This year, Ropes & Gray has seen some “unusual” turnover — as its managing partner recently put it in an interview — especially for a firm that operates in the upper echelon of corporate legal services.
But firm leaders say the number of exits don’t tell the whole story.
“Many who have left — we haven’t necessarily prevented them from moving, to say it as politely as I can,” said David Chapin, a corporate lawyer who manages the firm’s business from its hometown of Boston. “Some we wish have stayed. We remain fully committed to our strategy in London and elsewhere.”
To back up for a minute, some Big Law Business readers have pointed out a number of exits from Ropes & Gray in recent days, which is unusual, as Chapin points out, given it is ranked as the No. 33 most profitable U.S. law firm this year, averaging more than $2 million profits per partner.
Typically, the most profitable firms aren’t susceptible to a high degree of partner exits.
In recent days, competitor firms such as Kirkland & Ellis, Gibson Dunn & Crutcher and Dechert, have hired senior partners, in London, Hong Kong, Chicago and Boston, shaking loose some assets that the firm was not ready to part ways with.
Among those leaving firm-wide were a Chicago managing partner, a co-chair of its global anti-corruption and international risk practice, and a series of corporate M&A and finance partners in London.
“There were some partners we didn’t expect who decided to move on,” said Mike Goetz, managing partner of Ropes & Gray’s London office, in a recent interview.
Here at Big Law Business, we thought the developments warranted a check-in with firm leadership. Ropes & Gray provided both Chapin and Goetz to address the recent exits and the overall direction of the firm — both on a local and firm-wide level.
In an interview, both stressed that context of the turnover is key. Below is a full interview with Goetz and Chapin, which has been edited for brevity and clarity.
Big Law Business: Ropes & Gray has been seeing a number of exits lately. What’s going on?
Chapin: Let me give a little perspective from a firm-wide perspective. There have been — which is unusual for us — recent departures from Ropes & Gray that should be put in context with respect to overall growth of the firm over the past 10 years.
[The firm] is larger than it was eight years ago. AmLaw peer firms have barely grown at all. We have been the net beneficiary of partner movement by hiring over 120 lateral partners over that time period. Our number of partners is up about 11 percent [over the eight years]. If you look at AmLaw partner ranks, they have grown around one percent. We have been growing quite a bit faster than the peer group of firms we look at. In terms of total lawyers, we have grown more than 55 percent around the world and AmLaw firms have grown less than four percent. We have grown on a rapid growth curve. You can imagine, as people settle in, there will be people who find it is not for him or her and they move on.
[Big Law Business requested Ropes & Gray to provide its analysis of the firm’s growth trajectory compared to AmLaw peer firms. We haven’t yet received it, but will update this post once we do.]
Many who have left — we haven’t necessarily prevented them from moving, to say it as politely as I can. Some we wish have stayed. We remain fully committed to our strategy in London and elsewhere and from my perspective it is kind of business as usual.
Big Law Business: Mike, can you speak to what’s driving this turnover in London?
Goetz: We were the 99th U.S. firm to open in London eight years ago. And I’ve been in London myself for eighteen years and a couple previous firms before this. It was fairly common for firms to open offices and have significant turnover. We bucked that trend significantly before these losses.
We’ve been here for eight years, and as you mature, you start to have these kinds of turnover.
Last year, there was a lot of that going on in our office. Brexit didn’t help anybody in London. I think people moved on from the U.S. firms by the uncertainty created by Brexit. We reached not an inflection point, but a stopping point to take stock in where we were. As a result of that, partners did move on. There were some partners we didn’t expect who decided to move on. If you’re sitting there and you look at the last year, you say, ‘That’s a lot of partners you lost.’ But over the last eight years, you say, ‘That’s not too many.’ That said, we have lost a number of partners and there is no doubt that is unsettling, to some extent, to our workforce, and we try to make sure that they understand as much as we can. And I think they understand what the strategy is and why we’re in this position. Because of the recent departures, I’ve been spending a lot of time with associates and business support people and making sure they understand what the concerns are. And I don’t want to sound overly confident, but I was very happy with the response. They understand why we are in this position.
A lot of times when you lose a number of people, you go talk to the firm and say, ‘We have looked at the partnership and decide to reshape it.’ This was not a strategic overview. This was taking a look at a number of areas and deciding whether or not we could do better with a slightly different workforce, and some people looking to see if they had other opportunities and being in a firm that was going to continue to grow and needing to develop new business to fuel that growth wasn’t necessarily what they wanted to do. There were more mature practices where the clients are there and you go there to service the clients. That is a perfectly legitimate decision but it’s not legitimate in a firm that needs to grow. There are reasons why people may say, ‘I would like to move to a large firm. They have work for me.’ And we lost some people on that basis. We get [praise] when we hire people and we always get knocked around a bit when we lose people. That is what we’ll have to endure. At the end of the day, the office is very stable and moving forward at a good clip. We are going to have a good year this year and that gives us confidence that we are very well paced to grow existing practices or replace people who we lost that we need to replace.
Big Law Business: How many lawyers do you currently have in London?
Goetz: We are probably at 28 partners and another 75 associates.
[As of Sept. 1, firm had 27 partners, four counsel and 74 associates, according to a spokesman. Trainees and paralegals included, the firm had a total 122 fee-earners on that date.]
Big Law Business: How has the firm’s strategy changed —if at all — as a result of these exits?
Goetz: It hasn’t changed at all. We are very comfortable with our strategy. It is to represent sophisticated investors, financial institutions and asset managers. Basically, we are designed with that type of a client in mind. We try to offer them… restructuring, tax, transactional [advice] as well as financing. Those are the main areas of business we have in the office.
People come and go. We are sorry to have lost some of the people who have lost. That doesn’t change our strategy. Our financial performance is putting us in a strong position with regard to our ability to attract and retain people.
Big Law Business: You mentioned Brexit as a factor for departures. Can you elaborate on that?
Goetz: Basically what happened, Brexit took everyone by surprise. Investors don’t like surprises and uncertainty. A lot of the investment community took the rest of the summer off because they had no idea what was going to happen or what they were going to do. There was a slowdown in legal and transactional work in the summer and into September last year.
Big Law Business: Didn’t Brexit create legal work as well though?
Goetz: There were a lot of legal issues associated, but at the time nobody wanted to pay for advice. There were a lot of shifts [in regulations], but they didn’t start to take hold. We had a… shifting regulatory market that nobody knew and nobody wanted to pay for advice. It wasn’t a great spot from the beginning.
Once the dust settled and people knew this was going to happen for a great period of time, investors came back and business came back. But it put a four-month dent in the year. When lawyers don’t have much to do, they sit around thinking about their future. When we had that lull, I think it was a time for people to reflect, I have a breather, and say, ‘Where am I going? Is this firm right for me?’ I think there was some association between that bit of a break and the fact that people started to move after the period of time necessary to get new jobs. It’s a little harder and slower to move than in the U.S. because our labor laws here are a little more restrictive and the partnership laws are a little more restrictive. You have notice provisions and gardener leave where people are set aside and not allowed to work for a period of time between firms.
We were doing the same thing. While they were thinking about where they are all at in life, the partnership did as well. I think it’s one of those things where we all kind of said, where are we? And where are we going? And if we’re going the right way, do we have the right people?
Big Law Business: You mentioned the firm’s growth over the past eight years. Do you have specific figures regarding headcount and financial growth?
Goetz: I don’t have real numbers because we don’t do separate P&Ls. We don’t want the offices competing with each other for work. The first six years, the trajectory was starting from a low base, so very high [growth] from a percentage point of view. And then in 2016, 2017, it started to slow down and flatten out. It’s picked back up but it won’t return to the high percentages we started with. But there will be healthy growth here in the London office. We won’t know until the end of the year but I’ll be surprised if it wasn’t 15 or 20 percent [revenue growth]. Our headcount, we will have started out by contacting and replacing people. Our headcount will be pretty close to flat but our revenue will be up quite a bit, which is a good trick if you can pull it off.
Big Law Business: David, what is the state of the firm at this point?
Chapin: Through August… our total lawyer hours are up quite substantially in the range of eight to ten percent at a time when overall partner headcount is down five percent year on year.
The real story for Ropes & Gray is that it is a very strong financial performance year. We have taken some strategic moves. The spin-out of the IP rights management practice has been in the works for the better part of the year. We agreed that they could provide better service to clients in a separate, more lean operation rather than carrying the overhead of a big law firm. That process has gone really smoothly. We continue to work with them for mutual clients.
Big Law Business: Any practices you are planning to invest in or de-emphasize?
Chapin: I don’t think there is anything comparable to the IP rights management practices. We are constantly assessing our portfolio of people, but I’m frankly happy with where we sit on that now. I am happy with our geographic makeup. I don’t think we will be opening any offices in the near term. I think our emphasis is strengthening in key financial markets in the world — financial centers across New York and Hong Kong. We have made significant efforts to bolster our New York office, which is up to close to 400 lawyers.
Big Law Business: Merger activity has continued to be hot among law firms. Would Ropes be open to a merger?
Chapin: We certainly are not looking at anything. I frankly don’t think there is anything out there that would be attractive for us. If you look at statistics, there is a pickup in merger activity, but if you look at who is actually doing it, it tends to be AmLaw 200 firms getting together to increase their scale or geography. You don’t see too many AmLaw 50 firms in that mix and that would include us. I don’t think there would be anything that is terribly interesting to look at.
We have done better over the years with organic growth and laterals and ones and twos and bolstering our presence in that way. I think the last time we did any combination of a significant size was more than 10 years ago when we combined with Fish & Neave in New York. But that was to get a particular practice in IP litigation that we would have struggled to develop.
Big Law Business: How is the firm’s associate hiring going for next summer’s class?
Chapin: It’s going as it is reported to me, I’m not involved in the day to day. It’s going very very well. I forget what our target number was but it’s about the same as last summer. Maybe a little bigger, in the 130 range.
[A firm spokesman later said the firm is expecting to bring on board 151 U.S. summer associates. in 2018.]
Big Law Business: What are the big trends that you see affecting Ropes & Gray’s law practice?
Chapin: In the segment of the market in which we operate, I think the competitive pressures are similar to what every firm is finding. Clients are increasingly sophisticated users of legal services and they are demanding that we need to do more with less. They are all under budget constraints and looking for more efficiencies and less intensive ways to get things done. Law firms need to be responsive to that and we have a number of initiatives underway that range from knowledge management to technology to different staffing models to stay on the forefront.
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