Sedgwick Latest Am Law Firm to Make Back-Office Move
San Francisco–based Sedgwick is going to Kansas City, Mo.
The Am Law 200 firm announced Friday that it plans to shift various administrative operations to a new office in Kansas City that will open sometime this summer. The facility will eventually house all of Sedgwick's finance, human resources, information technology, knowledge management, marketing and new business operations. Ultimately, roughly 100 employees—a mix of new hires and staffers who relocate from other firm offices—will occupy the office.
Most of the operations being shifted to Kansas City are currently handled in Sedgwick's San Francisco headquarters, while some are scattered across the nearly 350-lawyer firm's other 14 offices in the U.S. and abroad.
In a statement announcing the move, firm chair Michael Tanenbaum said the high price of San Francisco real estate and a desire to provide clients with "efficient and cost-effective" services had prompted the firm's decision to move the support staff. "As we evaluated our options," Tanenbaum said in the statement, "we had to weigh our 80-year history of firmwide operations being centered in San Francisco against the escalating cost of San Francisco real estate, opportunities available outside the Bay Area and the advantages of bringing together our firmwide resources in a central location. San Francisco remains home to our largest office, and we are committed to expanding the services we provide our clients from our San Francisco office while growing that office."
Sedgwick enlisted Deloitte Consulting to vet potential locations for the office, ultimately choosing Kansas City over such competing locales as Indianapolis and Raleigh.
Michael Healy, a San Francisco–based Sedgwick partner and member of the firm's executive committee, tells The Am Law Daily that it was more than just lower operating costs that tipped the decision in Kansas City's favor. The city's central location and the high-tech talent pool were also key factors, Healy says: "We have great information technology needs, and Kansas City actually has a very sophisticated IT environment."
Sedgwick is currently shopping for just under 20,000 square feet of office space in downtown Kansas City to house its operations, according to Healy.
If they are in good standing with the firm, all Sedgwick employees whose jobs are being shifted to Kansas City will be given the chance to move with them. Those who do not wish to relocate will have the chance to move into a new job at the firm. Employees who do not choose either option will be eligible for severance packages and outplacement services as long as they stay on through September 30.
Healy says it is not yet clear how many of the Kansas City staffers will be current employees who relocate and how many will be local hires: "We'll probably know in a couple of weeks what percentage of people here are interested [in relocating], and then we'll begin our recruiting efforts to fill the spots that need to be filled by local people."
In shifting its support operations to a less pricey locale, Sedgwick joins several other Am Law firms that have made similar cost-cutting moves in recent years. Kaye Scholer consolidated roughly 100 back-office staffers across a variety of departments to a new operations center in Tallahassee last year; Pillsbury Winthrop Shaw Pittman shifted its administrative operations to Nashville in 2011; and Wilmer Cutler Pickering Hale and Dorr combined nearly 190 employees in Dayton in 2010. As The Am Law Daily has previously reported, Orrick, Herrington & Sutcliffe put itself on the leading edge of the trend when it relocated its administrative staffers to Wheeling, W.V., more than a decade ago.
Healy admits that Sedgwick tracked the moves made by others before deciding to make one of its own. He also expects more firms to follow suit.
"Our lease was coming due in San Francisco," he says. "And, I suspect in other expensive cities for both workforce and space, as their leases come due, they'll have to make the same serious evaluation. We've been watching how a lot of other businesses are doing this as well, not just law firms."
One way in which Sedgwick's staff relocation departs from those undertaken by other Am Law 200 members is that it involves a city with a rich large law firm landscape of its own, thanks to such firms as Lathrop & Gage, Polsinelli and Shook, Hardy & Bacon. To Sedgwick, Healy says, the strong legal presence was a selling point. "To have a number of law schools, a number of other lawyers in town, was attractive to us," he says. "And also, in terms of supporting our operations center, it's comforting that big law firms are able to fully fill their needs from the local community."
Kansas City's ability to support such a robust legal community could ultimately persuade Sedgwick to deploy some its lawyers there, though Healy says there are no immediate plans to do so. Bringing attorneys to the new office, he says, is more of a "long-term plan" that the firm will consider further over the next couple of years.