Is This A Law Firm, or the Salvation Army? Greenberg Traurig Launches 'Collection Drive' (and Hints at No More Pay Raises)

From the year-end message of Cesar L. Alvarez, CEO of Greenberg Traurig (one of our favorite firms here at ATL — see, e.g., here, here and here):

I had a few thoughts for 2007 and 2008 that I would like to share as my year-end message.

First, 2007. As of today, Sunday, December 30, 2007, we have collected $313.5 million during our collection drive and expect to collect approximately $16.5 million on Monday, the 31st, to reach $330 million for our December collection drive. Although we expect to be short by $10 million of our goal, this is still a great accomplishment when you consider the housing situation, the subprime issues and the dislocation of the credit markets that prevented a number of deals from being completed this year.

Read the rest of Cesar Alvarez’s message — in which he spreads holiday cheer doom and gloom, jawboning down associate compensation expectations — after the jump.


Mr. Alvarez continues:

The legal industry and our firm began to see the impact of these factors in late 2007. In addition, costs in the legal industry, including our firm, continue to go up at levels that, in our opinion, are not sustainable. We can not control the legal industry, but we can control what we do in our firm. We were blessed to have done exactly that during the days before the dot.com frenzy and it paid big dividends for us. And we started to do it again in the latter part of 2007.

“Costs” = Associate Salaries.
“We can not control the legal industry” = We can’t stop other large law firms from raising.
“[W]e can control what we do in our firm” = We can refuse to raise salaries for our people.

Now, 2008. As we look at 2008, we, together with the legal industry, face significant challenges. We will be challenged in 2008 by many of the factors that began to impact the legal industry in late 2007. These include a slowing economy, tighter credit markets that make transactions more difficult, a troubled housing market, a high-level of consumer debt (over 50% of our economy is based on consumer spending), high gas prices, and significant cost pressures in the economy and by our clients.

Most buyers of legal services are also vocal about and taking action on the perceived high cost of legal services. The number of clients requesting adjustments to hourly rates and bills or refusing to have anyone work on their files that lacks certain experience levels continues to increase. In part as a result of these pressures, 2008 will be a year when, in our view, transformational changes will accelerate in the legal industry. Only firms that recognize this will benefit. Legal industry costs to clients need to be brought under control. We need to align with the cost pressures that our clients are facing. We do not know what the legal industry will do, but we know what we will do.

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I.e., resist associate pay raises.

We view these challenges in 2008 as potential opportunities. We believe that no firm is better positioned than Greenberg Traurig to take advantage of these challenges. As we have said before, these conditions are not something to be scared of, but they are something to be managed. And managed they will be.

“And managed they will be…” Is that a threat, Mr. Alvarez? If so, props — it’s nicely phrased.

So in 2008, we will need to turn these challenges into opportunities. We will need to maximize the leverage that our platform provides. We started out 15 years ago with a dream to have the best and most cost-effective delivery network of legal services in the legal industry in the United States, and today we are there! Today, only 3 law firms have over 1,600 lawyers in the United States, the best legal market in the world (the United States collects 60% of all legal fees in the world with only 5% of the population). We are one of those three firms! Today, only one firm has more than 1,600 lawyers in the United States and more than 25 offices covering over 90% of the growing part of our economy. That firm is Greenberg Traurig, our firm! The other two firms with over 1,600 lawyers in the United States have less than half the number of offices we do and therefore, a lot less coverage. So, in our view, we have the best platform to deliver legal services in the United States in an efficient and cost-effective manner with true global quality lawyers.

“[O]nly one firm has more than 1,600 lawyers in the United States and more than 25 offices covering over 90% of the growing part of our economy.” Also, only one firm has a name that starts with “Greenberg” and ends with “Traurig.”
“That firm is Greenberg Traurig, our firm!” In case you, as one of GT’s 1,600+ minions, had forgotten the identity of your employer.

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But, we have only started to achieve our potential by making our clients and potential clients see the great benefit we offer them in this high-cost environment. And 2008 is the year to give this advantage the true focus that it needs. When we do, it will align us with the needs of our clients and potential clients in a way no other firm can. And that is good business.

The international side of our business will also become more important in the next few years. Projected growth rates in the United States, Europe and Japan are in the 2% to 3% range per annum while the same growth rates for developing economies such as China, India, Russia, Brazil, and Israel are in the 5% to 10% range. So investments seeking higher returns are going abroad and we need to have a select network of offices and alliances to take advantages of these opportunities. Luckily, the overwhelming concentration of international growth will be extremely concentrated in 5 developing economies and Europe. Our foreign offices and alliances are doing well and you will see more emphasis on the international front in the next few years.

We will therefore hire more European partners. Because they send out the best emails.

We need to start the year strong on January 2, 2008 by going after each piece of business as though it is the last one available, giving incredible service and leveraging our platform, working collaboratively in every instance, paying close attention to our intake of matters and our risk management, making sure we bill and collect on a timely basis and not fall behind on these critical tasks, because to do so in a slowing economy is very dangerous.

On the cost side, we need to watch every dollar and make sure we utilize each one to generate revenue and provide great service to our clients. We can not waste our resources. We need to look at our resources and see how we can be even more efficient. Again, we do not know what the legal industry will do, but we know what we will do.

We have had a number of good years and we have tried to compensate everyone fairly, and we hope that next year will be no different. However, as we see the challenges and opportunities in front of us, we need to manage conservatively for the greater good. This means that more will be asked from each of you, and if you answer the call and help our firm have a good year by working efficiently and doing more, we will do our best to reward those who did their part. As we go into this year of uncertainty, we also need to keep a strong balance sheet, so we need to leave salaries at present levels until we get a better financial picture for 2008.

Ah, there’s the money quote: “we need to leave salaries at present levels.” In case all that talk of belt-tightening wasn’t already getting the message across.

We have made wonderful strides as a firm and many of you as individuals. We can see why almost all of us have benefited from the value of our culture and our platform and why so many have multiplied their client-base and have grown significantly larger and more sophisticated practices. In so many cases, several times their original practice when they joined GT! Our business staff has also shown amazing personal growth. They have provided the administrative structure for our success. We have seen what can be achieved with individual drive and the collaborative environment of GT. Achievements that in almost all cases would have been impossible to achieve solely on our own.

We have built a great firm with a wonderful culture. Our biggest challenge, however, is not from the outside. Our biggest challenge is internal. It is how each of us will act in the future. Will we continue with our drive to achieve, continue our disdain for unnecessary bureaucracy and keep our unswerving commitment to collaboration and the power of “WE”? Or will our success, our size, and our egos begin to impact our future? These are questions that each of us has to answer. Our future depends on our answers!

Actually, doesn’t your future depending upon hiring and retaining top legal talent? Talent that doesn’t always come cheap?

It is my pleasure and privilege to serve you, and I want to thank each of you for your support and your efforts on behalf of our firm. My best wishes to you and your families for a great 2008.

Let’s continue to deliver on our dream! Happy New Year!

Cesar

At Greenberg Traurig, our firm!!! Where everyone’s a winner.
If Cesar Alvarez was hoping to put the fear of God into his associates, maybe he shouldn’t have sent around this message, just a few minutes after his original missive:

Sorry for any confusion, but I wanted to make clear that salary increases for associates will be made in the same manner as we have done them in the past.

Thanks,

Cesar

“Remember all that saber rattling about keeping costs in check? I was just kidding. Special bonuses all around!”