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As Reed Smith Leadership Challenge Fades, Managing Partner Focuses on Economy
The Legal Intelligencer
June 10, 2009
What at first looked to be a brewing internal battle for leadership of Reed Smith seems to have been quickly nipped in the bud.
Philadelphia labor and employment partner John DiNome has decided he will no longer run against nine-year incumbent Gregory B. Jordan to serve as the firm's global managing partner and chairman of its executive team.
The now uncontested race has Jordan focusing on working through a challenging economic environment while preparing the firm to come out on the other side well-positioned to handle what he said will be fundamental changes to the legal industry.
Word first came out late last week in the Philadelphia Business Journal and Pittsburgh Business Times that DiNome wrote a lengthy memo to firm partners announcing his candidacy for the September election and laying out a number of areas in which he felt the firm was headed in the wrong direction.
According to the report, DiNome called for a more independent executive committee and said a lack of checks and balances was leading to "exorbitant capital expenditures." He said the firm was overpaying its managers and called for a greater use of alternative fee arrangements as many smaller clients look to smaller firms and lower hourly rates.
Both Jordan and DiNome had said they agreed not to talk about the election publicly, but with the race now back to being uncontested, Jordan offered some thoughts.
Jordan said he and DiNome met and realized there was some common ground between them. He said it was DiNome's decision to pull out of the race, and he will continue on at the firm as normal.
"All businesses have a lot to focus on right now so to the extent we can have maximum focus on working our way through the global slow down," the better off the firm will be, Jordan said.
Some in the legal community questioned whether DiNome, who joined Reed Smith in 1996, five years after graduating law school, would have had a shot against Jordan, who has a long history with the firm and has led Reed Smith far up the Am Law 100 chart to become the 16th largest firm in the country in terms of gross revenue.
Since Jordan came on board in 2001, Reed Smith has seen its attorney headcount grow from 600 to about 1,500 attorneys, its gross revenue rise from $268 million to $979.5 million, its revenue per lawyer move from $425,000 to $660,00 and its profits per equity partner increase from $400,000 to $940,000.
Mergers in London, Hong Kong, California and Chicago and office openings across the world have turned Reed Smith from a Pittsburgh-based firm into a much more widely known international presence.
Like many large firms in the current recession, Reed Smith was no stranger to adjusting its makeup in the face of slowing client demand. The firm has laid off more than 230 attorneys and staff since late 2008. It also shortened its summer associate program by two weeks and delayed the start of its first-year associates until January 2010. It became one of the first local firms to cut associate salaries, dropping salaries by 10 percent across most of its offices.
Reed Smith has a self-nomination process for running for managing partner, and Jordan said he had to decide whether he would run again for the term that begins in January 2010.
"I felt a responsibility during a difficult economy to continue to try to help" the firm work through a challenging time, he said of his decision to run.
Some firms have gone through leadership changes in the last year, but others in the industry have questioned "switching horses in mid-stream."
Jordan said it really depends on the firm. He said Reed Smith did pretty well last year and continues to go strong thus far in 2009.
"But this is clearly the most difficult economy any of us have practiced through and managed through," he said, adding that the range of tough decisions being made at great firms across the country are unprecedented.
Jordan said the firm is very proud of what it has accomplished over the last nine years and is focused on ensuring its success through the recession and beyond. He said the strategy will remain largely unchanged in his next three years, assuming no others look to challenge him before September -- a prospect sources have said is very unlikely. And that strategy is to position the firm to broadly service its major client relationships around the world.
"We are using a variety of strategies to not just get through the downturn but be positioned to be a long-term winner in this," Jordan said.
"We've got this geographic diversification that really helps us. We've got a practice balance that's very attractive right now."
Reed Smith has scaled back the corporate and real estate practices, and now two-thirds of the firm's attorneys globally are focusing on litigation and restructuring work, he said.
While DiNome's letter of candidacy cited the loss of work to smaller firms because of increasing rates, Jordan said the firm is actually the beneficiary of work from firms even higher priced than it is. He said many of Reed Smith's largest clients are moving more work to the firm that would have gone to firms with higher rates. The firm's largest accounts are getting bigger right now, Jordan said.
The firm is also diving deeper into the world of alternative fee arrangements and, on the other side, is aggressively managing costs, he said.
"Those are the kinds of things I think are both critical to succeeding through the downturn and in some ways they are fundamental changes that will give us a competitive advantage even after the downturn is over," Jordan said.
Jordan wouldn't comment on whether this would be his last run for a three-year term as managing partner.
