K&L Gates Goes on the Offensive in the Legal Talent Wars

When it comes to winning the legal industry talent wars, the best defense is a good offense, according to K&L Gates’ global managing partner, Stacy Ackermann.

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Her firm is “going out into the market” rather than “being in a reactionary mode of ‘Let’s see what comes to us and what the headhunters bring to us,’” Ackermann said.

She spoke to Bloomberg Law editor Chris Opfer on our podcast, On The Merits, about how competitive the market for legal talent has gotten, even in secondary markets like her home base of Charlotte, N.C. She also talked about why K&L Gates is continuing to push its attorneys to use AI, even after some of its attorneys got reprimanded last year for using hallucinated citations in a court case.

“I remember not so long ago that clients would say to me ‘Please tell me you’re not using AI,’” Ackermann said. “And now they’re saying to me ‘Please tell me you are using AI.’”

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This transcript was produced by Bloomberg Law Automation.

David Schultz:

Hello and welcome back to On the Merits, the news podcast from Bloomberg Law. I’m your host, David Schultz. Our guest today is Stacy Ackermann, who’s been at the top of the firm K&L Gates for almost a year now. Her firm is in the top 50 in the country in terms of gross revenue. But as you’ll hear, it still has to fight hard to attract and retain talent in a legal market where lawyers command higher and higher paychecks.

Ackermann spoke to Bloomberg Law editor Chris Opfer about this and about her firm’s approach to adopting AI. As you’ll hear, K&L Gates is still all in on the technology despite a high-profile misstep last year. First, Chris started the conversation by asking Stacy what it says about her firm’s geographic strategy that she and her co-chair, Rick Giovannelli, are both based in Charlotte, North Carolina.

Stacy Ackermann:

The fact that Rick Giovannelli and I both sit in Charlotte is really just happenstance to say that either of us are ever in Charlotte on the same day. It’s a very, very rare occasion that you will find either of us in the office together on the same day. So I do think that it speaks to the talent that we have in Charlotte and beyond.

Chris Opfer:

As somebody who has been there, at least officially based there for a long time, I’m curious what you make of these new entrants recently. We’ve seen Orick, Proskauer, I think Paul Hastings. Do you feel like we’re gonna see more of these national, global firms making a bigger play in Charlotte?

Stacy Ackermann:

Well, I do think it speaks volume as to the talent in Charlotte and also the client opportunities and relationships that are in Charlotte and continuing to come to Charlotte. Charlotte continues to grow with respect to the corporate entities that are sending and hiring in Charlotte. As you know, I mean, the lateral hiring wars are a real thing, right? And it makes it even more difficult when you have these law firms coming into town. And so of course we have to be very defensive and strategic about our current talent that sits in Charlotte and other locations as well. We’re seeing that in Seattle and other places, not just Charlotte, but it is a true talent war right now. And we’re being both defensive and offensive.

Chris Opfer:

Yeah, on the offensive side, grow, baby, grow seems like the mantra for all of big law. Is that the way you all are looking at it? And what’s your thought in terms of strategy?

Stacy Ackermann:

Well, I think grow, baby, grow in a strategic way. Yes, grow, baby, grow just to grow. No, we’re not going to do that. I stepped into the role as global managing partner back in July. So it’s been one of the things that we have done since I’ve stepped into that role is we have really changed up our lateral hiring approach. I’ve observed over the last several years, and this is not unique to K&L, but I think it’s one of the consequences of COVID as well is that many firms have become more reactionary in lateral hiring as opposed to really going out on the offensive in a strategic way. And so that is one of the changes that we have made since I stepped into this role as global managing partner is creating a committee that is led by equity partners that is going out into the market. So we are being strategic about the practices that we are interested in, the industries that we are interested in and the relationships. And instead of being in a reactionary mode of, let’s see what comes to us and what the headhunters bring to us, we’re really taking a different approach.

Chris Opfer:

Yeah, can you specify just a little bit? I mean, it seems like there’s two options here that we see firms in terms of how they approach it. One is like trying to widen the net of what you’re doing and the other is trying to go deeper in what you’re already strong in. It sounds like a little bit of the latter for you. And if so, if that’s right, what are you really focusing on in terms of industries and practice areas?

Stacy Ackermann:

Sure, so of course you’ll hear a lot of firms going after the same talent, right? I mean, different fund work and especially in the finance space and the corporate space, but also energy and insurance coverage, those are at the top of our list as well. So I am not so interested at this point, given our platform in expanding breadth, it’s really focusing on depth. Servicing our clients is first and foremost. And one of the things that we continually say at K&L is we’re bringing the voice of the client into the firm. And so bringing that voice of the client into the firm and listening to what they need and what we anticipate their needs to be in the future is what’s gonna drive those decisions with respect to lateral hiring.

Chris Opfer:

Does it give you any heartburn when you see stuff like yesterday, there was a report that Kirkland was giving somebody $80 million guaranteed over a three-year period to woo them away from Wachtell. I mean, I know there’s crazy numbers out there.

Stacy Ackermann:

It all gives me heartburn. But as I mentioned earlier, I mean, the lateral hiring right now is something that is a challenge every day. And a lot of times I see these numbers and I’m just scratching my head because they’re real. They’re real. And I think that, well, I know that our platform has some significant advantages for laterals and making sure that we provide the resources so that we not only bring the laterals in, but we ensure their success. Lateral integration is a big piece of lateral hiring. And I’ve always viewed lateral integration as a two-way street. It’s not just what is the lateral bringing to us, but what can we do and must do to support that lateral and help them grow their business once they join us.

Chris Opfer:

The other piece of this growth conversation is there’s been a ton of chatter, I think, so far about outside investment in law firms, whether that’s through changing some of the existing rules or going through these MSO routes that certainly are getting a lot of attention these days. I’m wondering, just as someone who’s worked in this space and leads a major law firm, what you think of that idea generally that law firms could start taking outside investment from private equity or elsewhere? And two, is it something that you think K&L Gates would ever consider?

Stacy Ackermann:

Well, I would never say we would shut anything out. As you know, lawyers don’t really like change, right? So I do think that a lot of lawyers thinking about this potential change, and we’re seeing it in pockets, right? But that potential change I think is frightening to many. I take a bit of a different approach is I think we need to be realistic that the profession will evolve and we need to make sure that we are being strategic about how we are going to evolve with it. And so I would never shut out any possibility and I expect that that’s gonna be our future as we’re continuing to monitor it. It obviously raises different questions within the profession. And I know I’ve listened to some of your podcasts where you’ve specifically addressed this issue with other law firm leaders as well. And it’s something that we’re staying on top of.

Chris Opfer:

So one of the justifications that we’ve heard is that AI just costs a lot of money to vet these tools, pay for them, figure out what you wanna use and how. Can you talk a little bit about the firm’s approach to AI? What, if anything, is it changing about the way you do business right now?

Stacy Ackermann:

My personal life, I never thought I would spend so much time on AI on a daily basis. And I would say it probably takes up anywhere to 30, 40% of my individual day. As you said, it’s not inexpensive, right? I mean, as a law firm, we have three big cost drivers, right? It’s our people, it’s our real estate, which continues to fluctuate in this market. And then third, it’s technology. So that is a very large piece of our overall expense budget. Clearly, AI is changing the way that we all practice on a daily basis. It’s also changing what our clients need and what our clients expect. And so working in a way that we can deliver on two fronts. One is our back office, right? I mean, from an expense standpoint, there’s some savings there. And then there’s the second piece of it, which is the work that the actual legal work that we’re doing for clients. I remember not so long ago that clients would say to me, please tell me you’re not using AI. And now they’re saying to me, please tell me you are using AI. How are you using it to do things in a more efficient way? And so we have been very calculating about how we are implementing it, the type of technology that we are using. I mean, every single day I’m hearing about a different type of AI technology and how it’s being used, either from an administrative perspective or actually providing the legal services.

Chris Opfer:

Yeah, I’m curious, is there an example that jumps out to you of like a unique way that you’ve seen lawyers at the firm using it to solve problems for clients?

Stacy Ackermann:

You know, this is a silly one, and it’s really, really simple, but someone was showing me the other day how they took a credit agreement and just put it in and spit out a closing checklist immediately. And it was maybe one minute, 30 seconds, and it was this complete closing checklist, which just blew my mind thinking, okay, if I had this tool as a junior associate, how different life would be. There’s obviously the challenge also though of, you know, if you have these tools and you’re able to do it so quickly, how are we training our junior associates, right? I mean, how are they going through the process that I went through of marking a credit agreement and actually typing out the closing checklist? There was a lot of learning that came through that process. And so that’s another piece of our professional development that we’re focused on is how do we make sure that we’re providing the same professional development to our younger lawyers? We’ve really taken a top-down approach with AI that, you know, I’m using it, our management committee is using it, our equity partners are using it. We’ve also taken some steps to reinforce that professional development. You know, we are now offering 50 hours that are counting towards billable hours for our associates for AI and technology use. So that’s been a recent change that I know is not unique to K&L, but was something that I believe our associates wanted and I do believe that it’ll further their development.

Chris Opfer:

And of course, K&L is among, you know, we’ve seen many examples here, but last year getting caught up with some hallucinated case citations in a court case, along with another firm that was working on an insurance case. We’ve seen examples of judges getting caught doing this. So it’s really an issue that a lot of firms are dealing with but curious in the wake of that experience specifically for the firm, have you made any changes there to just ensure that doesn’t happen?

Stacy Ackermann:

Well, we’ve always had a robust governance on our AI usage. Obviously we dove into what we needed to do, if anything, to strengthen that, but we have received certifications in the industry and have a very strict guidelines on training as well as governance as to the use of AI. And I think that’s something that we placed a great amount of importance on before that incident and most definitely after as well, and we’ll continue to do so.

Chris Opfer:

I mean, these are the, I don’t think any of these are surprise topics to you. These are the ones that we spend a lot of time on and we hear a lot about from folks in your position, but I’m wondering for you as someone who’s in the hot seat, so to speak there, what keeps you up at night as the leader of a law firm?

Stacy Ackermann:

Well, what keeps me up at night is making sure that we’re focusing. I mean, technology is a key thing. Also just making sure that we’re focused on profitable revenue growth. That’s where we are placing our emphasis of moving K&L forward is where do we see profitable revenue growth? Where do we, how do we provide the best quality service to our clients and provide a great working environment for our employees? Bringing the client’s voice into the room and listening to that voice to drive our decisions and to our priorities and where we want to invest, that will be what propels us forward.

David Schultz:

That was Stacy Ackermann, Global Managing Partner at K&L Gates, speaking with Bloomberg Law’s Chris Opfer. And that’ll do it for today’s episode of On The Merits. For more updates, visit our website at news.bloomberglaw.com. Once again, that’s news.bloomberglaw.com.

The podcast today was produced by myself, David Schultz. Special thank you to Alison Lake for booking our guest, our editors were Chris Opfer and Alessandra Rafferty, and our executive producer is Josh Block. Thanks everyone for listening. See you next time.