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For most of the past decade, Ballard Spahr Andrews & Ingersoll has been widely viewed as the “it” firm in Philadelphia. After all, it has been the firm of Edward G. Rendell, now Pennsylvania governor, and David L. Cohen, now a top executive at Comcast. While Ballard Spahr’s profits per partner, revenue per lawyer or associate bonuses are not as generous as those of most of its local competitors, it has remained a firm of choice for some of Philadelphia’s top lateral hires and elite law school graduates. That good fortune has been attributed to its stable of high-profile talent, unmatched political connections and reputation for having an excellent quality of life. The firm has rarely used law firm consultants, has never had a top-level marketing professional, and has avoided the temptation to open offices in some other big cities. Much of that appears to be changing, as the firm has decided to shake up its management structure and strategic plan to have more of a bottom-line focus. But change often creates uneasiness at law firms, and Ballard Spahr is no exception. The firm did not promote any Philadelphia associates to partner this year. And some legal headhunters say they are seeing Ballard Spahr associate resumes crossing their desks for the first time in recent memory. Ballard Spahr chairman Arthur Makadon announced last week that longtime partners Robert Gerlach and Mark Stewart would assume newly created leadership positions. Gerlach will serve as management partner – not to be confused with managing partner – and will focus on operational issues such as profitability and revenues per lawyer. Stewart will serve as strategic planning partner and will spearhead initiatives designed to grow the capacity of the firm’s current offices, establish new offices and refine the firm’s strategic planning. Along with Makadon and finance partner Tom Eshelman, Gerlach and Stewart will be implementing a new management philosophy. “We are functioning well,” Makadon said. “But if all you do is continue to concentrate on functioning well, then you won’t be functioning well in the long run. So we are going to sharpen our focus.” Both Gerlach and Stewart are Ballard Spahr “lifers” who joined the firm out of University of Pennsyl-vania Law School. Gerlach, with Ballard since 1974, is a partner in the business and finance department who concentrates on public utility law, and corporate and public finance. Stewart is a commercial litigator who joined Ballard in 1983. Makadon said Gerlach would be concentrating on financials, specifically revenue per lawyer. Makadon said he believes RPL is the best yardstick for determining a firm’s economic growth because it cannot be fudged, like profits per partner. He said Gerlach would assess how each practice area and office functions and see how bottom-line numbers could be improved. Ballard Spahr finished just outside last year’s edition of AmLaw 100, in which firms are ranked according to 2002 gross revenue. The firm was in 101st place. The firm’s revenue per lawyer of $420,000 ranked be-hind seven other Philadelphia-based firms – Morgan Lewis & Bockius ($530,000), Dechert ($525,000), Blank Rome ($495,000), Duane Morris ($485,000), Drinker Biddle & Reath ($470,000), Wolf Block Schorr & Solis-Cohen ($455,000) and Fox Rothschild ($430,000). Similarly, Ballard Spahr finished ninth out of the 12 Philadelphia firms on the list in profits per partner, with $360,000. Ballard Spahr’s relatively low PPP has been traditionally explained as a function of the firm’s decision to eschew a two-tiered partnership structure. Many of its competitors, on the other hand, have non-equity partnership. Furthermore, Ballard Spahr has not been one of the local firms linked to de-equitizing partners. Many firms have been accused of using non-equity partnership and the de-equitization of existing partners to artificially pump up their profits-per-equity-partner numbers. But now Ballard Spahr is looking at ways for its RPL and PPP to be worthy of the firm’s reputation for quality work, lawyers and lifestyle. One move that sparked some internal controversy was the decision this year not to promote any associates to partner. One source familiar with the situation said associates are frustrated over the apparent new partnership criteria. Some partners are frustrated because they had senior associates who they thought deserved to make partner but didn’t and are now afraid of losing them. “The thing about Ballard is that while bonuses were always lower than some other firms’ in town, the quality of life was really strong, and that kind of made up for it,” the source said. “Now I think they’re going to have some problems, because associates are upset. I think when the firm comes out with something that defines how one makes partner at Ballard, things will simmer down. It won’t help those senior associates [who didn't make partner], but I think lawyers tend not to function well when something as important as that is not spelled out.” One Ballard Spahr associate confirmed that many associates were upset about the lack of promotions and some even left because of it. Makadon said he was unaware of any departures caused by the lack of promotions this year. He said that partner promotion decisions had never been made for reasons of personal convenience and that a few partners would complain when one of their associates doesn’t make the cut. He also said that associates are well informed of the standards for making partner and that the standards were just not vigorously applied in previous years. “We’re certainly going to be selective with whom we make a partner,” Makadon said. “We’re not creating a group of non-equity partners here, and we don’t have the luxury of using that position as some kind of way station,” he said. “We’re not as concerned about what kind of business an associate has [when being considered for partner]. We evaluate the potential they have to generate business as well as how good they are as lawyers. I think we may have deviated from those standards in recent years, but now we are merely getting back to evaluating them the way we always have.” Stewart, who will eventually have to be replaced as the firm’s hiring partner, will explore expansion opportunities within the firm’s seven existing offices – in Philadelphia, Voorhees, N.J., Wilmington, Baltimore, Washington, D.C., Denver and Salt Lake City – and will be looking at sites for new offices. Makadon said the firm could target areas such as Arizona and Nevada, where the firm’s public finance and real estate practices would fit nicely. He said there could also be opportunities in northern California and Seattle. One expansion possibility he did not mention was New York City. Aside from Pepper Hamilton, Ballard Spahr is the only one of Philadelphia’s 10 largest firms that does not have an office in Manhattan. “I just think it’s nothing but a money pit,” Makadon said. “I think it subtracts [from the bottom line] and doesn’t add. If I was a law student looking to practice in New York, I wouldn’t work for a Philadelphia firm with a New York office. I’d work for a New York firm. And second, I think that clients that want a New York firm are also going to go with the [indigenous] New York firms and not Philadelphia firms with New York offices.” As for practice areas the firm hopes to introduce or enhance, Makadon said Ballard Spahr would build on its strengths in litigation, public finance, labor and employment, business and finance, and real estate and will look to add a patent element to its intellectual property group, which now consists largely of trademark and copyright work. Ballard Spahr went on a lateral hire binge in 2001 and 2002, adding trademark partner Roberta Jacobs-Meadway, 13-attorney South Jersey firm Brandt Haughey Penberthy Lewis & Hyland, a 14-attorney labor and employment group led by Kenneth Jarin, litigator John Lavelle, labor and employment lawyers Steve Suflas and Denise Keyser, and corporate attorneys Richard Jaffe, Robert Krauss and Harvey Shapiro. Makadon, who replaced Cohen as chairman in July 2002, said the firm concentrated in 2003 on absorbing all of its new additions and made only a few minor acquisitions. Now he thinks the opportunity is ripe for more expansion. “It was important to absorb what we added, and now the timing couldn’t be better to [look for expansion opportunities] because our lawyers are happy, we have the capital, and there is a window open for some new additions.”

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