Russ Welsh on Growing Polsinelli
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Here are some highlights of my interview with Russ Welsh:
I’d say it’s great to be aspirational, but you have to be realistic as well. Know your firm really well. Be realistic about who you are and what you can accomplish.
Be prepared to travel. When we were smaller and primarily Kansas City, I’d say I’d do management by walk around. Now it’s by fly around.
Some of the deals you don’t do are the best.
When I took over, we had had a managing partner and he knew it was time for him to step down when someone who had come into the office and he already knew what they were going to say, so he didn’t listen to them.
Where I’ve grown and continued to be a successful leader is listening to people. It’s not your way or the highway. These are complex organizations that are really people driven and you really have to stay close to your people.
The best recruiters are the ones that really know their candidates as opposed to are just fishing for a fee.
We listened to the consultants, but we take them with a grain of salt because they’re not in the system, they’re not in our firm, they don’t know our people.
One thing we think about the coming recession, whenever that may be, is that our lawyers, while we do specialize, we need some cross training so that there’s more flexibility in the lawyers.
I’ve heard law firm leaders say,“Our firm doesn’t have any debt.” Talk to lawyers in those firms and they say they all have debt. You’re going to fund these firms one way or the other. Either by use of some institutional debt that’s guaranteed by the law firm or some personal debt that the individual lawyers have to assume and put capital into the organization.
If people haven’t been to Kansas City, they’re missing something. It’s a real livable city. I know from statistics that it’s a generous city. The percentage of charitable contributions here is quite high. But it’s a mid-size city and we grew out of this city for opportunity, but we never left the city because we love it.
I think we have an obligation as attorneys, as business leaders to give back to the city that’s our home and has benefited us.
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Links referred to in this episode:
Hero of the Empire: The Boer War, a Daring Escape, and the Making of Winston Churchill by Candice Millard
Destiny of the Republic: A Tale of Madness, Medicine and the Murder of a President by Candice Millard
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Hi listeners, this is Chris Batz, your host of the Law Firm Leadership podcast. Here’s a brief clip of my conversation with the chairman and CEO of one of the fastest-growing law firms in the US. “When I came to the firm in 1986, there was a lot of discussion and that was back in the time when the partners all met around a table. The firm had decided it did not want to grow more than 25 lawyers and they didn’t want a super active litigation practice like I had, so there were people who didn’t want to bring me on at that time and here we are today. It’s just amazing.”
Just remember the PDF transcript of this audio is available to download. Go to LionGroupRecruiting.com/podcast.
As many of you know, we interview corporate defense, law firm leaders, partners, general counsels, and legal consultants. You’re listening to episode twenty-six of the Law Firm Leadership podcast.
Chris: Welcome to the Law Firm Leadership podcast. I’m your host, Chris Batz, with the Lion Group. Today I have the pleasure of speaking with Russ Welsh, chairman, and CEO of Polsinelli. Under his leadership and for 20 years, Russ has seen Polsinelli grow from 90 attorneys in four offices in Missouri to now 850 attorneys in 21 offices nationwide. This growth includes national recognition of one of the fastest-growing law firms in the US, also, being named 1 among the top 100 US law firms as well as nationally ranked Chambers USA Healthcare and Real Estate Practices.
Prior to leading the firm, Russ was the chair of the Litigation Department, having extensive trial experience in product liability, torts, trade secrets just to name few. Before joining the firm he was a trial attorney for the US Justice Department in Washington, DC. He also received his law degree from Georgetown University Law Center. Welcome, Russ to the Law Firm Leadership podcast. It’s great to have you on the show.
Russ: Thanks, Chris. I look forward to our conversation today.
Chris: Russ, I want to start off with a basic question that I ask attorneys and leaders who’ve experienced the kind of growth you’ve seen. When you took the helm in ’98, were you anticipating becoming a firm of over 800 attorneys when you were less than 100?
Russ: Not at all. When I took the helm, I was anticipating growing the firm, but really more focused on specialties than size. I could never imagine us getting to 850 lawyers having at the time been primarily a Kansas City law firm.
Lessons Learned from Law Firm Growth and Expansion
Chris: What led you to start adding to the firm? I think one of those first additions was the 2004 merger with St. Louis?
Russ: Well there was that, but let me go back a little bit. When I took over in 1998, we had some really excellent clients, but we also knew at the time that we were unlikely to be a merger target. Kansas City was not as robust a business community as the firms on the coast or out of Chicago. We charted our own path. At the time we really knew that we had some clients that those larger firms coveted, so we had to be invested in our clients and that meant investing in lawyers that had the specialties that our clients needed.
Chris: So it was kind of building a moat for the firm and creating that competitive advantage by keeping those clients and servicing their needs?
Russ: That’s right. For example, we didn’t have any intellectual property attorneys when I took over, but we had a life sciences institute that we were doing a lot of corporate and tax work for because it was just being formed. We knew that they were going to have discoveries that needed to be patented, so we went out and hired our first patent lawyer in 2000. From there we have well over 100.
Chris: Was there a large client base or just a couple key clients that really drove you guys to move outside of the Kansas City metro?
Russ: It was a combination of key clients and lawyers who were perhaps a little audacious and felt that they could create something beyond a local practice.
Chris: Let’s talk about some of the initial acquisitions you made. Let’s talk about St. Louis. When you grew with that first group, what were some takeaways from that initial merger?
Russ: By the time we combined with the Suelthaus firm, which was the one we merged with in 2004, we had grown to about 30 or 35 in St. Louis by the kind of 1’s and 2’s and small groups that firms traditionally grow through. The Suelthaus firm itself had 35 lawyers. We were looking to have a more prominent position in St. Louis. They were a business firm and it seemed to fit well.
I think the lesson from that was that we kept separate offices, two offices in St. Louis and St. Louis isn’t Los Angeles. I think if I had to do it over again, I would have combined those offices earlier. We did combine them about five years later, but I think it would have been a better integrating experience if we’d have combined the physical locations sooner.
Chris: You then picked up in 2006 a banking and real estate boutique in Chicago. Tell us about that.
Russ: In the early 2000s we had a CMBS practice, so commercial mortgage-backed security practice. We were doing a lot of real estate lending work for banks and private equity groups both in the States, but also internationally, in Europe and in Japan, when that practice was so active. We thought we needed a presence in a financial center. It was more natural for us to look to Chicago for that growth and plant a flag than it was for us to go to New York, for example. It was partially a credibility issue to the markets by having an office in a financial center.
While that acquisition of a small real estate and banking firm took place in 2006, it was probably four years of looking for the right opportunity. Many of the firms at that time were ranging from 30 to 40 lawyers. The senior lawyers were really looking for an exit strategy. That was not attractive to us, so we passed on a lot of opportunities before we found this group that joined us.
Chris: Let’s talk what looks like your largest acquisition in your backyard in Kansas City back in 2009, Shughart, Thomson & Kilroy, 180 attorneys. How did that process go?
Russ: We were looking for a stronger litigation practice than we had. We knew the Shughart, Thompson lawyers and we thought a merger might be attractive. Candidly, we talked to them four or five years earlier and both of us decided that wasn’t the time. I don’t think we were mature enough as a law firm to swallow that entire group and integrate them.
The focus wasn’t to look for additive bodies in Kansas City. It was really to add litigation strength but also get a presence in Denver and Phoenix, which they brought. On the other hand, the Shughart firm was looking for additional business strength, broadly defined real estate and business transactional work and financial services work, and we brought that to the combination. That was the impetus and kind of the strategic reasons for the combination.
Chris: Russ, was it encouraged because of the recession in 2008/2009 for the firms to combine?
Russ: No, it was terrible timing. If I had to choose a time to combine, I wouldn’t choose right before a major recession. We obviously weathered that together and probably were stronger for it, but those were challenging times for many of our clients and there can’t help but be consequences to the law firm.
Chris: What kind of advice would you give someone making a combination like that? You had to deal with combining large groups of attorneys in the same office or same physical presence. How did integration go with an acquisition like that?
Russ: There were some bumps in the integration process. We had a pretty systematic approach to integration.
Every firm has a culture. We highly valued our culture. We thought our culture and the Shughart culture were very similar. In many ways, they were, but in some ways they weren’t. The most important way that had the most significant consequences at the time even though we were about 300 lawyers at Polsinelli, we were practice managed. Shughart had those offices in Phoenix and Denver and they were more office managed. There was more flexibility at the office level than we thought appropriate for one large firm that we had become. Changing that attitude and culture from an office-managed culture to a practice-managed culture was probably our biggest challenge in that combination.
Chris: Polsinelli has remained a practice-managed culture, is that correct?
Russ: We have for sure. We highly value it. We think we’re better serving our clients by managing by practice. It helps integrate smaller offices to know that they’re able to work on major deals or litigation even if it’s not in their home area.
Chris: I noticed also that about a year and a half later you guys expanded into California with considered California’s largest woman-owned bond counsel firm. Tell me about the strategicness of moving into bond counsel as it relates to probably relationship with governments and things like that.
Russ: Truthfully it wasn’t as much her actual practice as it was Lisa and her approach and her persona in the LA market that was attractive to us. That acquisition was driven by our healthcare practice. We had a growing health care practice and we were interviewing for a system to represent that had facilities across the United States and the system asked during the RFP process and the interview process, “We’re really looking for a firm that has offices in every time zone.” We knew when we had that interview and eventually got that work that we needed to open a West Coast office to serve the client.
Chris: Now the next acquisition was in Atlanta with Nancy Rafuse. Tell me about that journey when you picked up Nancy’s firm with her partners.
Russ: Nancy Rafuse and Lisa happened to be excellent lawyers, who had had an entrepreneurial spirit because they created their own firm. That worked well in our culture that continues to have an entrepreneurial bent. While we have a lot of institutional clients now, we have this attitude that we’ve got to fight for every client and continue to fight for the ones that we have now.
Advice for Newly Elected Law Firm Leaders
Chris: Twenty years of growth, almost a 10x applied to firm size/headcount, let’s say I had you talking to an entire group of men and women, who are basically in your shoes now when you were in 1998 taking the helm, what advice would you give them who has aspirations to grow their firm to a full nationwide firm?
Russ: I’d say it’s great to be aspirational, but you have to be realistic as well. Know your firm really well. Listen to outsiders including consultants. Don’t swallow everything they say because that may not fit with your culture and approach. But be realistic about who you are and what you can accomplish.
I mean I’ll give you an example. In the early 2000s when we were really thinking about scaling some of our practices and growth, we knew we could not be a seven-figure net income firm at that time because we didn’t have primary offices on the coast, so we didn’t strive for that. We tried to take advantage of who we were rather than try to be something else that we thought was unattainable. That’s led to a lot of this growth keeping the core in lower or mid-cost cities so that we can have a value proposition for clients. That really comes from knowing your firm and knowing it well.
A couple other things I might say is be prepared to travel. When we were smaller and primarily Kansas City, I’d say I’d do management by walk around, where I’d walk the floors of our office. Now it’s by fly around. If you don’t do that, you just become a franchise model and that’s not a law firm.
Then the final thing I’d say is some of the deals you don’t do are the best. I’ve looked back at a few potential acquisitions or opportunities in cities that we could have accomplished early on and recognized that now where we are we’d probably be unwinding those if we had done them.
Personal Growth as a Leader
Chris: Imagine yourself 20 years ago and where you are today, how have you grown through the process?
Russ: When I took over, we had had a managing partner and he was the first one at the firm. He had done it for ten years or so. About the only piece of wisdom he provided me was that he knew it was time for him to step down when someone who had come into the office and he already knew what they were going to say, so he didn’t listen to them. I think that was pretty good advice.
What I would suggest that one of the ways I’ve grown or at least continued to be a successful leader is listen to people. It’s not your way or the highway. These are complex organizations that are really people driven and you really have to stay close to your people.
I’ve obviously grown financially. We’re probably just over half a billion dollars in revenue. When I started we were 27 million dollars in revenue. That financial growth requires you to be more sophisticated in your financial analysis and ability to balance those issues.
Chris: Yeah. How important were consultants and recruiters for you doing that kind of 10x growth that you experienced?
Russ: I recall one time in the early 2000’s sitting at a roundtable of chairs of firms that were about our size. We were around 100 then in the year 2000. The first roundtable I went to there were three other firms of similar size that I gravitated to talk to their managing partners. The next meeting there were only two of us left.
The acquisition of law firms of that size was something that was on my mind and the consultants and the recruiters were at our heels, if you will. We wanted to retain the ability to control our own destiny. We listened to the consultants, but we take them with a grain of salt because they’re not in the system, they’re not in our firm, they don’t know our people. We do use recruiters, obviously not always, but we’re open to that. I think the best recruiters are the ones that really know their candidates as opposed to are just fishing for a fee.
Growing with Capital or Debt
Chris: How did you approach growth from a financial position, meaning did you fund growth with equity or with debt or both?
Russ: There’s two major financial consequences of growth as I look at it. There’s the capital side of things. You need a long-term lease in a city, computers and desks and chairs. Then there’s the personnel side of it. People start with your firm on day one and obviously they expect to be paid from the beginning but their revenue stream doesn’t come in for three or four months, so you have to balance all of those things.
The way we did it was a combination. Some of the capital items we have financed and used some debt for, an appropriate level of debt, far below the debt our clients use. But on the lawyer side of things, we have not used debt to fund those. We’ve used current income to fund the lawyer acquisition with I guess a limited exception. Occasionally when we’ve done a merger, we’ve spread the cost of that over a couple of years, no longer, but over a couple of years instead of a one-time hit because the return on that combination is going to be over time, not exclusively in that one-year period.
One thing I should add is I’ve heard law firm leaders say, “Our firm doesn’t have any debt.” Talk to lawyers in those firms and they say they all have debt. You’re going to fund these firms one way or the other. Either by use of some institutional debt that’s guaranteed by the law firm or some personal debt that the individual lawyers have to assume and put capital into the organization.
Chris: Can law firms grow in scale without institutional debt, outside debt?
Russ: I doubt it. Somebody’s going to have to come up with the cash to accommodate the growth. In the early 2000s, again, when we were about 100 lawyers, we did some deferred income because we knew we were going to grow. It wasn’t really this kind of growth. It was bringing in those specialists that I thought we needed for our existing clients. Then we returned that income four years later with a growth factor to it. It worked well. That gave credibility to the strategy.
Chris: You have weathered the great recession of 2008, what was that like and what is some advice that you would give law firm leaders because we’re going to be facing another one eventually?
Russ: Well, it was challenging. By the time the recession came along and for us the impact of the recession was in 2008 and 2009. Before that we were doing really well. After that we did really well. But we did have the impact in those years. I think diversification mattered a lot then. The practices that were the most impacted were those that were using a lot of debt meaning our real estate finance practice that was CMBS-driven, our pure real estate practice, where the developer side of that used a lot of debt. Those practices were substantially impacted.
During and particularly right after the recession, the requirements that clients had for legal skills changed. Lending is a perfect example. We were doing a lot of lending. While it takes legal skills, younger lawyers can do a lot of the initial work there. When we were on the work out side of it, during the recession and post, it really took more experienced lawyers.
One thing we think about now in the coming recession, whenever that may be, is that our lawyers, while we do specialize, we need some cross training so that there’s more flexibility in the lawyers.
But the diversification of the practice, for example, there were not many M&A deals going on in 2008 through 2010, but our corporate lawyers who did M&A deals were pretty busy with healthcare deals. They were a little less impacted by the recession and we were able to push our true corporate lawyers into working more closely with our healthcare lawyers. Actually, that helped us coming out of it so we could do more of those deals as our healthcare practice continued to grow nationally.
Succession Planning the Chairman and CEO
Chris: I know that you are transitioning. Chase Simmons is going to be taking the reins. Tell me about that process and what are you going to be doing afterwards?
Russ: Well, in terms of me personally, I’m going to step down from this position at the end of December. I’m going to stay on for eight or nine months and then I’m going to retire. During that eight or nine months, there’s a couple of strategic initiatives that I’ll take on and then just be a sounding board for Chase in his new role.
The process, we had four candidates internally. I was really sensitive to respecting them during the process and not losing them because of the result of the process. I know some law firms that have three or four candidates and they select one and less than a year later the others are gone. I did not want that. That would be very harmful to our firm. I worked on it for a couple of years before trying to get these people together to work together on initiatives and innovation so they became not just colleagues but really friends. Then since the time of the selection, they continue to work together. It’s been I think a very positive outcome.
Chris: What are you most proud of Russ, over the past 20 years?
Russ: I think the quality of our firm has grown even at a greater rate and pace than the size of our firm. In reflection, I’m most proud of the quality of the lawyers that have joined us and are part of us today.
Current Trends Affecting the Legal Industry
Chris: Where do you see the legal industry going and what are some of those influences?
Russ: I think law firms are now run more like businesses but there’s a fine balance that you have to be mindful of that the individual lawyers and particularly the shareholders or partners of your firm have a lot of choices in their life. You have to maintain those relationships. It’s always been a relationship business, both with clients and internally. I think it will be more so as the mobility of the industry continues.
In terms of technical changes, obviously there have been a lot in the last 20 years. I think the advent of artificial intelligence is going to substantially impact the practice. I know a lot of firms and lawyers are talking about it. Not sure we’re all doing enough about it.
Chris: How do you see artificial intelligence affecting the private practice attorney and the in-house attorney?
Russ: Think about 10 or 15 years ago, in litigation, a lot of what drove revenue was having associates or young partners reviewing documents to determine if they were discoverable or not. Now we have computers doing that in e-discovery and it’s taken revenue from the law firms, but it’s more efficient, it’s more effective. The lawyers just do the final review as opposed to the initial cut.
That’s now happening in due diligence work, in patent work, in contracting work. It’s going to continue to impact the law firms going forward. Not only we have to talk about and think about what that impact means when we have our own artificial intelligence systems as we do as we grow, we have to figure out how to price that to take in not just the time but the value.
An Active Community Leader and a Love for Kansas City
Chris: I want to pivot a little bit again to some more personal subjects. We both live in Kansas City. I notice that you’re a Jayhawk graduate. Were you Missouri or a Kansas resident?
Russ: I was kind of both. I grew up on both sides of the state line, so I was born and raised in Kansas City and went to KU undergrad and then I went to DC to law school. I stayed there for ten years, law school and after law school.
Chris: Yeah. I didn’t want to have this ridiculous long intro, that you definitely warrant, but I just want to list off your community involvement. You’ve been on the boards of the Greater Kansas City Chamber of Commerce, United Way of Greater Kansas City and Civic Council. You’re the past chairman of the Greater Kansas City Chamber of Commerce and Board of Starlight Theatre, Board of Trustees of the Leukemia Lymphoma Society Mid-America Chapter, the local bar association, the Kansas City Area Development Council, the Community Blood Center. You’re also involved with the ABA. Tell me about that.
Russ: If people haven’t been to Kansas City, they’re missing something. It’s a real livable city. I know from statistics that it’s a generous city. The percentage of charitable contributions here is quite high. But it’s a mid-size city and we grew out of this city for opportunity, but we never left the city because we love it. I think we have an obligation as attorneys, as business leaders to give back to the city that’s our home and has benefited us.
I did have some role models in that. In the ‘70s and ‘60s, particularly, there were law firm leaders who were very actively engaged in the business community and organizations like you described. But by the time I took over in ’98 that had changed. I think the change from law firms becoming more business-like also might have pulled some of the lawyers out of the civic and charitable organizations. I just felt a responsibility to give back.
Chris: Russ, how else do you enjoy life away from the firm?
Russ: Well, my wife and I play golf. Truthfully, she plays a lot better than I do because she plays a lot more than I do. I have two children, who like many people in Kansas City moved away from six or eight years, but they’ve moved back as they had families. I have three grandchildren so that’s an important part of my life.
What is on Russ’ Bookshelf?
Chris: What’s on your bedside table or in the office that you’re reading these days that you recommend?
Russ: A Gentleman in Moscow. That’s an excellent book that I’m reading. Then there’s a book called The End of Civility that I’m reading. There’s a great book about Churchill called Hero of the Empire and there’s a book about McKinley called Destiny Republic. Those are excellent books. I kind of go back and forth between novels and historical books.
Chris: Yeah, I’m a big, avid reader. I really do the same thing. I tend to find there’s something about novels that almost is stronger than truth or stronger than non-fiction that gets across points that really drive home truth. I don’t if you find that as the same.
Russ: I do. I like to switch back and forth, but I do like the historical as well. It gives you perspective about historical figures that you may not have had and causes you to think about your own life or those of the political class today.
Leaving a Legacy
Chris: Russ, now that you’re transitioning with Chase, you’re going to put a little bit more time, eight or nine months, at the firm and then in essence you’re going to retire. Let’s assume you didn’t accomplish all that we talked about, what would legacy look like going forward for you?
Russ: I do think about legacy but it’s not personal. I think about institutional legacy of the firm. We have a true, strong generation of really young leaders like Chase, who is in his mid-40s, that we’ve left this firm in good hands, Jim and myself and others.
We look at demographics periodically. We have more equity partners under 45 than we do over 65. The equity partners in our firm are those who generate business, so I think that says a lot about where we are and bodes well for the future. I’m very pleased and proud of the legacy that we’ve been able to create and that I know will continue.
Chris: That’s excellent. Russ, it’s been an honor and a pleasure. Thank you for your time today.
Russ: Yeah, thanks very much Chris. I’ve enjoyed it.
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