McCarroll, a Texas-based firm that added depth in healthcare, real estate, and energy practices. See Jess Krochtengel, “Husch Blackwell Enters Texas With Brown McCarroll Merger,” Law360, June 19, 2013. In 2016, the firm merged with Whyte Hirschboeck Dudek, a Wisconsin-based regional firm with approximately 140 lawyers. See Kathleen Gallagher, “Whyte Hirschboeck Dudek law firm to combine with Husch Blackwell,” Milwaukee Journal Sentinal, Apr 29, 2016.
Two things are noteworthy about the merger with Whyte Hirschboeck. First, Whyte Hirschboeck had been actively pursuing the idea of a merger for a couple of years, holding discussions with approximately 30 firms. This suggests that the decision was the product of a reasoned assessment of the firm’s position in a changing market. Second, the CEO leading those discussions was Paul Eberle, an accomplished business professional with no law degree.
In fact, Eberle had served as Whyte Hirschboeck CEO since 2009. At the time he was hired, he quipped to the local press, “I’m not an attorney, but I do know how to run a successful and growing business, which I’ve done for the better part of my life.” John Schmid, “Whyte Hirschboeck names Eberle chief executive,” Milwaukee Journal Sentinal, Oct 14, 2009. Prior to taking the reins as CEO, Eberle founded and served as president of Milwaukee-based Capital Data Inc, a hardware, software, and technology services firm with middle-market clients, including some in the Fortune 1000. At the time Eberle sold his interest, Capital Data had approximately $25 million in annual revenue. See “Capital Data, Inc,” BizTimes, Sept 15, 2006.
After the merger, Eberle became part of Husch Blackwell’s senior leadership team, including serving on the firm’s Executive Board. 18 months later, Eberle was elected to a three-year term as CEO of the firm, replacing Greg Smith, a Husch Blackwell partner and real estate lawyer, who moved to the position of chairman. See Molly Dill, “Paul Eberle elected CEO of Husch Blackwell,” Milwaukee Journal Sentinal, Aug 15, 2017.
Apparently, things have gone well. In anticipation of Eberle stepping down in 2024, the firm has publicly announced a search for its next CEO. A recent article in the legal press notes that “because Ebere’s tenure was such a success, the partnership is looking specifically for a business professional to succeed him.” A spokesperson for the firm noted that “[a] JD degree won’t be held against any candidate but it is certainly not a requirement.” Patrick Smith, “As Husch Executive Plans Exit, Law Firm Seeks New Business-First CEO,” Law.com, Sept 27, 2022.
For our purposes, however, the interesting story is not Paul Eberle’s professional credentials, but instead, back to Jae Um’s two-pronged strategy, what would happen if a non-elite AmLaw 100 firm (1) professionalized its management, and (2) began the journey of optimizing its operating model?
As discussed below, it appears that Husch Blackwell has been walking down this road for several years, including the pre-Eberle era.
B. Optmization of the operating model
The core data point for this case study is the work that Gene D’Aversa and his team have done with Husch Blackwell partners J.Y. Miller, Joe Kilpatrick, and Jen Dlugosz, who all specialize in toxic tort and products liability defense work, including the management of large portfolios of asbestos litigation on behalf of some of the world’s largest corporations.
As a “data point” case study, it’s critically important to emphasize that Husch Blackwell does cutting-edge work in many practice areas, sectors, and geographies and that what is presented here is one practice-specific example of optimization done at a world-class level. What is noteworthy is (1) the firm’s ability to stand up an immensely sophisticated and cost-effective solution to an industry-level problem, and (2) how that learning, know-how, and multidisciplinary talent is an asset of the firm that can be used to solve problems in other areas of law for other clients, thus giving the firm a source of firm-specific capital. See Part II (332) (discussing the value of firm-specific capital as a source of competitive advantage).
One of the mass tort team’s biggest career wins was architecting a national coordinating counsel model for Monsanto to handle its sprawling, voluminous asbestos litigation. At the time, the company had a docket of 8,700 cases being litigated by 17 different firms. The innovative engagement with Monsanto was enabled by an earlier initiative at Husch, which reorganized the firm along industry lines and scuttled the system of origination credits that stifled partner collaboration. The new system was a series of KPIs designed to align lawyer and staff effort with the achievement of business objectives and outcomes valued by clients. In Monsanto’s case, they wanted to reduce the number of active asbestos cases and the overall per-case cost (both legal work and indemnity).
Husch Blackwell and Monsanto eventually agreed to a fixed-fee portfolio arrangement in which Husch Blackwell took over active management of all of Monsanto’s asbestos litigation, including the supervision of local counsel law firms. As part of this initiative, the firm used historical data to build a risk profile model with more than 100 variables that could predict likely outcomes, thus enabling the firm to efficiently select the best pathways to resolution. Husch Blackwell’s IT team, led by Gene, designed an electronic knowledge management platform to harness and share the collective work product of local counsel. They also built an electronic billing platform that enabled invoice reviewers to ensure that specific activities are within the scope of individual case plans.
Through its innovative national coordinating counsel model, Miller and his Husch colleagues were able to reduce the number of Monsanto’s asbestos cases by 53%. Per case indemnity also declined by 30%. Not surprisingly, this initiative earned the firm a 2018 ACC Value Champion Award. See Jennifer J. Salopek, “Multifaceted Partnership Shares Knowledge, Reduces Cost and Effort,” Association of Corporate Counsel.
What Gene D’Aversa shared with my class was a 2.0 version of Husch Blackwell’s national coordinating counsel model, which was necessitated by the addition of new clients. Basically, upon learning that the firm was about to onboard significant asbestos litigation for SPX Corporation, Gene’s team was charged with designing, building, and operating a workflow that simplified and automated all of the administrative tasks that stood between a new case being filed and a Husch Blackwell attorney being able to make an informed decision on how to best manage the case.
To illustrate what the allied professionals at Husch were doing, I asked Gene to show my students “before” and “after” process maps of the initial phases of a general dispute case. Below is a stylized example of the “before” process:
At a practical level, there is a large amount of administrative work, including a conflicts check, that needs to be done before an attorney can open a new matter and start making legal judgments. In fact, the bright gold box near the center of the map is what is going on in the mind of the lead attorney as they review the matter for the first time — and, in the “before” map, it’s not a formal part of the process.
In the case of SPX, however, the typical billable hour incentive structure does not apply. Specifically, virtually all of the above process map reflects costly overhead that the firm would like to eliminate, as profit becomes a function of getting a good outcome as efficiently as possible.
Below is a stylized example of a general dispute workflow after Gene and his team of developers, working with lawyers and litigation staff involved in these types of cases, redesigned the process.
Note the little red gear at the second step of the process, which is a series of bots that automate (1) processing incoming files, (2) requesting a conflicts check, (3) populating the database (HB Vault) used by the case team, (4) creating a workspace in NetDocs, which is the firm’s document management system, (5) notifying the docketing team so response dates are set, and (6) a settlement document is created and saved to the workspace.
After the robots are done, most of what remains is legal work performed by lawyers, all of it directed toward generating the greatest return on each defense investment. Probably the most important and tangible asset created by Gene and his team is the ever-growing database of facts and variables connected to Husch Blackwell’s work as national coordinating counsel. Because of the workflow set up by Gene and his team, including bot-enabled automation, the data flowing in (including data on federal court cases from PacerPro) are clean and normalized on an ongoing, real-time basis, which is exactly what is needed to make sophisticated risk profile calculations or calculate progress against client goals for early resolution or declining indemnity costs.
Below is a screenshot of the HB Vault interface:
It’s noteworthy that Husch Blackwell’s work on behalf of SPX Corporation earned them CLOC’s 2020 Legal Innovation in Operations (LIO) Award. See “2020 LIO Project Recipient: Husch Blackwell,” CLOC, Dec 2, 2021. Per the CLOC write-up, below are the key metrics that the firm achieved for their client, SPX Corporation.
|Year||Open Claim Inventory||Defense Spend||Indemnity Spend|
Yet, winning ACC and CLOC awards has not been the primary payoff to Husch Blackwell. Instead, the client team has attracted a lot more asbestos litigation work. Frankly, because of the process improvement and automation baked into the firm’s toxic tort workflow, it’s become extremely difficult for other firms to compete with Husch Blackwell’s multidisciplinary national coordinating counsel model. Internally, this team has been renamed the Innovat Alliance and is now one of the largest client teams, as measured by lawyers and professional staff, in the firm’s history.
A second-order effect of this type of process-driven litigation is that it may work to at least the partial benefit of injured parties, enabling them to collect their damage award sooner.
For example, in a recent article in the legal press, Lisa Oberg, another Husch Blackwell partner who focuses on asbestos litigation, recounted the stereotypical example of a tort case that settles on the steps of the courthouse after months or years of pre-trial legal work. Oberg points out that, in her experience, both asbestos defendants and insurers would prefer an earlier resolution. She also notes that decades of experience in resolving cases have revealed that asbestos defendants and insurers have much to gain “from resolving meritorious claims as early in the litigation process as possible.” See Lisa Oberg, “Resolving Asbestos Suits Faster in the Pandemic and Beyond,” Law360, Nov 9, 2021.
This requires building a system that can cost-effectively and efficiently take in claimant-specific information necessary to evaluate timing, product exposure, mitigating factors, etc., and the corresponding damages. And that’s exactly what Husch Blackwell has done.
In a follow-up phone call with J.Y. Miller, I learned something that appears to be strong market validation of Husch Blackwell’s efforts to optimize its operating model (prong two of Jae Um’s strategy for Everybody Else firms). Among companies with large asbestos exposure, claims need to be carefully monitored and professionally managed, as it’s not uncommon for a single case to result in a multi-million dollar judgment. Yet, a second major wrinkle is that the best actuarial estimates predict liability to persist until 2057, see Husch Blackwell, “Asbestos Litigation Information Sheet,” (Sept 2021), which may be outside the window of many companies’ insurance coverage. Some private equity companies view these large looming future liabilities as a business opportunity in which they receive a large upfront cash payment in exchange for assuming all legacy liabilities. Husch Blackwell’s process and tech-enabled approach appears to be a highly credible way to manage and wind down this risk.
C. The road to firm-specific capital
Harkening back to an important concept discussed in Part II (332), Husch Blackwell’s Innovat Alliance is a new type of firm-specific capital — that is, J.Y. Miller and his 100+ lawyer team rely upon a sophisticated data, process, and technology infrastructure that is not available to them if they move to another firm. Conversely, by sharing clients and collaborating with each other and various key allied professionals, they can maximize the value of their particular legal expertise.
During the course of this case study, it became obvious that the foundational elements of several Husch Blackwell modernization efforts significantly pre-dated Paul Eberle and that Eberle (a pure business professional) becoming CEO was more the next logical step in an ongoing evolution than a commitment to something new.
For example, the firm’s realignments into industry groups and the restructuring of the firm’s compensation model—away from origination credit and toward clients’ goals and objectives—was an initiative that began when Greg Smith and Maurice Watson, two longtime partners, served as the firm’s CEO and Chair. (With Eberle’s promotion to CEO in 2018, Smith moved into the Chairperson role.)
Recalling that time period, J.Y. Miller told me that the most important innovation at the firm was the orientation of the firm into strategic business units with a common industry focus. “The idea was to get transactional lawyers, litigators, and regulatory lawyers to collaborate with one another in service of better client solutions.” Yet, crucially that required a revamping of the compensation away from the origination and in favor system that rewarded sharing and the achievement of client outcomes. “Everything we’ve built since then flows from those decisions,” including all the initiatives discussed in this case study.
A key but also reassuring throughline in the Husch Blackwell story is how much the firm has leveraged existing homegrown talent, particularly in the allied professional ranks. In brief, you can go a long way by giving good people the resources they need to do challenging work that has strategic value to the firm—and in most law firms, there’s no shortage of good people.
For example, another person credited for getting Gene D’Aversa and this team the resources needed is the firm’s Chief Operating Officer, Bret Chapman, who originally joined the firm in 2007 as Chief Information Officer. Bret has an MBA and formerly worked as a Managing Consultant at Baker Robbins (now HBR), an IT firm with deep roots in the legal industry. The firm’s current Chief Information Officer (and Gene D’Aversa’s boss) is Blake Rooney, who joined the firm in 2006, serving as the firm’s Director of IT. Rooney, who also has an MBA, formerly worked as a Senior Network Engineer at Ernest & Young.
A third example is Kevin Bielawski, the firm’s Director of Legal Operations, who worked shoulder-to-shoulder with Gene and his team on the Monsanto and SPX projects. Kevin, who also has an MBA and certifications in project management and pricing, originally joined the firm (then Blackwell Sanders) in 2002. Although Kevin left briefly for stints at other professional service firms (Big Four and a competitor law firm), both times he boomeranged back, preferring the culture and resources he had available at Husch Blackwell. Finally, Gene D’Aversa has literally been with the same employer since 1993, when he was 18 years old, albeit the name on the door has changed.
With literally decades of continuity with business professionals with expertise in technology and process, it was probably easier for Husch Blackwell to move to a model in which these folks made major investment decisions in both technology and personnel. Stated another way, the professionalization of Husch Blackwell’s management (prong one of Jae Um’s strategy) occurred organically over a period of years. It was enabled by years of accumulated trust and credibility. Once in place, however, optimizing the operating model (prong two) was something that these business professionals were extremely well qualified to do.
There’s an obvious lesson here: If you want 21st-century firm-specific capital, you need to treat your people — all your people, not just the lawyers — with respect. Otherwise, they won’t stick around to build the complex systems that, in the years to come, will be a source of significant competitive advantage. For some law firms, this culture shift is going to be much more difficult than the process, data, or technology.
Finally, it is worth noting that this type of firm-specific capital is not cheap, as it requires professional management combined with investments in the operating model. For my class, I asked Gene to share an organizational chart that summarized the number and type of allied professionals working on his team. In total, Gene supervises 24 professionals. Below are some of their titles:
|Sr Manager, App Developer & Bus Analysis||Enterprise App Mgr||Manager—Process Improvement & Automation|
|Manager — App Development||Enterprise App Team Lead||Sr Proj Manager (2)|
|App Development Architect||Enterprise Software Admin (2)||Business Analyst, KM (2)|
|UI/UX Designer & Developer||Database Administer||Sr Automation Developer|
|Sr App Developer||Senior Sharepoint Analyst||Robotics Engineer|
|App Developer (3)||Sharepoint Analyst||Innovation Tech Managers|
Although these are not lawyer jobs, they are certainly legal jobs. Fully loaded, this is a multi-million dollar per-year investment in making lawyers better at their jobs and more valuable to clients. How many legaltech companies have the funding for this level of technical talent? At Husch Blackwell, a professional business manager is responsible for green-lighting (or not) this budget. In other firms, however, particularly a confederation described in Part II (332), a committee of partners would struggle to understand the ROI and would be anxious to get back to their desks to respond to clients. This management structure is why so many law firms are slow to innovate.
Gene’s team is not an island, as there are several other teams of allied professionals at Husch Blackwell. For example, under CIO Blake Rooney, there’s a fairly large team focused on financial systems and data science. Obviously, this team was important to the firm’s Innovat Alliance asbestos work. But Blake also related examples of DEI work connected to the firm’s talent management and ad hoc projects that have solved significant client business problems connected to the firm’s legal work. On this front, Blake offered the example of market analysis of retail stores that was necessary to obtain more rapid FTC antitrust clearance. “As lawyers discover the team’s capabilities,” noted Rooney, “there’s no shortage of new use cases.”
In other verticals, Rooney also supervises a significant number of professionals connected to competitive intelligence, traditional library research, and internal training and development. In his role as Director of Legal Operations, Kevin Bielawski supervises other allied professionals connected to client project management and pricing. Kevin reports to the firm Chief Client Officer, Angela Quinn, who has been with the firm for 22 years, starting as a lawyer (and becoming a partner) but transitioning to legal operations in 2012.
Although the optimization strategy at Husch Blackwell model is well underway, it has been built (especially at the top) by and with business professionals who have been with the firm for a very long time.
2. “Everybody Else” economics
One of the enormous advantages of doing these case studies in the context of a law school class is that I get to see the motivations and values of law students before systems of hierarchy and prestige begin to subtly challenge and, in some cases, reshaped their sense of what’s important.
Indeed, when it comes to law firms and the modern legal services market, the vast majority of law students really do sit behind a Rawlsian veil of ignorance. As a result, how they react to new information gives me a refreshing glimpse at what ought to matter as one plans one’s life.
A good example is a deeper dive into BigLaw. Every student entering law school has heard of BigLaw because so much of the pre-law culture points to it as the fastest, most direct route to the repayment of loans, financial security, and work experience that opens other doors. But beyond that, BigLaw is largely a monolith.
For students in my Law Firms class, that changed with Jae Um’s “Kings of the Hill” article (American Lawyer, May 2022), which broke down the corporate law market into finer gradations based on the English football league system. Although they knew about “soccer” before this class, it was surprising to them that it was organized into a pyramid of leagues and that the highest-ranked firms make the most money, thus making them, in the eyes of some, more prestigious and desirable.
As lawyers and humans, how much we care about something is often affected by how much our peers care. This is the psychological phenomenon of social proof. It’s not something that’s rational or coordinated. It also suggests that hierarchies of prestige are socially constructed and put us at risk of making bad life decisions. Cf Post 082 (discussing dilemmas created for lawyers who go for prestige and money).
As discussed in Part I (330), during the first week of my Law Firms class, I asked my students a series of short, simple questions about what they want out of their legal careers. In terms of geographic location and work-life balance, very few preferences tracked the profile of a Premier or Championship League firm. In addition, the single most important factor to my students (selected by 90%) was the need “to respect my peers and the place I work.”
Sticking with Jae’s soccer metaphor, below is a weighted-average breakdown of the remuneration of law firm partners who play in this pyramid of leagues. (Note that Jae’s original analysis was limited to the AmLaw 100; the table below includes the AmLaw 101-200, since the data are readily available.)
|League||Equity Partners||% of AmLaw 200||Profits Per Equity Partner|
|Everybody Else (in AmLaw 100)||12,104||39.5%||$1.5 million|
|Everybody Else (AmLaw 101-200)||9,369||30.6%||$966,000|
Obviously, the average incomes of all these equity partners, even those in the “lowest” leagues, are extraordinarily high, at least compared to the aspirations of most young people who come to law school. Yet, over the course of one’s career, money can become the way to keep score in an all-consuming tournament.
Fortunately, this class helps me (and I hope others) remember that behind the veil of ignorance, the most important thing is to respect our peers and the values of our organization. If we find that—and make Everybody Else money, or even a fraction of it—we’re living a rich life.
What I found heartening about the Husch Blackwell case study is that many years ago, the senior leadership of the firm made a strategic decision to restructure itself so that lawyers could work collaboratively in the best interests of clients. This is really nothing more than scaling fiduciary duty so that the internal incentives of lawyers don’t conflict with one another. That said, it’s extraordinarily hard to do well because it’s time-consuming and requires the building and refinement of new systems. See Randall Kiser, American Law Firms In Transition: Trends, Threats, and Strategies ch 7-8 (2019) (discussing the practices and systems necessary for law firms to effectively compete as a firm for clients and talent).
Once put in place, however, the new approach generates its own forward momentum. Thus, Gene D’Aversa’s team grew organically in the course of solving client problems. I would posit, however, that this is the exact type of environment that many of my students, and students at other law schools, are looking for.
According to the feedback I collected from my class, one of the most memorable topics of Gene’s presentation was the concept of capacity management, which is finding ways, typically through data, process, and technology, to allocate resources in ways that increase throughput and avoid strain during periods of peak demand. Basically, conserve the effort of your humans, because their time is the system’s most constrained and expensive resource. My students understood that this insight was key to what they wanted out of their careers.
True professionals invest in the betterment of their profession. Many thanks to nearly a dozen true professionals at Husch Blackwell for their willingness to participate in this case study.