SAN FRANCISCO — Aggressive cost-cutting delivered level profits for Pillsbury Winthrop Shaw Pittman in 2008 despite a slight drop in revenue.
Revenue dipped 2 percent to $576 million. While other firms with relatively flat revenue reported double-digit profit drops, Pillsbury’s profits per partner declined a mere 1 percent to $975,000. Revenue per lawyer was also flat at $805,000. The number of lawyers at the firm dropped 1.5 percent to 716. Click here for Pillsbury’s full results.
|Pillsbury by the Numbers
The firm held its profitability by tackling expenses early, said Chairman James Rishwain Jr.
“I view 2008 as a success, given the headwinds that we faced. We knew very early in our budgeting process going into 2008 that we would face difficult headwinds. As we look at our results, I think there’s a lot of enthusiasm and satisfaction with our performance overall,” Rishwain said.
The Recorder reported results for seven of the largest homegrown Bay Area firms on Monday. Most firms in the survey group reported modest to flat revenue growth, but large drops in profits per equity partner, with Orrick, Herrington & Sutcliffe posting the biggest decline, at 21 percent. Several firms noted the profit drops came from rising associate salaries and expenses incurred from expansion efforts, both in terms of lateral hiring and new offices.
Pillsbury is the only firm in this survey to report a revenue drop.
But the firm preserved its profit margin by slicing expenses 3.6 percent in 2008. That’s a result of a smaller summer associate class, “adjustments” to timekeeper and staff ranks, and trimming spending, according to Rishwain. Attrition slowed because of the economy, Rishwain wrote in an e-mail. “As a result, firms can be left with a greater number of attorneys who are not as busy as they would like to be,” he wrote. The firm reduced its hiring of replacement associates beginning in 2007, and made reductions in 2008.
“Some [departures] were voluntary, some were performance based and some were based on excess capacity,” he said. “Overall, approximately two-thirds of departures in 2008 went to either government or in-house positions.”
The firm completed two mergers since 2001 and has since been able to eliminate duplication in its technology infrastructure. As the recession deepened, the firm dug a little deeper on discretionary spending, renegotiated contracts with vendors, and subleased unused space, Rishwain said.
The Recorder and The American Lawyer ask firms for headcounts as of Aug. 31, and Pillsbury reported 716 lawyers, down just 2 percent from last year, and 176 equity partners, a 1 percent drop. The firm had 7 percent fewer non-equity partners, at 145. Pillsbury took on 20 attorneys in Shanghai from Thelen, a month before that firm dissolved. Not all the costs of bringing on those attorneys were included on the firm’s 2008 balance sheet, Rishwain said.
“While there were some start-up costs, these weren’t as high as you might expect, since we already had established offices in Shanghai, D.C. and San Francisco where these attorneys joined us, and some of the start-up costs were capitalized, thereby having a limited impact on 2008 financials,” he said.
Looking ahead, Rishwain said he expected the firm’s energy and intellectual property practices to help it weather 2009. In addition, the firm has put together a global business evolution team to examine ways the global market will change and how the credit markets are going to operate, he said.
“We are asking, ‘What do we need to do now?’ We are in a new economy where no assumption is safe.”