Episode 2 – Alex Gertsburg: Growing Rapidly through Innovative Business Practices

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Alex Gertsburg

Alex Gertsburg

Founder, The Gertsburg Law Firm

After working as an associate for two large regional firms, Alex Gertsburg left private practice to take a General Counsel position. In that role, he experienced frustration with outside counsel and learned firsthand what clients really want from their law firms. He used that insight to launch a business-law practice that delivers on the promise to put clients first. Now, just three years later, the firm has grown to 11 attorneys.

Full Interview Transcript

Michael: Hello, my guest today is Alex Gertsburg, the founder of the Gertsburg Law Firm. I’m really excited because Alex launched the firm just 3 years ago, in late 2012, and it’s already grown to 11 attorneys. So I’m looking forward to hearing how that’s come together. Thanks for joining me, Alex.

Alex: Michael, thanks for having me, happy to be with you.

Michael: You bet. So just to get a sense of what you’re doing, I think it’ll be helpful, can you tell us a little bit about your firm, what practice area, and how it’s come together?

Alex: Sure. So we’re a full service business law firm. We’re in Chagrin Falls, Ohio, which is about 20 miles south…well, I guess about more east-southeast than south of Cleveland. We’re a pretty unique place. The four senior most attorneys here, myself included, are former big law firm attorneys who went in house and spent a number of years in their careers as a general council for a corporation. I was with a company called Broadvox for 10 years. My partner, Henry Grendell, was general council for Family Heritage Life Insurance for 10 years. Jim Drozdowski at North Coast Container…most of the other folks here have some in house experience or spent some time as business owners themselves. So the composition of this firm is deliberately geared towards business ownership or in house council service.

Michael: Right. Okay. Also, prior to your experience in house, you were with some firms as well, right?

Alex: Yeah. I spent the first part, the first half of my career, at Roetzel & Andress, which is a regional firm here in Northern Ohio with offices, I believe now, in Florida and outside of Ohio as well, other places, and then Calfee, Halter & Griswold, same thing, big firm. At least regionally, it’s a pretty big firm with offices in Ohio, and I believe they, too, now have offices outside of Ohio.

Michael: Okay. So how many attorneys, just approximately, when you were at those firms, kind of in the hundred level? That kind of thing.

Alex: Hundreds. Yeah, both were in the hundreds.

Michael: Okay. So your early experience was as an associate in those types of firms. Then you went in house. And then, more recently, founded the firm you’re now running.

Alex: Right. So it was, it’s a long story but the short version is that my partners and I saw an opportunity to take what we learned at the big firms, take what we learned as the clients of those big firms, and put those lessons into a new law firm. I like to say to people that there’s an experience that you have as a general council for a company that most lawyers don’t have and will never have, business lawyers that is.

So being next to the CEO all day, addressing a board of directors, seeing how your budget falls into the PNL of your company, answering to the CFO when you go over budget, having to work with outside council to make sure that they’re doing their job cost-effectively. There’s a punch-in-your-gut feeling that you get when you get an outside council bill that is more than 5 or 10% higher than what you told your board of directors it should be for that deal, or for that litigation. That punch-in-your-gut feel informs a lot of what we do here. So we built our firm around the feelings of comfort and of discomfort that we had as clients of those big firms and those feelings that we never really appreciated when we were with those big firms ourselves.

Michael: Right. So is it just about being able to accurately project the cost of legal work or is there more nuances to it than that?

Alex: That’s a great question. It’s a lot more than just billing, but billing is a big part of it. Billing is usually the thing that keeps our clients up at night, as much as the end result they’re looking for. But it’s more than that, we use contract attorneys more than other law firms might. Also, that’s partly a function of the billing, but we use project planning, we use Gantt charts, we use planning principles that we get from the business world that certainly I wasn’t trained in as a lawyer. We use reporting concepts that we know are important to the CEOs, and the HR managers, and the boards that are our clients.

Michael: So can I ask for an example? What’s an example of a metric that you report on that you don’t think is typically reported on, but adds value?

Alex: So budget-to-actual would be the biggest one. Most clients ask their lawyers, “What do you think this is going to cost me?” And their lawyers give them a huge range, kind of a CYA. If everything goes well, this will cost you $10,000. If things go sideways, this will cost you $100,000 right. Litigation is always the stepchild that lawyers point to to explain why they can’t give their clients a good budget, because litigation, especially in discovery, goes sideways really easily.

So what we do is we chunk everything. So we tell our clients, “This is a basic road map that you can expect in litigation for example.” You know there’s going to be some initial pleadings at the complaint and dispositive motion stage. You know that at some point there’s going to be some pre-trial and case management conferences. You know that at some point there’s going to be discovery. Discovery can be broken down into depositions, into offensive written discovery, defensive written discovery. You know that there’s probably going to be an expert witness phase, and that’s going to have its own discovery, and its own reporting, and you know there’s going to be a summary judgment phase, and you know there’s going to be a trial phase. That’s if this thing does not settle.

Michael: I’m sorry. I just bumped my camera.

Alex: So we chunk our budgets into those phases and then break them down into…we still provide ranges but we aren’t talking now about a $10,000 to $100,000 range. We put each of those phases into their own budgetary ranges. That would be one kind of report. And then we report the actuals. So than, we give them on either a monthly basis, or on a per-phase basis, a budget-to-actual report. That’s to the clients that ask us for that. We offer it all the time and some clients say, “You know what, just get me a result.” Most of my clients want that level of detail, and get it.

Michael: And so they can also see, as they’re making decisions that are going to take them further into litigation, they can see what the cost is and weigh that against their expected benefit.

Alex: Yes. So we have a client right now that we do a lot of work for, a lot of different disputes with their customers. And at any given point, there’s probably five lawsuits going on. And it is in an industry that is very prone to customer disputes. So because there’s always this rolling level of disputes that we’re retained for, we’ve put in place an early settlement evaluation report, where we tell the client, “Okay, this is what’s at stake. This is what you should expect to pay in legal fees over time. This is what we think you can expect to settle for. This is what the cost of mediation might be.”

And so we give that to them up front, they make an early settlement evaluation. They basically value their case with our help early on, and that helps to steer the case towards a settlement, or a result, that will make them happy. And then, we track our actual legal fees to that budget, and to that goal. A lot of insurance companies do that, and a lot of attorneys in the insurance defense field work that way. It surprises me that business lawyers and businesses don’t adopt those methods for all their litigation.

Michael: Can you think back to your time as an associate with corporate clients, and maybe a misperception, or a change in perspective that you had after you got on the other side?

Alex: Yes. So the biggest, I think, is discovery. We had clients who, you said, “Listen, this is going to cost you $50,000 in discovery. Let us handle it, we’ll take care of it.” And they’d say, “Okay.” And the firm would throw…this isn’t specific to…either particular firm that I worked for, I should give a friendly disclaimer, both very good firms. But I would say, this is typical of a lot of big firms. They basically just throw manpower, humans, at a particular problem and say, “Okay. We need these 100,000 pages of documents reviewed. I have a war room in the back filled with bankers boxes of documents and I’ve got 20 lawyers billing at 300 bucks an hour that are going to spend the next week looking through these documents, indexing them.” That was how things were done. And I think that still is how things are done in a lot of law firms.

Here, well, to answer your question specifically, when I was the client, and I knew that that’s how things were done with our outside council, I asked the question, “Are you using contract lawyers?” Because there are contract attorney firms out there that are not going to charge me 300 bucks an hour to review documents. Are you using those? Are you using law clerks efficiently? How are you billing your junior attorneys for this work? Because reviewing documents is not $300 an hour work, and the same attorney can be doing $300 an hour work that is not document review. They can be doing substantive work, analysis.

So as the client, I saw the difference in how that was done among firms. I saw how empowered I was as the client to ask questions like that, push back a little bit. And as head of my own firm now, we’re proactive about those kinds of things. We don’t just throw bodies at a large discovery project. We have those budget conversations with our clients up front, and we staff our cases efficiently, including by using contract attorneys from other firms to make sure document reviews, for example…I’m just throwing out what tends to be a very labor intensive, time consuming project…the most cost effectively. That would be one example of something I learned both sides of the table.

Michael: That’s great. So you and your partners had a perspective, said, “Hey, we think we can do this differently.” What have you found now that you’re actually doing it? Were you able to proceed with those assumptions intact? Or have you had to…there’re some certain basics that I imagine every law firm has to just simply handle the same way or similarly.

Alex: No, Michael, it’s crazy. Once you put…the answer is it has changed how we practice law and it has emboldened us to change how attorneys relate to their clients in general. So you always hear the concept of you just start moving forward. And then one decision leads to another decision, one idea leads to another idea, just start moving. So that’s what we did.

So three years ago, we just started moving. And the philosophy was we’re going to be different. The idea was that we are going to act like business owners and we are going to be our client’s in house council, even though we’re outside council. And you put that hat on, and you start walking down that road, and one idea turned into another idea into another idea, and now, our entire practice is focused on being more than just another outside council, being more like a trusted advisor that is in the office next to you.

So the snowball went like this. So it started with that philosophy. And then that philosophy turned into this one idea. Let’s offer to our clients the ability to hire us on retainer. Basically, to be their general council. So we have clients that in order to get predictability, pay us a monthly…basically a subscription fee, a monthly retainer to be on-call, to be available, to go to their office when they need us, and to put customized general council plans for them. So that idea started, and was very successful, and launched a second idea, which was let’s provide our clients with an internal audit service. So now, before the plaintiff’s lawyer comes knocking on your door to serve you with a complaint for violating overtime laws, violating the FLSA, before the Department of Labor comes knocking on your door, before OSHA comes knocking on your door, we’ll come knock on your door as your lawyer, and we will craft an internal audit, wearing that hat, as the plaintiff’s lawyer.

And we put together a customized audit, basically an internal investigation that we do for our clients now. And that was the next part of the snowball. We started doing these internal audits for our clients, and it’s great because it’s all privileged. It’s your lawyer doing an investigation for you as a business owner. We give them a report card. We give them a guidance letter that fixes the problems that we’ve identified as the most at risk, with the highest exposure. We give them a proposal to have us fix those problems for them, or a road map so that they can fix it themselves. We then follow up with them six months later to do spot checks. And these are all really customized vehicles, different for every client.

The next thing that happens in this snowball is clients start using us more. This is, I think, how we get from 1 attorney to 11 attorneys in 3 years, and somebody came up with the idea here of giving the client an automatic 10% value adjustment. So we thought when we were in house council, there were so many times when we wanted to go to our outside council and say, “You know what, our expectations just weren’t met here in some way.” And we did, we said that. And once in a while, the outside council would offer to write off a little time, or would give us a credit on the next bill. So we had the idea, let’s just give all of our clients the ability to reduce their own bill by up to 10% for any reason. All they have to do is articulate it. All they have to do is say, “This was our expectation. This was not met. We are going to reduce our bill by up to 10%.” And it’s no questions asked. That kind of was the next part of the snowball.

Michael: That’s really intriguing to me. I’m going to ask you a couple questions around that, if that’s okay?

Alex: Sure.

Michael: That could be a significant portion of the margin. So how did you feel about that before you knew to what extent it was going to be used?

Alex: Uncertain about where it would land, but confident that if we followed our own principles and we were the lawyers we wanted to be for our clients, that it would seldom, if ever, get used, confident that, by putting that tool into our client’s hands, they would see that we are putting our money where our mouth is.

Michael: That’s interesting. So the other thing is, it could…I come from an insurance defense perspective, where there’s a lot of bill cutting that is sort of engineered into the system. And I can see how that could even have the effect of limiting the damage. The whole conversation becomes one portion of the 10% versus let’s look at the entire bill. But I realize, ultimately, what it’s doing is giving you a mechanism for all your people to feel like we’re accountable to something. And then secondly, it’s like a risk reversal thing from maybe a marketing standpoint.

Alex: Yes. And I’ve looked at it almost entirely as I want to partner up with my clients. I want to make their goals my goals. And I’ve viewed that 10% value adjustment as, again, putting our money where our mouth is. The limitation, the idea that you’re limiting your bill cutting exposure, we’ve just never really looked at it that way, haven’t had to. And it does, I’ll tell you, it does motivate our lawyers to be the lawyers we say we are. If you know that your client has that power, no questions asked, you’re not going to give them a reason to want to use that sword. We come to work every day saying, “We want to be the lawyers that we say we are.” And this is one of the ways that we motivate ourselves to do that.

Michael: Got you. So I also wanted to ask too, what has the trajectory been just in terms of headcount? Did you start with the same number of attorneys, or close to that? Or has it been over time, through the growth of the firm?

Alex: So three years ago in November, I walked into this office. Not this office, we just moved a week and a half ago. To the office that we moved from, there were four offices there, and it was just my secretary and I, and we walked in, and our footsteps echoed, and every time we talked it sounded like we were in a cave, and it was nerve wrecking. And I remember saying to Kim, my assistant, “We really need to fill these offices with clients and lawyers or things are going to get worrisome.”

We went from 1 lawyer in November of 2012, I want to say to 5 lawyers by the end of 2013, and then 8, and now 11. We’ve got a staff of 15 right now, with support staff and lawyers. And we just kept absorbing the work. We kept at the point at which the lawyers were working too hard and too much, and that’s one of the things, one of the other things that we try to differentiate ourselves with is by not…so we don’t have a billable hour requirement, we certainly incentivize ourselves, but we don’t require our lawyers to bill a certain amount because it’s important to us to have a culture that emphasizes family time. We all have kids, and spouses, and the hours that we work need to be hours that we want to work.

So at the point at which that balance started skewing too heavily towards doing the kind of work, and the amount of work that was making us feel uncomfortable, we would add a lawyer, or two, or three. So we’ve grown in a way that’s commensurate with the work that’s come in the door.

Michael: Right. So one of the things that I thought was really interesting on your website, you have a set of guiding principles, I wonder if you could tell us how those came about and give me some background on that.

Alex: I was looking for the easiest place to grab it from, and I think it’s right here on my wall. So everybody here keeps one on their wall.

Michael: Okay.

Alex: Right. And it’s right on our website. And it basically is kind of like our charter. I don’t know. I…

Michael: And I wanted to ask too, did that come about at the very beginning or is that something that evolved and you formalized later?

Alex: Yes. It definitely evolved but, for the most part, these, this one page document is very similar to how it looked. I would say probably about two and a half years ago, so I’d been in business here for about six months at that point, and…I don’t know. The way my brain works, Michael, is I need to keep shrinking things down to their most basic fundamental concepts. When I was in law school, right, I took a textbook in a lecture, and turned it into 50 pages of notes. And then, as you got closer to exam time, 20 pages, and then 10 pages, and then…so I would have this manifesto here of all these things that I wanted this law firm to be. And we just kept polishing it, and paring it down, until we got it into this one page. And it is, basically, just our instruction manual on how we want to be as lawyers, how we want our law firm to operate, how we want to relate to each other as lawyers and support staff, how we want our law firm to relate to our families at home, how we want to relate to our clients. Basically, just our little instruction manual on how we were going to exist with the community over here.

I think that it does that. It pares down to, I don’t know, about 15-20 lines, exactly who we want to be. And we remind ourselves of this on a daily basis. It’s on the website, it’s in every office. It’s our values and our mission.

Michael: Right. Well, the one that caught my eye was aggressive representation. We don’t let our clients get pushed around. If they have rights, whether under contract or otherwise, we identify and enforce them. It’s saying, really clearly, what the value is that a client can expect. Because you see a lot of things like service, and clients are the focus, but have you had conversations with clients about things they’ve noticed in these guiding principles?

Alex: Yes. And the biggest one that I try to talk to the clients about and get feedback on is whether we’ve exceeded their expectations. So we go through this exercise with ourselves, with our employees, with our clients, where we ask, so I’ll ask a client to rate the service that they’ve received from my firm on a scale from 1 to 10. And if it’s anything less than a 10, I ask them, “What do I need to do to make it a 10?” And frankly, I don’t want to hear that it’s a 10. I just don’t think it’s possible. I think that there’s always some way to improve your business, your processes, yourself, your relationships. It’s just that constant, never-ending improvement that we as business owners, and as lawyers, and as humans, just need to be doing all the time. And so the concept of exceeding expectations, that’s the one that I probably talk to my client’s the most about, I talk to my employees the most about. I want to know what their expectations are and I want to beat them. And I know that if I keep doing that consistently, they’re not going anywhere else; either anywhere else to work, or anywhere else to represent them.

Michael: I’m just curious if there are any of the things that I haven’t asked about that you think would be appropriate to highlight in this conversation? What are some of the key insights that you’ve had as you’ve grown the firm about how to bring excellence to the practice and to the environment as well?

Alex: You and I were talking earlier about trial and error. And I think, what I learned from representing businesses for the 13 years before I started this firm is the really successful businesses, the really successful clients that I had had audacity and they had guts to do things differently. They took risks. They weren’t afraid to fail. And the legal profession tends to be conservative, and we should be with our clients’ rights, with our clients’ treasures. But we shouldn’t be afraid to take risks as business owners ourselves.

So the 10% value adjustment is a perfect example. Yes, that’s got some risk attached to it, but we’re just not afraid to take that risk. There are so many ways that we can change how lawyers interact with their clients. And they involve rocking the boat a little bit, bringing in contract attorneys to do work so that you can send your clients smaller bills rather than larger ones. That’s rocking the boat. That’s not customary. But I know that it’s the right thing to do. And it feels right in my gut, so we’re doing it. And I think our clients are happy that we’re doing it.

I guess that would be the biggest one, Michael, is get out there, and don’t be afraid to take risks in the way you deliver quality service to your clients.

Michael: Okay. Can you think of another thing that could be considered a risk at a more traditional firm that delivers on that promise of doing a better job from the clients?

Alex: Yes. No billable hour requirements. I don’t know of any other law firm that tells that to their employees. I am going to evaluate you on so much more than just the number of hours that you bill that I’m going to take that off the table entirely in terms of a requirement to continue your employment. There’s risk there because you may get an attorney who just doesn’t bill. What you want to do there is be careful who you hire and make sure you’ve got attorneys here that believe in your mission and in your values and they are going to work hard for you, and are going to help you build your law firm into the thing you want to bill. So, that’s risky.

Michael: Could we take a minute on this one because I’m curious, in my own experience, over the life of the firm that I helped to manage, we had an era where that was the case. And, eventually we did move into the direction of billable requirements. And the area that it impacted us was our ability to be competitive in hiring associates at the money they wanted to receive. That there’s an intimate relationship between what they’re generating and what you can pay them. And it’s easy for an associate to expect top dollar without being as connected to that reality as the business owner has to be. So I’m curious if you thought about that? And how are you going to be able to do that, especially as the firm continues to grow?

Alex: So we use a lot of different inputs for compensation: billable hour amount and the rates that are being charged, the realization, utilization, those are all one bucket. But we emphasize non-billable time, too. We really want our…so, I remember as a young associate bringing work in the door that I wasn’t able to keep because we were charging too much. They were clients who were unwilling to pay those fees. When I have a young associate come here with a client, we have a conversation about what that client can afford to pay, what they’d be willing to pay, what arrangements we can make with them to accomplish what they want, but we don’t turn the client away. And there’s just so much creativity that you can add to the way employees operate that goes beyond the billable hour.

So some of those things that we were talking about earlier, those more nuanced, more innovative things that we do. Some of those came from second year associates, those ideas that they came up with because they owned restaurants, or they owned a bar, or they owned real estate. So they’ve hired lawyers before. So how you help the firm, that is what should set your compensation. Not just how much money you bring in from billing. Especially, because there’s just a, and rightfully so, there’s such a backlash now to the traditional billable hour for that reason, there’s an inherent conflict. You have associates that need to justify their compensation, that are working hard to get those bonuses at the end of the year, and it’s just not in the client’s interest. And the clients are seeing that. I think that…there’s a really great article about disruptive innovation in the law. I want to say it was published last year by some law professors in California. I think one of them might have been Stanford, I’ll email it to you if you wish.

Michael: Yeah, no, I’d be into that.

Alex: It’s a fascinating study of these four new business models that are totally changing the billable hour and getting away from it. I’m proud to say that two of those business models are ones that we use. One is the accordion model. When we need to provide our clients with lawyers that we don’t have, we expand and we bring lawyers into the firm for that lawyer, rather than sending the client to somebody else. And the other is the alternative services. So connecting our clients with accountants and with insurance agents. Providing them these general counsel services, things like that; non-traditional delivery of legal services.

My point it, it’s a long winded way of making this point, there are a lot of great, creative ways to compensate your employees other than just billable hours. And we really latch onto that over here.

Michael: It’s really interesting too because a young associate who’s learning how to develop business, they’re not necessarily going to land that $100 million company. But they need to have the ability to develop their skills on those smaller companies. And if the firm is not receptive to that, it doesn’t give them the opportunity to grow and get started.

Alex: So it’s funny. The thing you hear a lot when you’re a young associate at a big firm, again, I’m not pointing any fingers at any big firms, but the one thing you hear is, “You just focus on your craft. Focus on learning on how to practice law. Just think about that. Don’t think about anything else.” I always interpreted that as code word for just bill. Bill all day long. It’s a euphemism, at least that’s I always saw, and I know now that that’s how a lot of other junior associates interpreted that, from talking to them, from being one myself, from growing up with them, and coming up in the ranks with them.

You can bill, and you can learn your craft, and at the same time network, and sit on panels, and give presentations, and meet with perspective clients, and create budgets, and create proposals. You can do all of those things. You can pitch your services to a small start-up that can’t afford the large law firm, and figure out a way to keep their business. And there are very few things that, as lawyers, we can guarantee our clients. But one thing that I always say we can guarantee is, “We’ll find a solution that will work for you. We’ll figure something out.” You just have to be creative and you can’t just say, “You can’t afford us.” That just doesn’t work.

Michael: Well Alex, thank you so much for your time, and your thoughts, and good energy on this conversation.

Alex: Michael, thank you. And again, I love the podcast idea. I love the attorney excellence concept. I can’t wait to listen to all of the ones you’ve got coming out. So, I look forward to it. Thanks for having me.

Michael: Cool! You bet, thank you so much.

Key Links

Show Notes

  • Taking the lessons of big-firm practice and working for clients into launching a new law firm [2:45]
  • The punch-in-your-gut feeling from a bill that is higher than you told the board of directors to expect [3:45]
  • Other factors clients care about beyond just billing [5:10]
  • Providing Budget-to-Actual reporting to clients [6:00]
  • Giving clients more tools to make informed decisions about litigation [8:55]
  • When to use contract attorneys to provide better value to clients [10:44]
  • Clients might not realize it but they have power to ask question and push back on attorney recommendations [12:00]
  • Starting a firm with a different perspective has empowered them to innovate continually [13:55]
  • Becoming General Counsel for hire on retainer [16:00]
  • Internal audit services [16:35]
  • The no-questions-asked value adjustment for clients [18:35]
  • The firm’s list of Guiding Principals [25:25]
  • The quality that he observed his most successful business clients all shared [31:00]
  • No billable hour requirements [33:58]
  • Enabling associates to learn the skills needed to land new clients [39:05]