Revenue Dips, PPP Rises as Blank Rome Cuts Partner Ranks
Blank Rome's gross revenue fell 2.6 percent to $320.5 million in 2013 while other key metrics rose as overall headcount fell and the equity partner tier was cut by 16.4 percent.
Last year marked the end of a program to "rightsize" the firm in an effort to deal with "excess capacity," firm Chairman Alan J. Hoffman said. Rightsizing has been a priority for the firm for the past five years, but Blank Rome has made a concerted effort to trim ranks during the past two to three years, Hoffman said.
"It was a difficult two years with respect to that but we are finished with that," Hoffman said of the rightsizing, which happened through de-equitizations, dismissals and natural attrition.
Blank Rome had $8.5 million less in its coffers at the end of 2013 than it did in 2012. Overall headcount was down as well, dropping 5.1 percent from 471 lawyers in 2012 to 447 lawyers in 2013.
Hoffman said the firm was able to stop revenue from dropping in line with the larger headcount decrease because the remaining attorneys in the firm increased their productivity, with hours increasing by 38 for each lawyer. Overall hours at the firm fell by 5 percent, Hoffman said, which is in line with the headcount decrease.
The firm's revenue per lawyer (RPL) rose 2.1 percent from $700,000 to $715,000. Hoffman noted another reason for the overall decline in gross revenue was that the firm's typical contingency fee revenue of between $9 million to $12 million a year was only $4.9 million in 2013 given when certain cases were resolved.
Hoffman said Blank Rome has been focusing on improving its profitability through adjusting its attorney complement and focusing more on alternative fee arrangements and project management. The firm's profits per equity partner (PPP) rose 9.3 percent from $750,000 to $820,000, but that was thanks in large part to a 16.4 percent decrease in equity partners. Blank Rome's equity tier fell from 140 in 2012 to 117 in 2013 and the nonequity tier grew 6.5 percent from 108 nonequity partners to 115 in 2013.
Pay to nonequity partners rose at a greater rate than did their ranks, increasing 18.1 percent from $36 million to $42.5 million. That increase contributed, in part, to the 8.6 percent decrease in net income for the firm. Blank Rome's net income dropped from $105 million in 2012 to $96 million in 2013. The firm's profit margin fell two percentage points to 30 percent. The firm's average income for all partners rose 4.4 percent from $570,000 to $595,000.
Blank Rome's equity partnership tier has generally been shrinking since the recession took hold. In 2006, the firm had 480 lawyers and 166 equity partners. Now there are 447 lawyers and 117 equity partners. In the two years since the firm was actively trimming those ranks, Hoffman said more than 30 partners were affected. Blank Rome has continued to promote "star performers" to equity partnership but, as with many firms, the criteria for making and keeping that partnership stake has become stricter, he said.
Not all of the drop in equity partners is attributed to what Hoffman calls "reclassifications." He said some partners died, others made lateral moves and some retired or chose to take a different status in the firm.
"The vast majority did not leave," Hoffman said of the equity partners who are no longer equity partners.
Blank Rome also made a big move toward tailoring its staff ranks in 2013, offering buyouts to all of its secretaries in an effort to achieve a 4-1 attorney-to-secretary ratio. The firm also created an associate resource center that utilizes pools of secretaries for associates to contact when they need something rather than certain secretaries being assigned to certain associates.
The use of a secretarial pool is going to increase in 2014, Hoffman said, to now include partners. The ARC, as it is known in the firm, previously was only used by associates but now partners will also be covered by secretaries in the ARC, Hoffman said. He said there is no additional layoff program or buyout package being offered—those cuts are done. He said the firm will further reduce secretarial ranks through attrition.
In terms of practice areas that had a strong year in 2013, Hoffman highlighted the firm's real estate and financial services practice as well as the corporate and maritime groups. Hoffman also noted Blank Rome's litigation arm was strong, including the consumer financial services practice, which grew 25 to 30 percent between 2012 and 2013, he said. Blank Rome has also been growing its energy practice locally and in Houston, Hoffman said.
Blank Rome grew its Houston location in 2013 with the August acquisition of the eight-lawyer maritime boutique Bell, Ryniker & Letourneau. Hoffman said that acquisition ended up being a "break-even" in 2013 in terms of its impact on the year's finances. Around the same time, the firm shuttered its Hong Kong office, deciding to channel its work in Asia through its Shanghai location. Hoffman said the firm would be expanding the Shanghai office soon.
"A lot of what we did in '13 was premised on where we want to go in '14," Hoffman said.
Blank Rome has already made a number of headlines in 2014. The firm hired 21 lawyers from two California-based firms, expanding headcount in Los Angeles and New York and adding a small office in San Francisco. The firm then lost a five-partner public finance team led by Joan Stern when the quintet left for the Philadelphia office of Eckert Seamans Cherin & Mellott. Blank Rome also hired a new chief business development and marketing officer while its chief strategy officer left the firm.
The firm has brought on another two partners since announcing the California expansion. Leslie D. Corwin of Greenberg Traurig in New York, who has represented Wolf Block in several of its matters post-dissolution, has joined Blank Rome. The firm also hired Matthew J. Thomas from Reed Smith in Washington, D.C., as a partner in the firm's maritime, international trade and public contracts group.
Blank Rome adopted a new strategic plan in 2013 that began at the start of 2014. It involves an expansion of the firm's industry focus to include areas such as financial institutions, maritime and energy. Blank Rome already had other industry groups that included chemical, life sciences and consumer finance.
The firm is also streamlining the practice management model it adopted in 2003. For the past several years, Blank Rome had three departments that spanned 26 practice groups. It folded several of those groups into one another and now has two departments overarching 14 practice groups, Hoffman said. The new leaders of those groups are the "next generation of leaders" at Blank Rome, he said.