The legal industry is not exactly known for its innovation or experimentation.
Five friends are trying to change that.
Tom Crosbie, Ray Gliner, Dana Schiffman, Sean Southard and Craig Swanson all left senior-level partner positions with the 220-member law firm Allen Matkins Leck Gamble Mallory & Natsis in July 2013 to start their own boutique real estate firm.
The idea came about as the quintet watched big law's reaction to the recession.
“The legal industry has been slow to change over time," said Southard, who spent 13 years at Allen Matkins. "For the most part, law firms have historically dictated the economic terms of the attorney-client relationship. And clients just went along with it.”
When companies began to get hit by the recession, they re-examined all areas of expense, including what they were spending on legal fees. Law firm billing structures suddenly were placed under the microscope.
What followed was predictable. Companies started to get picky about where they purchased their legal services and how much they were willing to pay.
Many law firms "were caught a little flat-footed," Southard said.
Southard and his entrepreneurial-minded colleagues had some ideas, and they decided to put them to the test, forming Crosbie, Gliner, Schiffman, Southard & Swanson, or CGS3.
“We saw a real disconnect between firm management and the rank-and-file partners about what they were expected to produce,” Southard said. “And there was a disconnect between those partners and their clients. That led to a lot of frustration.”
The CGS3 founders set out to eliminate that problem by creating a compensation system that wasn't dependent on billable hours. They also nurture collegiality by making every client a client of the firm and doing away with the executive committee.
"We spent a lot of time just soul-searching [at first]," Southard said. "We crafted a partnership agreement that would prevent us from repeating the same mistakes as we saw them to be."
The team approach was central.
"A rising tide lifts all boats," Southard said. “We don’t want our attorneys getting work and keeping it for themselves because they have to hit a magic number, when the best person is two doors down. They are incentivized to push work to the best person.”
He said the firm's attorneys are given more control over their schedule and work-life balance.
Additionally, Crosbie, Gliner, Schiffman, Southard and Swanson developed 20 core values that they view as "sacrosanct to our culture."
"Although we look at the traditional metrics, at the end of the day what's equally important is the intangible stuff: good citizenship, recruiting efforts," Southard said. "We're not going to incentivize bad behavior."
Opening up a boutique shop has had its challenges, though.
By specializing in real estate transactional work, CGS3 doesn't want to spread itself too thin by trying to be all things to all people.
But at the same time, the firm doesn't want to miss out on work within the real estate industry and watch revenue sources go to other firms.
CGS3 recently hired a real estate litigator, so it can handle any disputes that involve its clients.
"We started doing strategic alliances," Southard said. "We don't want to run the risk of growing too fast or not fast enough.
"Part of the [new] model is to be responsive to what demands our clients have. It's about keeping an eye on staying true to who you are, but when clients have a need, you're ready and can step up and fulfill it."
He also said the firm has to strike the right balance between positioning itself as a low-cost alternative and still being able to provide high-quality counsel.
CGS3 is able to be both nimble and reasonably priced, Southard said, by nearly eliminating its overhead and legacy costs along with embracing part-time and flex-time attorneys.
Succession planning has been a challenge, as well.
“We want to bring aboard young, smart, talented, energetic folks that get it,” Southard said. “Attorneys who want to be part of something bigger than themselves. We’re trying to perpetuate that vision right out of the gate.”