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Godwin Gruber has a simple growth strategy. Recruit only experienced attorneys and maintain an office in only one location — Dallas. In five years, the firm has expanded by more than 400 percent, from a mere 25 lawyers to 135. And, according to managing partner G. Michael Gruber, it likely will add another 25 lawyers this year. Although Godwin Gruber hired 33 laterals during 2003, it also saw an attrition rate of 17.3 percent, the highest rate among the firms responding to Texas Lawyer‘s annual Lateral Hiring Survey. The state’s 25 largest firms, as listed in Texas Lawyer‘s “100 Largest Firms in Texas” poster for 2003, were asked to complete the Lateral Hiring Survey. According to the 19 firms that participated, the numbers for 2003 show a slight improvement compared with 2002: Lateral hiring increased, the total number of attorneys at the firms increased and the attrition rate slightly decreased. Lateral hiring increased by 4 percent during 2003, for a total of 467 hires, compared with 402 hires by the same 19 firms during 2002. The total number of attorneys at the reporting firms increased by 6 percent, from 6,223 on Jan. 1, 2003, to 6,574 on Jan. 1, 2004. And the number of departing attorneys, 755 in 2003 compared with 851 in 2002, results in a slightly lower attrition rate of 11.2 percent versus the 12.7 rate for the same respondents the previous year. Godwin Gruber’s attrition rate of 17.3 percent, compared with 9.6 percent the previous year, was intentionally on the high end, Gruber says. “We did have a conscious effort last year, especially in the partnership ranks, of identifying people we didn’t think were profitable,” he says. “We really did take an approach of trying to determine who those people were and talked to them about practicing elsewhere.” The firm also had some excess capacity after settling 300,000 asbestos-related claims in a global settlement for Houston-based Halliburton Co., he says. Several attorneys were let go after the settlement, but three or four have been re-hired in the asbestos area as the firm has obtained new asbestos business, Gruber says. Except for rare situations, Godwin Gruber does not hire grads directly out of law school. “We’re finding specific clients telling us they won’t pay for first- and second-year associates,” he says. “Clients won’t pay for that training time.” Hiring laterals means budgeting for ramp-up time, he says. There’s usually a two- to three-month lag between the hiring of an experienced attorney and the firm’s return on that hire — i.e., revenue from billings. “What you do is plan to make sure you have the capital set aside to support people as they rebuild their practice” at a new firm, Gruber says. “One of the smartest things we’ve done in our growth is do it in one location and consolidate our overhead,” he says. “We are doing a good job of keeping overhead low and keeping good ratios between the number of partners and number of associates.” The firm generally maintains a ratio of two or three associates per partner, he says. And the firm expects partners to bill a minimum of 170 hours per month, which, Gruber says, is attractive to hard-working people. “It’s a certain culture, and we’re trying to find like-minded people. “ A DIFFERENT APPROACH Andrews Kurth has a different growth strategy. The Houston-based firm is expanding its presence in eight cities by hiring laterals and recent law school graduates, say David Runnels and Geoffrey Walker, partners in the Houston office who co-chair the firm’s strategic committee. The 372-attorney firm has added 200 attorneys in the past 2 1/2 years without opening any additional offices, Runnels says. The firm’s goal is to add depth to its offices in Austin, Dallas, Houston, London, Los Angeles, New York, Washington, D.C. and The Woodlands. “We are happy with the eight-city footprint that we have,” Runnels says. “Our growth strategy has been to strengthen our presence in each and every one of those markets.” The firm hired 49 laterals last year, more than double the number of laterals hired in 2002. “We get about twice as many lawyers laterally than from law schools,” Walker says. Among the 19 firms participating in the survey, Andrews Kurth hired the second largest number of laterals 29 which joined in groups of five or more. Last year’s growth included adding three such groups: nine lawyers from the business and technology group of now defunct Brobeck, Phleger & Harrison in Austin; 15 attorneys from the corporate and financial institutions team in the now defunct Dallas office of Arter & Hadden; and five patent specialists from the D.C. office of Dorsey & Whitney. “Between Brobeck and Arter & Hadden, we got 12 partners and 12 nonpartner lawyers,” Walker says. Andrews Kurth experienced an 8.3 percent attrition rate with 31 departing attorneys, a decrease from a 12 percent rate in 2002. The 8.3 percent attrition is not a concern, Runnels and Walker say. “Just in the economy at large, consultants will tell you that all institutions have to expect more departures than they did 10 to 15 years ago,” Runnels says. The real measuring stick is where the departing attorneys went, Walker says. Of those who left the firm in 2003, some went to work in-house, some to the judiciary and at least one to write a book, he notes. Rarely do attorneys leave for perceived better opportunities in competing firms, he says. “We have a substantial line-item for lateral growth in our budget, approved by the partnership every year,” Runnel says. “We strive to hire and bring people on early enough in the year to where revenues come in that fiscal year.” Walker says the firm doesn’t use a specific ratio or formula to balance the number of associates and partners. “When you bring in a group, very often the group has its own viability inherent in it,” Walker says. “It already works as a group.” Runnels and Walker say the firm will continue to build its intellectual property and technology practices and is looking at private equity and capital markets practices in the New York and D.C. markets. GROWING FAST Austin-based Brown McCarroll was the fastest-growing firm last year among the 19 who completed the survey. The firm increased its attorney count by 28.6 percent, to 161, including 51 lateral hires. Brown McCarroll’s attrition rate was 9.3 percent, a decrease from 11 percent the previous year. It also was the firm with the greatest number of laterals — 30 — joining in groups of five or more when it acquired Hilgers & Watkins in October 2003. “We started talking about the merger at the beginning of the year and it took six to seven months to do due diligence,” says Robert “Bob” Werner, managing partner. “Hilgers was a firm with practice areas we thought would complement our firm, particularly [its] commercial litigation and health-care practice,” Werner says. As a result of the acquisition, the firm is not recruiting at law schools this year. “We wanted to make sure we could integrate all the attorneys, and so we wanted to give ourselves a little bit of time to do that,” he says. Generally, the firm’s individual practice groups determine and initiate lateral growth, he says. “Someone in a practice group will suggest we need to consider a potential candidate,” Werner says. “Then that person will come in and be interviewed, always in the office where they will be hired, and sometimes in other offices, particularly if we’re dealing with a partner-level candidate.” The firm’s management committee reviews and approves nonpartner candidates. If the lateral is a partner candidate, then the hiring is approved by the partnership as a whole, he says. Lateral growth expected during 2004 would be in the areas of asbestos defense, corporate, health care and commercial litigation, Werner says. ATTRITION RATE Houston-based Vinson & Elkins decreased in size by 69 attorneys, to 775, during 2003 — the largest decrease among the firms responding to the survey. The firm made only 16 lateral hires during 2003 and saw 127 attorneys depart, for an attrition rate of 15 percent. During 2002, V&E had an attrition rate of 12.4 percent. The firm made a conscious effort in 2003 to get leaner due to a slower economy, says Kevin Lewis, V&E’s hiring partner in Houston. Routine attrition and performance reviews resulted in the size decrease, he says. “It takes us a little longer to make these moves than it does a lot of other people,” he says. “We seem to wait until there is absolutely no alternative before we try to right-size.” Other firms downsized in 2001 and 2002, Lewis says. “We went through a lot of that last year because we kept trying to see if the economy would turn sooner,” he says. “We were catching up with the rest of the market.” V&E may also have lost some lawyers due to its former relationship as leading outside firm for Enron Corp., the Houston-based energy company that filed for bankruptcy in December 2001. The firm is a defendant in shareholder securities litigation filed by disgruntled Enron stockholders in federal court in Houston. Lewis disagrees. He says attorneys chose to leave the firm because they wanted to pursue what they perceived as better opportunities, not because of negative Enron publicity. While some firms were growing or shrinking during 2003, Dallas-based Gardere Wynne Sewell held a steady course with an attorney head count of 287 (versus 286 in 2002). The firm made 33 lateral hires during the year and saw 22 lawyers depart for an attrition rate of 7.6 percent, a decrease from the 9 percent rate the previous year. The firm opened an office in Austin about a year-and-a-half ago and has been looking for people in government relations, lobbying and regulatory areas, says managing partner Stephen Good. “We also just generally have been looking for trial and corporate lawyers,” he says.
PRACTICE AREAS The following is a list of practice areas that saw the most lateral movement at 19 of Texas’ 25 largest firms in 2003. Appellate — 3 Bankruptcy — 5 Business — 12 Energy — 6 Environmental — 3 Finance — 6 Government Relations/Legislative — 6 Health Law — 2 Intellectual Property — 8 International Law — 4 Labor and Employment — 9 Litigation — 18 Other — 11 Real Estate — 5 Securities — 7 Tax — 5 Trusts and Estates — 4 Note: Twenty-five of the largest Texas firms as listed on Texas Lawyer‘s “100 Largest Firms in Texas” poster for 2003 were asked to participate in the Lateral Hiring Survey. Six of the 25 largest firms — Beirne, Maynard & Parsons; Clark, Thomas & Winters; Hughes & Luce; Jackson Walker; Jones Day Reavis & Pogue; and Strasburger & Price — declined to participate. Source: The firms

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