Leaders say shrinking firms are more efficient

Thirteen firms on Missouri Lawyers Weekly’s MOney 20 rankings were operating with fewer attorneys in 2010.

But less can mean more. Law firm leaders say the changes last year resulted in more productive offices.

The firms cumulatively shrank by about 145 attorney positions in 2010, according to a comparison of the number of full-time equivalent lawyers the previous year. Missouri offices most keenly felt some of the cuts.

FTE numbers take into account how long an attorney has been at a law firm and how many hours he or she works. The cuts span the largest to the smaller firms on the MOney 20 rankings, from a 10 percent drop at now 908-attorney Bryan Cave to a 9.3 percent drop at 49-attorney Baker Sterchi Cowden & Rice.

Shook, Hardy & Bacon, Husch Blackwell and Thompson Coburn all showed larger declines in Missouri attorney positions than the total number of cuts firmwide. SNR Denton showed a majority of its 22-attorney drop — 12 attorneys — in Missouri.

Although leaders from two firms reported a limited number of layoffs in 2010, six firm leaders attribute their firms’ smaller size mostly to natural attrition and less aggressive hiring.

Law firm leaders say the number of lawyers they have now balances their work, leading to more efficient offices. Increases in revenue per lawyer and profits per partner confirm it.

Revenue per lawyer places a dollar value on the average production of an attorney. It’s viewed by law firm leaders as the most reliable indicator of a firm’s financial health, in part because it can’t be tweaked.

St. Louis-based Bryan Cave’s headcount drop of about 100 attorneys was because of exits following a merger and natural attrition, such as partners leaving to work for clients as in-house attorneys, said Frank Wolff, operations partner.

The firm meanwhile increased its revenue per lawyer by 7.2 percent and profits per equity partner by nearly 13 percent. Based on these indicators and the firm’s increase in average compensation for all partners, Bryan Cave had one of its best years in its history, Wolff said.

“We achieved greater efficiency and as a result we were able to improve our financial performance,” Wolff said.

The outlook is the same at Kansas City-based Stinson Morrison Hecker, Missouri’s sixth-highest grossing firm. The firm had 10 fewer attorneys in 2010 than a year before, while its profits per partner jumped by 7.4 percent and revenue per lawyer increased by 2.3 percent.

In the past two years, the firm has slightly decreased headcount and expenses, said Mark Hinderks, managing partner.

“The conclusion is we actually became more efficient,” he said.

Still, Hinderks said, cutting alone won’t work in the long term.

“We can’t save ourselves to prosperity,” he said. “We’re going to have to grow the top line by adding lawyers and adding depth of expertise.”

Thompson Coburn’s hiring didn’t keep pace with “ordinary course” exits, said Chairman Tom Minogue. 

The fact that the St. Louis headquarters lost more attorneys than the firm’s other offices has nothing to do with the firm’s view of the city as a growth market, Minogue said. It likely has more to do with the larger number of attorneys at the St. Louis office, he said.

SNR Denton’s St. Louis office had ordinary attrition, Jennifer Marler, managing partner of the office, said in a joint April interview with John Snyder, who holds the same title for the Kansas City office. The number of attorneys sat at its usual level of 48 in St. Louis, and Kansas City is steady about 50 to 52 lawyers, Snyder said.

Staff writer Heather Cole contributed to this story.