McCarter & English posted a 2% year-over-year decline in gross revenue in 2019, to $245 million from $250 million, while improving in revenue per lawyer and profitability metrics.

The Newark-based Am Law 200 firm also decreased its lawyer head count by full-time equivalents to 359 from 372 (a 3.8% change) for the fiscal year, which ended on Sept. 30.

McCarter & English YOY financials

The firm is years into what leaders call a process to emphasize the business aspects of operating a law firm, and the net decline in attorney population in 2019 came amid ongoing efforts to achieve the right scale, they said.

Managing partner Joseph Boccassini said in a recent interview at McCarter's main office in Newark that a big part of the effort is "teaching the lawyers what the business side of the practice is."

The past five or six years "have been foundational for us," he added. "We're very institutionally patient."

Partner Joseph Lubertazzi Jr., who became the firm's executive committee chairman last year after Michael Kelly stepped down, called the process one that highlights "efficiency, productivity and profitability."

"The best way to get lawyer buy-in is to show them the results," said Lubertazzi, who joined in

Joseph Boccassini, managing partner, left, and Joseph Lubertazzi, chairman of firm's executive committee, right, with McCarter & English.

the interview. "What management has been doing here the last several years is show them the business side of law."

The compelling results, as Lubertazzi put it, include a 1.9% year-over-year increase in revenue per lawyer (RPL), to $683,000 from $670,000; and a 2.1% increase in profits per equity partner (PEP), to $827,000 from $810,000.

Average RPL for "second hundred" firms in fiscal 2018 was $667,513, and average PEP was $758,925, according to The American Lawyer's Am Law 200 report from last year.

Boccassini also pointed up that the firm's gross revenue has increased some $20 million (8.9%), and profitability has significantly improved, since fiscal 2014.

As for emphasizing the business side of the law, that has included the 2019 hire of Alex Macdonald, formerly of Venable, for the new role of chief client value and practice management officer; the recasting of the chief information officer position as chief innovation officer; the addition of a knowledge management director to replace the position of director of library services; and creation of an innovation task force looking into such measures as artificial intelligence-powered technology.

The chief value officer role has reaped benefits, the firm leaders said, citing as an example Macdonald's implementation of a fixed fee for an opioid litigation client that led the client to triple the legal work it gave the firm. (They declined to name the client.) There's also been a legal project management professional hired by the firm since Macdonald joined.

Macdonald's role is a client-facing one, and McCarter's emphasis on legal operations and practice management "is growing," according to Boccassini.

"The real challenge is for Alex to get out there and explain it" to some of McCarter's own lawyers, Boccassini said.

"The first question is, 'how much is that going to cost?'" Boccassini said of introducing the idea of pricing professionals to firm partners, adding, about Macdonald, "He'll pay for himself, and then some."

Lubertazzi acknowledged that the concept of pricing is not one that all law firms have fully embraced.

"I hope other law firms scoff at the idea … because we're taking work away from them," Lubertazzi said.

McCarter's decline in head count is attributable to retirements and other departures, according to Lubertazzi, who said the firm is hiring at about the same rate as it sees attrition, but called rightsizing "something we look at daily."

He added that demand is high, and "to the extent head count is down, we're not concerned."

Boccassini said head counts tend to fluctuate by practice area depending on economic cycles and countercycles, and it's "very hard to predict" those needs. He pointed to white-collar defense, corporate and real estate as practices to which the firm is looking to add lawyers.

He and Lubertazzi also named other practices that the firm sees as growth areas: products liability, the Washington, D.C.-based energy practice, corporate and intellectual property, as well as emerging growth, a capability added via the firm's 2014 acquisition of 17-lawyer SorinRand of East Brunswick.

The PEP increase came as the firm had a net gain of one equity partner (89), but saw a two-percentage point improvement in profit margin, to 30%.

That increased profitability is in part owing to the firm's renegotiating leases in three of its branch offices, a process that will also be undertaken for the Newark office, the firm leaders said.

McCarter has ranked in the 120s in recent iterations of the Am Law 200, which is ordered by gross revenue. It occupied the 125th spot in last year's ranking (based on its $250 million in fiscal 2018 revenue). That was one spot below Dinsmore ($250.9 million gross) and one spot above Kutak Rock ($249.1 million gross).