Muir points out in her article What the New Law Firm Looks Like that building bigger firms does not necessarily produce better bottom lines.  Of course for many firms long-term client development or other factors beside profitability fuel growth.  And then there are some growing firms which in fact achieve greater profitability in spite of the odds.

K&L Gates is one of the firms that has managed to accomplish that.  The product of a 2007 merger of Kirkpatrick & Lockhart with Preston Gates & Ellis, and then mergers with Nicholson Graham of London, Washington’s Hill Christopher and Boston’s Warner & Stackpole, the firm has completed since the beginning of 2008 three additional mergers — one with Texas-based Hughes & Luce, a second with Charlotte, N.C.-based Kennedy Covington Lobdell & Hickman and the third with Bell Boyd, which took effect March 1, 2009, bringing together a total of over 1,800 lawyers. Over the same period, the firm opened offices in Paris, Shanghai, Frankfurt and most recently Dubai, among others, and established a relationship with Taiwanese firm J&J Attorneys at Law, for a total of 33 offices.

This astounding growth trajectory is true to Chairman and Global Managing Partner Peter Kalis’s express intention to “grow aggressively,” taking advantage of the firm’s lack of short-term and long-term debt. Not only has growth been achieved but in this case the approach has so far proved profitable–revenues for 2008 were up 27% over 2007, while profits per partner for that year rose almost 7%, with first half 2009 continuing to show significant increases, again meeting Kalis’s stated goal of increased profitability every year.

So if a firm like K&L Gates manages to do the difficult if not impossible by growing aggressively while increasing profits, what are the challenges?

Of course the firm has been through a few clouds, as there always are around silver linings.  No firm, regardless of its size, can escape them.  Microsoft Corp.’s list of preferred legal providers did not include Bill Gates’s father’s firm this year. While Microsoft GC Brad Smith had welcomed the original merger of the Gates firm and Kirkpatrick & Lockhart, former Microsoft GC William Neukom left K&L Gates last year, perhaps signaling something. Or perhaps it was simply time for a change.  The firm did not add another DuPont “Meeting the Challenge” Award this year to those accumulated over the past few years.  And K&L Gates has had its share of difficult client relations–MTV Networks noisily canned the firm as defense counsel a few months ago.

One insight into the challenges that the firm’s success raises may be in a comment from K&L Gates’ most senior trademark lawyer Mark Peroff, who left the firm last year for a smaller firm.  “In my experience at K&L Gates,” he was quoted as saying in explanation of the move, “the focus was entirely on making money.  There was no glue among the partners.”  (Peroff also pointed out that in a smaller firm he could significantly lower his billing rate.)

There might be some who would question the importance of glue, both as to whether it significantly colors one’s experience at a firm and also whether it adds to the bottom line, a discussion we will take up in a later entry. But Peroff ‘s comments raise the conundrum that many growing firms in fact face, and often without the benefit of rising profitability.

Every year the ranks of new hires, lateral hires, and various contract, counsel, income, equity and other lawyers shift, while there is simultaneous shifting among personnel at various offices. How to add so many bodies to various locations and still keep a sense of commonality if not collegiality among the players?

And similarly, if a firm hopes to improve profitabiliy, can it push bottom-line results persistently, making each person accountable for their own production, and still maintain strong relationships?

In other words, do our goals and policies bind us or divide us?

Sometimes glue is simply a commonality that keeps all the various firm systems running in decent working order.  Sometimes glue produces real revenue through cross selling and enhanced relationship building.  Sometimes glue is just that ineffable bond that keeps people from leaving.

It may sound pretty fuzzy, but it’s important to consider the glue in your firm.