Co-founder and co-managing partner James M. Fisher II of FisherBroyles tells the New York Law Journal how the firm grew from six attorneys to 210 over 16 years. It now represents many Fortune 500 clients that appreciate the firm’s lower rates, Fisher said. Nevertheless, the partners earn twice as much as they did at much bigger law firms. The Q&A is part of an occasional series on midsize firms.
Other law firm leaders participating in the series are Craig Wittlin of Harter Secrest & Emery, Richard Stehl of Otterbourg , David Scherl of Morrison Cohen, Robert Creighton of Farrell Fritz. Ronald Shechtman of Pryor Cashman, Mitchell Littman of Littman Krooks and Luise Barrack of Rosenberg & Estes.
Q: How big is your firm, where is it located, and what are its primary areas of practice and focus?
A: As of this writing, we are 210 attorneys. In addition to New York, we have 20 other offices nationwide, including Atlanta, Austin, Boston, Charlotte, Chicago, Cincinnati, Cleveland, Columbus, Dallas, Denver, Detroit, Houston, Los Angeles, Naples, Palo Alto, Philadelphia, Princeton, Salt Lake City, Seattle and Washington, D.C.
Q: Please explain your firm’s governance structure and compensation model.
A: We are governed by a partnership agreement that covers most of the material policies and procedures of the firm. The agreement protects partners from the typical arbitrary and discretionary decisions that are endemic to a traditional law firm. For day-to-day decisions, the firm is managed by a team of attorneys and nonattorneys who ensure that firm operations are consistent with the partnership agreement.
Our model compensates our lawyers for the same things most traditional law firms do. For example, we have a formula that compensates our partners separately for developing business, managing work, performing work and growing the firm. But our Law Firm 2.0® model does it in a transparent, not discretionary and completely objective way, with no risk of unequal treatment among partners. What really sets us apart from traditional law firms and “alternative legal services providers” is that our compensation formula for business development and recruiting is on a recurring basis, which allows our partners an objective way to participate in the growth of the firm and earn passive income. We like to call this “transparent equity.”
Another unique thing about our compensation model is that we purposefully compensate partners for collaborating and sharing work among the partnership. Most traditional firms either fail to provide direct incentive to share work among partners or the reward for sharing work is subjective and ambiguous (aka the “black box”). In addition, origination credit decisions are also subjective and confusing, which fosters an environment of client poaching within the partnership. Our model protects partners who originate the client relationship in ways that traditional firms do not. And partners who share work with other partners keep almost a third, while partners who perform such work keep almost half, of the revenue collected. Approximately 60 percent of our annual revenue in 2016 was derived from partner collaboration.
Finally, the efficiency of the Law Firm 2.0® model allows partners to earn more than double what they were earning at traditional Big Law. This allows us to attract top talent and still charge our clients less, which makes it easier for us to obtain and retain clients.
Q: What do you view as the two biggest opportunities for your firm, and what are the two biggest threats?
Our biggest opportunity is Big Law’s refusal to recognize that the traditional law firm model is broken and that attorneys and clients are no longer willing to accept the status quo.
Our model is the ideal platform for millennials who are soon-to-be partners at traditional firms. For them, technology is second nature, and they reject traditional time and geography restraints in the workplace.
Correspondingly, the two biggest threats to any law firm are artificial intelligence and blockchain technology (smart contracts). Unless firms embrace technology and innovation, they will not survive these threats.
Q: After the recession hit, the prevailing theory was that midsize firms would start to see more work come their way from large clients who could no longer justify paying Big Law rates. What has been your experience?
A: That has been our experience since FisherBroyles’ creation 16 years ago. Even as a six-lawyer firm, we represented large clients like Atlanta Gas Light and the Home Depot. Now we represent many Fortune 500 clients who come to us for Big Law quality attorneys who work more efficiently and at lower rates because (1) they are doing the work themselves (and not training associates on the client’s dime); (2) they have control over their own billing rates and fee arrangements; and (3) equally important, they are not under any pressure to meet billing quotas, which are a conflict of interest with clients.
Q: Are your clients pushing for more alternative fee arrangements, and if so what types? Is your firm amenable to those requests?
A: Yes. But we view many alternative fee arrangements as a sleight of hand, touted by traditional Big Law to disguise their exorbitant billing rates. As long as fees have to recoup the enormous overhead cost, clients will always overpay, regardless of the type of fee arrangement. Only in an efficient, low-overhead model like FisherBroyles will clients see great value, regardless of whether they are charged an hourly rate, a fixed fee, success fee or other alternative fee arrangement. The practice areas where we see the most alternative fee arrangements are patent prosecution and immigration, both of which we often work under flat fee arrangements.
Q: There is much debate around how law firms can foster the next generation of legal talent. What advantages and disadvantages do midsize firms have in attracting and retaining young lawyers, particularly millennials?
A: I don’t see any material advantages that midsize, traditional law firm models have in attracting or retaining young lawyers. If midsize firms are structured similar to larger traditional firms, they will suffer from the same limitations as traditional Big Law.
Q: Does your firm employ any nonlawyer professionals in high-level positions (e.g., COO, business development officer, chief strategy officer, etc.)? If so, why is it advantageous to have a nonlawyer in that role? If not, have you considered hiring any?
A: We have found that lawyers are often not properly trained in school to be successful in business. And after being indoctrinated in the traditional law firm model, their business compass can be broken. We have been fortunate to have some partners who have deep experience in business, but we have not limited ourselves to attorney resources in searching for the best and brightest to help lead our firm innovation. Our chief financial officer and chief administrative officer are both non-lawyers who have an impressive understanding and commitment to the vision of our firm. We would clone them if we could.
Q: What, if any, technology advancements have you made in your firm in recent years? What are the challenges in implementing tech changes?
A: We are nearing completion of the development of our own proprietary software that tracks, calculates and manages our very complex compensation formulas. The software will also link to our third-party practice management, accounting and payroll software platforms.
Q: What would you say is the most innovative thing your firm has done recently, whether it be internal operations, how you work with clients, etc.?
A; In addition to the above-mentioned software development project, we modified our formula in such a way that makes it seamless for groups that want to move their practices to FisherBroyles and maintain their attorneys as a group, including the flexibility of compensating the members of their group as they wish. This change has resulted in two groups adding 10 percent to our revenue last year and we foresee that sort of growth increasing over time.
Q: Does your firm have a succession plan in place? If so, what challenges do you face in trying to execute that plan? If you don’t currently have a plan, is it an issue your firm is thinking about?
A: Like any forward-thinking business, we do have a proprietary succession plan in place. The challenge is to put a structure in place and choose the right leaders to ensure that the vision that has made FisherBroyles successful continues in place after the founding attorneys are no longer around. We have discovered that, when the next generation fully embraces the model and participates in the success, it is much easier to execute the plan.