By: Lizzy McLellan
Lizzy McLellan sat down with managing partner, George Pallas, to discuss the next generation of lawyers and planning for a successful future for the firm’s piece in The Mid-Market Report.
Pallas provided the answers below, which have been edited lightly for style.
What is your firm’s governance structure and compensation model?
I was named managing partner of Cohen Seglias effective Jan. 1, 2017, and my first objective was to change the governance of the firm. Previously, the firm’s managing partner position was at the top of the decision-making tree, solely handling every issue that presented itself. Instead, I set up an executive committee with ten individuals, responsible for managing operations of the firm, with each person chairing a particular subcommittee. These subcommittees include but are not limited to knowledge management, strategic recruitment, succession planning, and women’s initiative. The executive committee currently consists of four equity partners and six non-equity partners, and each person has one vote. I help guide the executive committee, but it is spearheaded by the firm’s Chief Operating Officer, Kathleen Garrity, who follows up with each subcommittee and ensures that all issues are properly presented to the executive committee.
Each subcommittee is composed of two to six individuals with a combination of partners and associates and each is responsible for reviewing, analyzing, and solving an issue and creating new initiatives to improve the operations of the firm. The chairperson of each committee then presents the solution or new initiative to the executive committee for decisions.
I am very pleased that the firm’s “sphere of influence” thereby consists of 30 to 35 individuals who, due to the structure, feel a greater sense of commitment to the business aspects of the firm. The result is that everyone can contribute their ideas for improvements and multiple initiatives are pursued simultaneously throughout the year. It is also extremely helpful that our COO oversees and prioritizes the committees and their initiatives. We do have a board of directors as well, which is made up of equity partners and is responsible for the strategic direction of the firm.
In terms of the firm’s compensation model, I serve as the treasurer of the firm and chair of the compensation subcommittee. The equity partners began to change the model five years ago, so that compensation would no longer be based solely upon an individual’s book of business, but rather the firm’s profits. Essentially, equity partners are compensated based on profits of the firm, with a mechanism to earn additional points tied to hourly output criteria. Equity partners aged 55 and below receive compensation based upon the higher of the points allocated or their book of business. Equity partners over the age of 55 are compensated based upon the points allocated to them.
This change in our compensation model has had a tremendous impact on the firm’s growth and profits. It has increased collaboration among the equity partners to venture into different markets and practice areas and to share or pass down clients. Everyone’s thinking about profitability rather than an individual book of business, which leads to higher revenue and higher headcount. For non-equity partners, there is a system in place to ensure that they get credit for the clients they manage and the individual matters for which they are responsible. This approach motivates them to develop new business and also treat assigned clients as if they were self-generated.
Do you offer alternative fee arrangements?
Yes, Cohen Seglias does offer alternative fee arrangements for some practice areas, including transactional work, trusts and estates, and real estate. We offer AFAs less frequently for litigation.
What do you view as the two biggest opportunities for your firm, and what are the two biggest threats?
Our biggest opportunity lies in our growing presence outside of the Mid-Atlantic region. We continue to handle cases across the Southeast, Midwest, and the West Coast. This increased reach has firmly established us as a nationally recognized firm offering a full suite of services built upon our foundation in the construction industry. We continue to invest time and resources into national trade organizations and becoming more involved in the construction industry in different locations. For example, our partner Edward Seglias was named General Counsel for the American Institute of Steel Construction (AISC) earlier this year.
The continued investment in our talent pool is another big opportunity. Our mission statement focuses not only on our client service but also on our commitment to the success of our employees. Retaining and nurturing talent is important and we do so through various career development opportunities and mentor programs.
The biggest threat to our firm, and all firms probably, is succession planning. Since we are a first-generation firm, this is a sensitive and important topic. We are building an organization that needs to be cared for as its equity partners get older, and the challenge is to train the next generation to become effective managers with the zeal and zest to conquer new territories.
The legal market is so competitive now—what trends do you see, and has anything, including alternative service providers, altered your approach? Is your chief competition other mid-market firms, or is your firm competing against big firms for the same work?
Alternative Service Providers have not really impacted Cohen Seglias, because the size of the firm allows services to remain in-house.
Very large institutional clients will typically choose firms larger than Cohen Seglias, but we also generally do not target that group of prospects. Our competition is mainly other mid-market firms. The big firms that do the same type of work as us are chosen, in part, because of their size. It takes more courage for a very large institutional client to decide to engage a midsize firm.
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?
Unlike other generations, millennials are not solely motivated by money and want a certain quality of life, a voice in decisions, and a work-life balance. Cohen Seglias is a firm that provides millennials with sophisticated, high-end legal work, a competitive compensation structure, and involvement in areas of the firm’s business operations. We strive to maintain an inclusive, family-oriented atmosphere and our attorneys and staff are members of the same team. We also encourage our attorneys to give their time and talents to issues they feel are important. For example, our young lawyers like the hands-on involvement we offer with charities such as Habitat for Humanity.
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?
Yes, in fact, the firm’s COO is not a lawyer and neither are our various business directors who lead our IT, marketing, HR, and operations departments. I believe that lawyers should focus on what they do best, which is the practice of law. Business directors who are non-lawyers tend to be better at business strategy and operations, and at Cohen Seglias we are in favor of having roles that play to each individual’s strengths.
What would you say is the most innovative thing your firm has done recently, whether it be technology advancements, internal operations, how you work with clients, etc.?
Cohen Seglias invests heavily in innovative technology. We are venturing into AI with document review and document management and expanded knowledge of information resources and management. We are also shifting to paperless and providing attorneys with tablets. In addition, the changes in our governance structure are different from what you might see at other law firms, and we are proud to be on the cutting-edge, bringing associates and partners together in subcommittees to help shape the business.
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?
As stated above, succession planning is a real challenge for the firm. While we do not have a plan entirely in place, the genesis of our plan began when we changed the compensation model five years ago and then changed our governance structure two years ago. We are changing the culture of the firm in order to successfully transition senior attorneys’ books of business and client assignments in the years to come.