"We had $17 million of additional expense in 2012 versus 2011 because we didn't do prepayments into 2012, so we were able to have the [expansion] we had, we didn't have the benefit of prepayments from the prior year and, despite that, we end up with our [net] profits up almost 7 percent and a steady basically the same [PPP] as the prior year," O'Donnell said. "So we performed at a high enough level that we were able to overcome not having the prepayments and we were able to overcome the costs involved in having the sort of expansion we had."
O'Donnell again cited 2012's revenue growth as how the firm was able to incur those additional expenses and still increase its net profit. He said there were no major expense cuts during the year. Rather, the firm invested even more into things like project management.
Capturing additional revenue in this climate has been difficult to do. When asked how Dechert did it in 2012, O'Donnell said the firm gained the most additional revenue from new clients rather than getting more work from existing clients. He said about half of that new client roster came from the attorneys who were joining the firm and the other half were new clients brought in by existing Dechert attorneys.
Dechert was able to hold on to more of that revenue in terms of profits through an increased use of project management, O'Donnell said.
"We face, in at least some areas, the same price pressures everybody else is facing," O'Donnell said. "We've chosen to deal with that by investing very heavily on the project management side so that we can do things more efficiently and we can have more confidence in so-called alternative fee arrangements, fixed-fee or staged-fee arrangements."
O'Donnell said the firm has tried to stay away from the "let's-just-bid-a-discount approach" and rather work out a plan with clients to look at each matter as a project and price it accordingly.
Dechert has integrated its project management team into its finance department. The team provides weekly reports to the heads of the legal teams working on the matter to ensure everyone is on track to meet the budget. If the work isn't on track, O'Donnell said, then the staff on the matter might be adjusted. Dechert also increased rates in 2012 by just under 3 percent, he said.
Dechert has seen its attorney headcount fall from a high of 922 lawyers in 2007 to a five-year low of 747 attorneys in 2011. That turned around in 2012 with the jump to 803 lawyers. O'Donnell said the firm's real estate finance practice, which "took major body blows" to headcount in 2007 and 2008, is being built back up. He said it wouldn't be built to anywhere near where it was before, however. And the firm got into the international trade practice in 2012 through hires in London and Washington, D.C. That is a practice O'Donnell said he expects to grow this year.
Not all practices are growing. The "nature of the way clients view some product liability matters" has changed, O'Donnell said, causing that group to reduce headcount and revenue during 2010 and 2011. Others in the practice group were "redeployed" and now maybe handle 50 percent products liability work and 50 percent commercial litigation, he said.
There are more partners at Dechert these days 7.3 percent more.