After five straight years of declines in profits per partner, Dorsey & Whitney looks ready to embrace change, in the form of a new management team. The Minneapolis firm’s PPP slid 8 percent in 2012, to $515,000, its lowest mark since 2006. While the firm’s gross revenue was down a more modest 3.1 percent, to $313.5 million, the falloff nonetheless erased the slight top-line gains Dorsey enjoyed in 2011. At $605,000, the firm’s revenue per lawyer was essentially flat.
While offering an optimistic take on the results, managing partner Kenneth Cutler acknowledges that Dorsey needs a rebound. "It was a disappointing year overall, but we were pleased with the fact that we continue to generate, for a middle-market firm like ours, a good RPL," says Cutler, describing RPL as the best indicator of a law firm’s ability to generate business. "But there is no question that we would like to improve all of our numbers—revenue, RPL, PPP—and that’s what our [new management] group is focused on."
That turnaround effort is just getting started. Cutler, a transactions practitioner who is a 39-year Dorsey veteran, began his tenure in January, after Marianne Short left to become chief legal officer at UnitedHealth Group, a longtime Dorsey client. When he took over as managing partner, Cutler appointed five new members to Dorsey’s eight-person management committee. The group is now working with outside consultants and firm lawyers to address everything from business development and cross-selling initiatives to putting new systems for time entry, billing, and collections in place. Late last year, the firm also hired a new CFO—the first chief financial officer with prior law firm experience Dorsey has ever had, according to Cutler.
"We had pretty much the same management committee for the last six years, and I’m not saying that [this] is better, but it’s new blood and it’s the next generation of leaders of the firm, and they bring new thoughts and ideas," says Cutler. He says that the revamped group’s effort will give Dorsey "a significant shot in the arm in the second of half of 2013 and going on into 2014."
Cutler cites a slump in transactional work as the biggest drag on Dorsey’s revenue in 2012. Though the firm saw an uptick in deal work toward the end of the year, the second half of 2012 was not as strong as expected. On the corporate front, Dorsey advised Park Nicollet Health Services on its merger with HealthPartners in a deal announced in August. By combining, the two health care companies—which had total operating revenues of approximately $4.8 billion between them in 2011—created Minnesota’s second-largest hospital system, behind the Mayo Clinic. Dorsey also handled multiple merger and acquisition transactions for longtime clients U.S. Bank and UnitedHealth last year, Cutler says.Dorsey’s total head count decreased 2.6 percent, to 517, in 2012, a drop that Cutler attributes primarily to associate attrition and smaller incoming associate classes in recent years. The size of the firm’s equity partnership declined by 1.8 percent, to 218, while its nonequity partner class grew 7.1 percent, to 45. Cutler says the shift is due to the firm’s decision a few years ago to require that all asso­ciates who are promoted to partner put in time as income partners.