Steptoe & Johnson’s Philip West (Photo: Diego M. Radzinschi / NLJ)
With just over 400 lawyers, Steptoe & Johnson LLP is neither large nor small, not wildly profitable or struggling to get by.
For new executive committee chairman Philip West, who took the helm Jan. 1, the question now is whether being in the middle is enough. Has Steptoe found the Goldilocks sweet spot between 4,000-lawyer behemoths and specialized boutiques, or is the market for legal services making such a model increasingly untenable?
It’s not that Steptoe doesn’t have options. Last year, the firm talked to “three or four” firms about merging, West said in a lengthy interview in Steptoe’s seventh-floor conference room overlooking a swath of downtown Washington near Dupont Circle. He declined to name the would-be partners.
When it comes to a merger, West said, “It’s kind of like asking how do you feel about marriage.” That is, he said, it only works if the right partner comes along–and the firm has yet to be swept off its feet.
For West, the tax group leader and a former top international tax lawyer at the U.S. Treasury Department, the job now is to chart a course that sharpens Steptoe’s less-than-distinct brand and grows key practice areas including white collar and securities litigation, intellectual property, antitrust and lobbying. West succeeds Roger Warin, who led the firm for the past decade and oversaw the launch of new offices in New York City, Century City, Calif., Chicago and Beijing.
In many respects, Steptoe is a classic Washington firm, with strong regulatory and litigation practices–white-collar defender Reid Weingarten is the firm’s best-known lawyer–and a smaller corporate presence. Clients include Metropolitan Life Insurance Co., LG Electronics, Motorola Mobility and the Chinese government.
“To some extent, there’s a little bit of a disconnect between who we are and how we’re perceived,” West said. “I think we’re perceived as a great, high-quality, old-line firm, [but] I think the perception that we are on the cutting edge and need to be on everyone’s short list … I think we can do better.”
To accomplish that, he points to marketing and public relations. “You make sure you’re visible at every point that you can be,” he said. For the firm’s 148 equity partners, that means doing more than having “their heads down at their desks doing the good work they do for their clients,” but also being “out there, with all of the opportunities there are, whether it’s traditional media outlets…or with new media outlets, social media outlets,” he said. “Our perception in the marketplace needs to better align with who we are and how strong we are.”
Steptoe’s brand image has one unique obstacle–there are actually two law firms called Steptoe & Johnson. The two offices were originally one, founded in the early 20th century in Clarksburg, WV. The Washington office split off in 1980, but both firms kept the name–a move that seems almost inexplicable in hindsight. The only difference is the firm in West Virginia, which has about 300 lawyers, is Steptoe & Johnson PLLC and the one in Washington is Steptoe & Johnson LLP.
“It’s a remnant of an earlier time that we are living with,” West said. “Clearly, it’s not a non-issue.” But there’s no easy fix. “What we have to evaluate is how big an issue is it, and what are the options for addressing it,” he said.
Of course, a merger would do the trick, but West seems on the fence whether combining with another firm makes sense for Steptoe.
“We could spend all our time and effort trying to be a 3,000 lawyer firm and not increase our partner profitability,” he said. “Size is not a driver for me.”
Steptoe’s profits per partner in 2012 were a respectable $980,000–only about 10 percent lower than those at mega-firms Hogan Lovells and Baker & McKenzie, and 10 percent higher than those at Jones Day and K&L Gates–four of the eight biggest firms in the country. The books for 2013 aren’t closed yet, but West said Steptoe hit its budget, with revenue and profits holding steady.
“Growth for growth’s sake is not something I’m focused on. Growth of practices where we need a certain critical mass to properly handle our clients’ matters, that is something I’m focused on,” he said.
But he also acknowledged it’s a “legitimate strategy to say you want market share, you want revenue”–measures by which Steptoe lags.
Other firms, in the past year, combined at an unprecedented pace. In 2013, according to legal consultant Altman Weil Inc., there were 88 mergers, up 47 percent from 2012, and the most since it began keeping track seven years ago. The majority involved large firms acquiring much smaller ones.
A Steptoe spokeswoman declined to name the firms with which the firm discussed a potential merger.
Indeed, for all the deals that were completed, some high profile ones fell through. Dentons and McKenna Long & Aldridge were on the verge of combining to form a 3,000 lawyer firm when a small but powerful group of McKenna partners nixed the deal, according to The National Law Journal affiliate publication The American Lawyer.
West indicated that partners at Steptoe would also be unlikely to rubber-stamp a merger.
“Our partners have always liked the autonomy with which they operate. Candidly, that’s a good thing and it’s a hallmark of our culture,” he said. “Everyone has an opinion on every issue, everyone wants to be heard, and frankly I view it as one of the key elements of my job to ensure that everyone has a voice.”
He continued, “With a major decision like a merger, you can imagine that people have opinions and they’ll want to be heard … that process alone of soliciting the input that you need from the stakeholders and making sure that everything proceeds in the way it needs to can be a very time-consuming process.”
Contact Jenna Greene at firstname.lastname@example.org.