Photo provided by Porter & Hedges
Not all firms suffered alike during the economic downturn. Rob Reedy, the managing partner of Houston’s Porter & Hedges, credits his firm’s lean model for carrying it through a recession that forced larger firms to lay off scores of attorneys and staff.
Porter & Hedges focuses on high-end work in national and international legal matters but has thus far eschewed expanding away from Houston. Nevertheless, at 100 attorneys, the firm has continued to grow since its 1981 founding and has implemented new management structures. Reedy, a widely recognized corporate partner, was elected the firm’s first management partner in July 2009.
Lawdragon: What have you been working on recently in your practice?
Rob Reedy: Recent deals include an issuer high yield deal and two equity deals representing the underwriter, a midstream asset sale to a private equity fund, a purchase of a significant position in the Eagle Ford shale play in South Texas, refinancing a 50 MW waste wood to power plant under construction, and recap of a Chinese joint venture.
LD: Can you describe how you got into this area of law? When did you decide you wanted to be a corporate lawyer?
RR: During law school I realized that litigation was not for me so I started looking for a corporate position during my third year. Houston was the place to go for that kind of firm so here I am. Really it was a process of elimination as I learned how lawyers work in law firms.
LD: How did you come to be voted for the management position in 2009? Was this something you were seeking out?
RR: Our firm implemented a strategic planning initiative in 2000 and one of the changes we instituted was a revamped management structure. Part of that process was electing our first Chairman, Bill Porter, the founder of the firm. When Bill retired, the firm undertook a careful search/selection process internally. I indicated that I would be agreeable to being considered and ultimately I ended up as the recommendation of the committee that did that work.
LD: Did this reflect a firm change to a more formal management structure?
RR: Yes. Bill was our first chairman and I am the first managing partner in the firm’s history.
LD: Has the firm’s partnership or culture changed in terms of firm decision-making as it has grown?
RR: Yes, structurally for sure. Historically, our firm has been run by a five person Management Committee subject to oversight by a very active democratic partnership. We now have a managing partner and Practice Group Leaders as well as a Management Committee. Those changes have led to more centralization of decision making on certain issues, but we have held on to one very key element of our culture – we are a true partnership that works as a democratic, one person, one vote system.
The partners meet frequently to set policy and make key decisions, and the Practice Group Leaders, Management Committee and Managing Partner are tasked with implementing that strategy or decision as well as making recommendations to the partners. It is a very open and transparent system where partners have access to all firm financial data including compensation, have a real vote and are part of the decision making process. I doubt we will ever change that – it is one of our keys in how we attract laterals and how we maintain such a stable group of partners.
LD: Did you feel any particular pressure inheriting a leadership role from Bill Porter?
RR: No pressure, just respect for what he has done and a desire to keep building the firm that he was so instrumental in creating. The job creates the pressure.
LD: Many firms in the past few decades have expanded their geographic reach by adding offices. Why did your firm decline to do this?
RR: Actually, we do think about it and analyze it, but so far we have not felt the need to have a regional or national footprint to succeed nor have our clients demanded it. The recent economic difficulty certainly put pressure on underperforming branch offices in other firms, a pressure we did not have obviously. We work out of one office but do transactions, litigation and arbitrations all over the U.S. and the world. We have great relationships with other firms and our Terra Lex association also provides assistance when needed in other jurisdictions.
We are also keenly aware that Houston is a unique market for lawyers and it is really difficult to move into other markets where the economics are as good as Houston. Again, it is on our radar screen and we continue to analyze adding offices outside of Houston if it makes economic sense, serves our clients’ needs, or if the right situation comes along in a practice area that complements our client base and strategy.
LD: A good number of firms have suffered in recent years due to the downturn. How has Porter & Hedges avoided this fate?
RR: Part of the answer lies in the strategic decision set out above. No pressure from underperforming offices. But the key was what I call our “hedge” – we have made significant investments in our corporate, energy, litigation, finance and bankruptcy groups and when one section suffers, as did corporate in 2008-2009, the others keep things moving forward and in that case actually expand with new work that can be spread throughout the firm.
We also have historically refused low margin, rate constrained work just to get business and revenue – that has made a big difference in our performance. True to our culture, we are consistently adding excellent partners and associates laterally to increase our breadth and depth. As a result our clients are comfortable sending the largest transactions or cases knowing that the matter will be staffed adequately and expertly. Lastly, we are conservative on financial matters – low or no debt, careful expense monitoring, and an excellent office lease.
LD: Has the firm nevertheless made certain difficult management decisions in response to the economic crisis?
RR: We cut costs too but given our conservative approach noted above, it was not a crisis moment for us.
LD: How has the firm succeeded in luring laterals away from other firms? What do you tell laterals when hoping to convince them to move to your firm?
RR: Our lateral recruiting efforts are very straight-forward. Porter & Hedges offers a “big firm” platform, support for lawyers growing their practice, a true partnership – which is harder to find now, and excellent income potential. As a result, we have consistently attracted successful partners and associates from the largest firms and from smaller boutique firms.
We have a solid, respected group of partners who are well known in the business/legal community, and have a strong track record of doing very high level deal work and sophisticated litigation and arbitration for significant clients. We work all over the country and internationally, and consistently work with and against the largest local, national and international firms on the other side of our deals and cases.
One attraction to laterals is that we support each partner in growing their business with the result that the vast majority of our partners have over $1 million in business. We do not have client or partner business concentration issues because everyone gets support to grow his or her practice. In short, laterals always expand their client base when they come here because of our culture of supporting practices.
As I said earlier, this is a true partnership – one person, one vote with regular partner meetings. Key decisions are voted on by the partners. To keep it simple, we have a very “flat” management structure and it is certainly not a dictatorship. New partners are amazed by this approach and really appreciate it.
We have a compensation system that combines a solid guaranteed income, a performance component using the usual factors (such as production and originations), all of which is done on an annual basis. Seniority and management positions are not relevant to compensation. We are also capable of providing a “bridge” to laterals to improve guaranteed income. The end result of all of this is an excellent financial picture for laterals, consistently strong profits per partner, clean balance sheet, quarterly profit payout, and a real opportunity to make more money.
LD: Can you share any strategic goals going forward in the years ahead?
RR: The key to success is not changing the fundamental things that make the firm work as noted above. But going forward, growing the firm’s partner base, especially in the transactional areas, is a key goal for us. Whether that leads us to expand in Houston or open new offices to service existing or new clients, the goal is the same – to have managed growth as needed to serve our clients.
LD: Have you enjoyed taking on this management role, and would you be interested in serving another term?
RR: I have only been at this for one year out of my four year term so it is very early to think about anything beyond my current term. Overall, I have really enjoyed it. I like the strategic planning part of my job and I enjoy the lateral hiring work which is very important. However, I do enjoy working with my clients and I have been very careful to focus on clients. The firm has structured the job so that I can continue to work with my clients and keep my skills sharp. So far this position has been really good for me and has forced me to grow in ways that have been rewarding personally.