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The Flaster/Greenberg Difference

When law firms are asked to describe themselves and their cultures, they all sound thesame. All firms want to believe they have (i) congenial atmospheres, (ii) excellent attorneys and

support staff, (iii) produce a high quality work product, and (iv) foster the client drivenapproach to the practice of law. In fact, marketing experts will relate that all law firms that go

through the trouble of formulating a mission statement end up with essentially the same one.This introspective soul searching is typically done from the perspective of the consumer -- the

prospective client.

This essay examines the question of what differentiates Flaster/Greenberg from the

perspective of the attorney.

The last 30 years have witnessed the evolution of our Firm from a two-person tax

boutique to a 50+ attorney regional commercial law firm. Attracting lateral attorneys from other

firms has fueled much of our growth. We attribute this success to several characteristics thatdistinguish our Firm from other law firms:

The Firms governance,Our objective compensation formula,

Profitability,Our business plan, and

Our people.

Firm Governance. Most law firms that evolve from a solo or two-person practice followa predictable path. The founding partners are the principal rainmakers and gradually add

attorneys to support their increasing practices. At this stage of development, the founder(s)typically govern as benevolent dictators and their authority is not questioned. At some point in

this evolution, other attorneys begin to develop independent practices/clients. These attorneyseventually initiate a more democratic management structure or leave with their book.

Frequently, resistance from the founding partners effectively limits the development of the firmpast a relatively small size. In situations where the founding shareholders are willing to share

power, the firm enters a democratic phase where each partner is given a say in managementhowever, ultimate power is often still concentrated with the rainmakers. As these firms continue


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to grow, the rainmakers increasingly control compensation decisions -- the ultimate source of power at a law firm.

Unlike many law firms, all shareholders at Flaster/Greenberg have an equal number of

shares in the Firm. The day-to-day management of the Firm is delegated to a managing

shareholder and non-attorney administrative personnel led by an Executive Director. Theshareholders meet as a group once a month to discuss strategic initiatives and major businessdecisions. The Firm recently formed an Executive Committee consisting of the Managing

Shareholder and four shareholders elected to staggered terms. This Executive Committeecontinues to evolve and presently makes recommendations to the shareholders on issues

discussed at the monthly shareholder meetings. Finally, on an annual basis, the Shareholdershold a weekend retreat to formulate the business plan and discuss major policy initiatives.

Unlike most law firms, shareholder compensation is not determined by a subset of

shareholders but rather, by an objective formula equally applied to all shareholders. Themechanics of the formula are discussed below. The effect on the Firm of having this form of

compensation system is dramatic. The typical politics present at many firms is absent. Newshareholders need not worry about alliances, voting blocks or existing loyalties among more

senior attorneys. Management and the shareholders are not preoccupied with compensationissues and instead focus on strategic decisions. Shareholders are content because they feel like

owners and are confident that every shareholder is treated equally.

Many sociologists will tell you that the most efficient form of governance is adictatorship where the dictator has unquestioned authority. Our form of governance is not as

efficient but is dramatically more inclusive. Our belief is that when shareholders are treated asowners, they act like owners and have a genuine concern for the long-term health and success of

their business.

Compensation. As discussed above, shareholder compensation is determined by anobjective formula. Our compensation formula tracks each shareholders production (cash

collected on a shareholders time), client responsibility or minding (cash collected on files thatthe shareholder manages) and originations (cash collected on files originated by the

shareholder).

Each year, the shareholders determine the total amount available for distribution.Twenty-five percent (25%) of this amount is then allocated proportionately to the shareholders

based on origination, nineteen percent (19%) is allocated proportionately to the shareholdersbased on client responsibility and fifty-six percent (56%) is allocated to the shareholders

proportionately based on production. Each shareholder is provided reports showing these figuresfor all attorneys. All financial information at the Firm is shared with every shareholder.

The administration of the compensation formula involves quite an extensive spreadsheet

and the firm has modified the formula to address contingent fees, associate profit and certainfirm service by shareholders however, the formula is applied equally to each shareholder. The

primary benefits of the compensation formula are:


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Shareholders receive the same production credit regardless of whether they workon a client file they originated or another attorneys file.

The typical credit for origination is divided into two categories origination andclient responsibility to allow for sharing between attorneys. Accordingly, an

attorney is rewarded for bringing in a client to the firm and where another

shareholder manages the file the minding attorney(s) is rewarded for servicingand growing the client. All politics associated with compensation are removed from the Firm.

The delicate balance between rewarding originators and rewarding the workingattorneys is maintained as evidenced by the fact that both the Firms high

originators and high billers have remained at the Firm. Our compensation formula recognizes the varying contributions of all

shareholders and the Firm does not need to differentiate shareholders byde-equitizing all but the highest originators.

Profitability. Clearly, the stability of any law firm is largely dependent on its

profitability. Unlike many other firms, Flaster/Greenberg is not obsessed with profits per partner(PPP). At Flaster/Greenberg, we can accommodate a broader range of practices and dont

force each shareholder to perform at the same financial level in order to remain a shareholder.

We believe revenue per lawyer is a better measure of a firms health. Ultimately,shareholder compensation at our Firm compared to lawyers at competing firms, with similar

performance figures (comparable production, minding and origination) is the best indicator ofprofitability. In discussions with numerous lateral candidates, our shareholder compensation

consistently compares favorably with attorneys at both larger and smaller firms.

Our Business Plan. No law firm can accommodate all types of practices. Many times,attorneys switch firms because they need a different platform to accommodate their practice.

As a regional commercial law firm, we see tremendous opportunities ahead for our Firm. Overthe last 25 years, the legal profession has experienced a transformation where large national and

international firms have emerged. This consolidation continues with many area firms electing tomerge or be acquired. A majority of our attorneys have joined us from these larger New Jersey

and Pennsylvania firms because their client base or practice focus was no longer consistent withtheir firms business plan or because the larger size and or greater geographic reach was not

necessary to service their existing and target clients..

Our Firm is committed to taking advantage of the opportunities created by consolidationin the legal marketplace. An examination of our practice areas and their client focus will

illustrate this strategy. In each area of our practice, we seek to focus on areas where we cancompete with the national and global law firms or target practice areas or clients that are outside

their focus. For example, because real estate matters involve state and local laws, a national firmwith offices throughout the world has no competitive advantage over our firm. In fact, in many

cases, the cost structure needed to support their practices places them at a distinct disadvantageto our Firm.


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A business with environmental contamination at their local facility in Trenton, N.J. gainsno advantage from a firm because it maintains an office in Paris, France.

Our corporate practice concentrates on representing companies based in the region.

Unlike the national firms, we desire representations of privately held and family-owned entities.

Increasingly, public companies with interests in our region are recognizing that they receive better service from a law firm based in this area.

Our newly expanded intellectual property practice has been able to attract and serviceinstitutional clients from throughout the United States and the World with no resistance

regarding our location or size from these clients.

Each year, we evaluate the market opportunities for each of our practice areas to identifyareas where we can achieve a competitive advantage. In speaking with attorneys interested in

joining our Firm, we take great care in making sure their practice and client focus is consistentwith our business plan. This process minimizes the chance that an attorneys practice becomes

incompatible with our platform.

Our People. Many attorneys believe that the best legal talent gravitates to the largest lawfirms. While it is often the case that the top graduates from the nations best law schools start

their legal careers at the largest law firms, we have been successful at attracting these candidatesafter they have practiced at these firms for a couple of years. In fact, many of our recent lateral

hires have joined us from AMLAW 100 law firms. Equally of note has been the Firms abilityto attract attorneys from smaller firms that saw a benefit to being at a multi-disciplinary firm.

These attorneys have seen their practices rapidly expand as a result of the additional cross-sellingopportunities available at Flaster/Greenberg.

In Conclusion. We welcome inquiries from qualified shareholder candidates. If

Flaster/Greenberg sounds like a place you could thrive, you owe it to yourself to investigate allwe have to offer. There is a difference - let us prove it.

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