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Corporate clients have traditionally turned to the nation’s largest firms when they needed outside legal help. But in today’s economic environment, less can be more. Small firms can offer speed, economy, flexibility and personal service — and many corporations are taking notice. How can your small firm attract and keep corporate clients? For starters, corporations are no longer operating on autopilot when it comes to selecting a firm. Michael Rynowecer, president of BTI Consulting Group Inc. in Boston, says Fortune 1000 companies are increasingly willing to try smaller firms. “It’s related to the underlying dissatisfaction with the costs and level of service of larger firms,” he says. For its 2004 report on the legal services industry, BTI interviewed 180 in-house counsel at Fortune 1000 companies and found that seven out of 10 do not recommend their primary law firm to peers who may be looking to hire a firm. But while cost is a factor that can help a firm displace the competition, it’s rarely enough. Firms must build relationships, demonstrate substantive expertise and invest in technology before they will attract the attention of corporate counsel. A firm must show that it can make a real difference, especially when it comes to providing service. That’s particularly the case given that the old adage that “clients don’t hire firms, they hire individual lawyers” remains an inescapable truth. It can be difficult to get noticed if there is a longstanding relationship that binds the client to a firm. Many general counsel who hire small firms have worked with the attorneys before — often at their previous, and usually larger, firm. As a result, the GCs know what they’re getting in terms of style, work ethic and compatibility. Four years ago, Bruce Fitzgerald was general counsel at Houston-based Union Carbide Corp. and in the midst of trying to close a nearly $12 billion merger with Dow Chemical Co. The deal was proceeding through the necessary regulatory clearances when Nathan Eimer, who at the time was the Sidley & Austin partner in charge of the Union Carbide account, left the firm and took 10 lawyers with him to create Eimer Stahl Klevorn & Solberg, a litigation boutique. Suddenly, Fitzgerald had a decision to make. He had been working with Eimer since 1978, and Fitzgerald needed someone he could absolutely trust given the pending deal’s “bet the company” implication. Ultimately he retained Eimer’s new Chicago-based firm to handle the antitrust implications of the merger. “We talked about whether he could marshal the extra support he needed, partnering with other firms or anybody else,” says Fitzgerald, who is now retired. Fitzgerald knew that hiring a small firm can come back to haunt a GC. “I always figured they hired me to run the law department and not cover my butt,” he says. “I just decided this was the person I had the most faith in to do the job.” Relying on partners who move over from big firms with their book of business is not an unusual path for boutiques. Eimer also brought over CITGO Petroleum Corp. and paper-giant Kimberly-Clark Corp., among others. But how do smaller firms keep such large companies happy and attract new clients at the same time? Undoubtedly, a big plus is the lower billing rates that smaller firms often offer to clients. At the time of his firm’s launch, Eimer reportedly dropped his hourly billing rate to $395, approximately $100 less than the rate he had been charging at Sidley. Within the first few months of operation, the firm also invested nearly $2 million in technology. “We realized that we were going to depend on technology to increase the level of service we could provide,” says Eimer. But the firm’s technology spending is the exception to the rule. “We are very conservative about how we build our firm, and the last thing we want to do is to go too far too fast,” he says. “Part of our business model is to be debt-free and live only off the income of the firm.” To aid in that effort, the firm uses temporary lawyers when a new client comes aboard. The firm has 22 attorneys, but Eimer says the firm has staffed up to as many as 60 lawyers through temporary hiring, bringing the head count back down once the heightened workload demands had been met. The firm also has taken advantage of what Eimer calls “an enormous resource that’s often overlooked” — professors from local law schools who are retained to offer insights and expertise on specific matters that range from criminal law to bankruptcy issues. Eimer declines to say how much these professors bill for their time. Douglas Ellenoff of Ellenoff, Grossman & Schole in New York City, isn’t interested in fighting over the Fortune 500. Instead, he focuses on smaller corporate clients — all of which generate several hundred million dollars’ worth of business — that his 20-lawyer firm is well suited to service. Because a large part of his practice involves business transactions and corporate financings, it’s been easy for corporate clients to try the firm by offering it a discrete portion of their business. “They sample you and see if they’re going to give you more,” says Ellenoff. Part of the firm’s attraction is its pricing. “We are going to give them a relatively large discount from what they would pay at the largest firms,” which estimates at 30 percent to 40 percent off of large-firm rates. Lower costs are particularly important to Ellenoff’s price-sensitive real estate client base. “Our real estate development firms are owned by individuals rather than public shareholders,” he says. “Consequently, they tend to be more careful how they spend money on outside professionals.” Rath, Young and Pignatelli, of Concord, New Hampshire, has grown from four lawyers to 30 lawyers since its founding in 1987. While the firm’s expansion has been slow and steady, it has still had to continually juggle the firm’s workload and the necessity for new hires. In the late 1980s, the largest firms in the state had fewer than 40 lawyers, so even firms of five or six lawyers tried to cover general practice areas, says partner Sherilyn Burnett Young. With those statistics in mind, the firm bet that it could best serve its clients by positioning itself as a full-service practice. Like a shopping mall developer, Young says the firm started out by trying to identify key clients that could function as the “department store,” along with drawing other clients to the firm. But the firm’s first big representation created a problem. A large 1988 bankruptcy proceeding helped the firm’s billings rise by 50 percent — climbing from about $800,000 to about $1.2 million. But the nature of the matter also put the firm in a precarious position. Rath Young had to ramp up to meet the demands of a large case and, at the same time, continue to address the needs of its other clients. It also had to recognize that the bankruptcy-related reorganization might not be successful, resulting in the client’s sudden disappearance. The firm responded by initially hiring two additional lawyers. But it also asked everyone to work longer hours, at least temporarily. To this day, the firm prefers a wait-and-see attitude before it adds new permanent lawyers to help service new clients. This approach recently paid off when a utility client bid on the sale of the Seabrook nuclear power plant. “[It was] a lot of work in a short burst of time. But in that case the client did not win the bid, so the matter ended rather abruptly,” says Young. The firm didn’t add any staff, and everyone just worked harder to get through it.” Small firms, meanwhile, have found several ways to keep their fee structures attractive to corporate clients. Billing rates at Zeichner Ellman & Krause, a 30-lawyer firm in New York City, are kept in check by several measures — among them, hiring seasoned associates, paying them a bit less than larger firms would and not going overboard with its office decor. The firm passes along its cost savings to its clients. The top rate for the firm’s partners is $445 per hour. Associates are billing at about $250 per hour. Hiring decisions and their associated costs are key to the firm’s management approach. The partners look for attorneys with a few years of experience to appropriately serve such large clients as Bear Stearns & Co., Citigroup Inc. and a number of its affiliates. “We have to work a lot harder to find good attorneys,” says partner Stuart Krause. “We probably interview associates at greater depth and over a longer period of time than large firms. We use recruiters, word of mouth and media ads. But the main point is that the applicant sees many people.” This includes many of the firm’s 15 partners and even a few of the 15 associates. The firm also keeps a sharp eye on office-related expenses. In other words, atmosphere isn’t everything. “We’re probably a little more careful about expenses than a big firm,” says partner Mark Zeichner. “Our offices, while pretty nice, are not as opulent” as others. Some of the furniture was bought secondhand. The firm’s conference room boasts a new table. But many of the lawyers’ desks came from a bank that was downsizing. Curt Schleier is a freelance writer based in River Vale, New Jersey.

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