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Palo Alto, Calif.-based Gray Cary Ware & Freidenrich is retooling its management structure to free up Chairman J. Terence O’Malley to focus on strategic issues such as a merger or geographic expansion. The new structure creates a layer of managing partners to oversee the day-to-day operations of the 420-lawyer Palo Alto-based firm. The firm says the change in structure will designate managers to address the details and free up thinkers — O’Malley and two of the new managing partners — to consider the firm’s future growth. “It gives me more time for strategic issues where the presence of a chairman is needed, and a chairman can’t really do these things when you’re constantly putting out fires,” O’Malley said. The change comes at a critical time, as Gray Cary braces for what O’Malley estimates will be a 7 percent to 8 percent decline in revenues for 2002 and a 10 percent drop in profits. The firm has had the same management structure in place since the 1994 merger of Palo Alto’s Ware & Freidenrich and San Diego’s Gray, Cary, Ames & Frye. Since then, as partners started up new practice groups and the firm took on partners with new specialties, the management structure expanded into a maze of practice groups and sub-groups, many with multiple group leaders. Currently, the head of each of the firm’s eight offices and the leaders of as many practice groups run every decision past O’Malley, who is also charged with mapping out the firm’s direction. The firm’s operational divisions, like finance and human resources, also report directly to O’Malley. O’Malley said the system has worked since the merger — but it’s no way to run a larger firm, which Gray Cary hopes someday to become. Under the new system, the firm cut itself in half, lumping all of the firm’s 220 litigators into one department and an equal number of transactional lawyers into another. John Howard Clowes will head the transactions department and Marcelle Mihaila will lead litigation, while John Shuman Jr. from Palo Alto will oversee the firm’s operations. Underneath the managing partners are new practice divisions, the heads of which will be in charge of staffing, workflow and personnel in their own groups. The new structure becomes effective Jan. 1. Clowes, who is based in San Francisco, said his new role as transactions managing partner is to oversee the leaders of the corporate, real estate, patent and trademark, licensing and tax groups and help them achieve the firm’s goals. “I’m not going to dictate where the new corporate clients are coming from,” Clowes said. “But I’m going to work with the department heads to figure that out.” Clowes, who still plans to represent clients, will focus on how the five different transactional divisions should expand and on cross-selling the firm’s expertise to new and existing clients. The same goes for Mihaila, who is based in Seattle. She will work with the heads of the corporate, trade and consumer, patent, copyright and trademark and employment litigation divisions to determine which ones should expand to new geographic areas or by hiring more partners. “We need to be strategic in our growth,” Mihaila said. “All of the division and practice areas have a plan, while my job is to analyze the market.” The three new managing partners will hold their jobs indefinitely and hold seats on the firm’s executive managing committee, which the firm expanded from seven to eight members. Because the managing partners are appointed by the chairman who also serves on the committee, the firm wanted an equal number of popularly elected members. The firm had its elections last month, and the other members of the management committee, who will assume their posts Jan. 1, are Robert Brownlie, David Gross, Margaret Kavalaris and Lawrence Tannenbaum.

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