(Editor’s note: This March 2010 One-On-One is being republished in honor of T. Kennedy Helm III, the well-known and accomplished attorney who died Friday, March 15, 2013, at age 66. Read his obituary here.)
T. Kennedy Helm III
Kennedy Helm III is chairman of the Louisville-based law firm of Stites & Harbison. Since his election to the position in 1997, the firm has more than doubled in size, combining with firms in Atlanta, Nashville and Alexandria, Va. A 2007 survey of top law firm managing partners conducted by Edge International, an international legal consulting firm, identified him as one of the top 10 managing partners most admired for excellence in leadership by his peers. He is listed in The Best Lawyers in America® (1995-2009), Kentucky Super Lawyers magazine, where he is listed among the Top 50 Lawyers in the state and Chambers USA, and “America’s Leading Lawyers for Business.”
A transactional lawyer who focuses on business, banking and finance, and airport law, Helm is also very involved in the Louisville community, serving on the board of directors of Greater Louisville Inc., the Louisville Urban League, Simmons College of Kentucky and the West End School.
Ed Lane: The U.S. economy has been in a recession during the last 18 months. How has a weakened economy impacted the legal services business?
Kennedy Helm: There are a couple of ways the economy is generally affecting the legal business. One is our client’s concern about the cost of legal services. The other has to do with the model by which legal services are delivered. Those are two distinct issues but a lot of times they get muddled up.
Let’s talk about the first one – the cost of legal services. When clients complain about the cost of legal services, they are really talking about a disconnect between the price they are paying and the perceived value of the services they are receiving. There’s been a lot of talk about getting away from the way the legal services are priced in the U.S. If you’re a business legal firm, most likely your fees will be based on an hourly rate. There’s been a great deal of talk about alternative fees for services. A lot of that talk predated what’s happening in today’s economy, but the discussion has continued and intensified since the economy went south.
Alternative fee structures have not caught on for two reasons – first it’s a question of trust, and second it’s your ability to predict what a given transaction is going to cost.
Some parts of the practice of law are very hard to quantify. How many depositions? How long are the depositions going to be? How long is a trial going to last? How many motions by the opposing party will have to defended, etc. If a law firm comes up with a fixed fee, the client may worry the fee is too high because the firm knows more than they do. The attorneys on the case may be concerned that the fee is set too low because the client knows lots of things that have happened that the attorney doesn’t yet know about.
So at the end of the day, everyone prefers the hourly rate. I’ve spent a whole lot of time for a number of years looking at alternative fee structures because I believe our firm is very efficient, and therefore more cost-effective than our competition. Getting away from the hourly rate would give our firm a competitive advantage, but it’s very hard to develop a combination of factors going forward that makes that a reality.
EL: What is your perception of business conditions in Kentucky relative to the U.S. economy?
KH: Kentucky is struggling like most states are. The key indicator for a business-oriented law firm like Stites & Harbison is capital formation. Without capital formation there are no business transactions. So, in a down economy there are limited opportunities for legal firms to provide business services.
EL: Did the delay in state banking reform hurt Kentucky when it comes to capital formation?
KH: There’s no question that Kentucky was late to the game in banking reform/multi-bank holdings. Kentucky was a single-bank holding state for a long time. I can’t rewrite the business history of the state. It’s pretty clear if you took a snapshot of public companies headquartered in Kentucky in 1975 versus those headquartered here in 2005 and adjusted the amount of market capital, Kentucky would have more homegrown capital that it has today. Stites & Harbison’s strategy has been to expand to other parts of the region where there is more capital formation going on – in markets like Atlanta and Nashville.
There’s a big movement among litigation counsel for major companies to engage in a process that’s generally referred to as convergence – a company using 150 different law firms from across the country for different things reduces the number of its law firms to eight, 10 or 12 strategic partners. For that model to work, companies are naturally going to gravitate towards law firms that can handle their matters across a broader geographic spectrum. That is another piece of the puzzle why geographic expansion seems to be a pretty important part of our firm’s model. Convergence and capital formation are the two big reasons driving law firms toward a regional, national or international model.
EL: How does your firm help its clients budget legal expenses?
KH: We develop a budget, scope and schedule at the outset of the engagement. The fee is based on our handling of similar situations and what we think is likely to happen. I caution clients that their case may be different, but this is a ballpark estimate. This sounds sort of corny, but this is why any fee estimate is so dangerous. Most lawyers make assumptions that everything is going to go right; not that everything is going to go wrong. When we say the fee is going to be $20,000 to $30,000, our clients are likely to remember $20,000.
EL: What areas of legal service are soft; which are expanding?
KH: In our practice, ‘green’ construction is an area that is pretty significant. We have a number of people that focus on LEED certification.
Intellectual property law also continues to grow a lot. With initiatives at the University of Kentucky and University of Louisville to capture and commercialize their intellectual properties, there’s a huge role for lawyers in that practice area. Our firm has bio-chemists, chemists, nuclear physicists and patent lawyers in its Alexandria, Va., office where the U.S. Patent and Trademark Office is located.
EL: How is your firm’s management structured?
KH: Our firm’s management model is three-dimensional. Each practice area has a group head. Those groups are non-geographic. For example, we have intellectual property lawyers in Alexandra, Louisville, Lexington, etc., and we’ll have one practice group head, and he may have lieutenants in various offices depending on the size of the group.
We are also organized geographically. For example, Ken Sagan is what we call office executive partner in Lexington. He’s my alter ego for that office and handles issues that are geographic in nature. That could be anything from office assignments, parking spaces, work on the lease, recommendations about charitable contributions, whatever it may be. He is the face of the firm in that community.
And then my office is geographic.
We don’t have profit centers. Stites & Harbison is one firm; a profit center to me is a certain way of managing and rewarding people. We don’t say, you’re the real estate group and it’s had a bad year, so everyone in that group gets whacked. We’re one firm, so it’s shared sacrifice and shared profit. We try to look at our practice areas and see which are growing and succeeding and which need help. We look at it geographically as well, but we don’t use that information as a basis for making the kinds of decisions a profit-center model would make.
EL: How does Stites & Harbison plan to grow the firm?
KH: We have a process. The firm is divided for the delivery of legal services into service groups. Construction law, real estate, business litigation, corporate finance are examples. Leaders of those groups annually project their hiring needs for new lawyers to keep the pipeline going forward.
We also recruit laterally, typically for specific needs or opportunities, and that’s done on a case-by-case basis.
EL: How do you recruit new attorneys?
KH: Out-of-school, entry-level attorneys for the most part have come through one of our summer programs. We’ve seen their work product and seen them interact with their peers and lawyers. We evaluate their work ethic, sense of humor and see how they interact with staff. We look at a whole lot of things to determine whether it’s a good fit culturally and intellectually.
I do interview every lateral that the firm hires. They’ve been a practicing attorney somewhere else. I want to know why they want to leave, what kind of baggage are they bringing, and their culture. I want to make sure their experience is compatible and they can deliver what they say they can deliver.
The firm is spending more money on an experienced attorney, so it’s a big investment. Because I’ve been practicing law since 1974, I can sit down with most attorneys and in the course of 45 minutes or so develop a pretty good gut feeling as to whether they are going to fit in at Stites & Harbison.
EL: What do you consider the most challenging part of your job?
KH: Here’s the secret about being a law firm managing partner/chairman. It is the most fun job in the world. I mean it is a challenge every day. It’s an opportunity to build something every day. It challenges you personally and intellectually. It is wonderful. I’ve been doing this now for 13 years; I’m in my fifth three-year term.
There’s a two-term limit at the firm, and I’m on my fifth term, so I’ve blown through the term limits. The firm’s management group (board of directors), about a year and a half before the term is over, appoints a committee to go out and interview the partners to determine who would be a good candidate to be managing partner. I’ve never participated in the process. They go through an extensive interview process and then make a recommendation. At some point, I am asked if I am interested in serving again. I say if the firm wants me to do that it’s fine and if the firm doesn’t want me to that’s fine, too.
I will finish my fifth term in 2011, and I’m not going to run again. I’ve told the group that five terms has been a great honor and great fun, but I will be 65 in July of the last year of my term. It’s smart and time for the firm to have a transition.
EL: As chairman do you practice law or is 100 percent of your time allocated to management?
KH: I do some law practice. I still stay involved with a half-dozen clients for whom I’ve done work for a long time. But I’m mostly running a pretty big business. Practicing law helps make me better. The work I’m doing for my clients is advisory; I’m not drafting contracts.
EL: Louisville Mayor Jerry Abramson will be stepping down to run for lieutenant governor with Gov. Steve Beshear. What impact will having a new mayor have on the city of Louisville?
KH: Nobody in this community has focused on what it’s going to mean. We’ve been blessed over the last part of my adult life with Mayor Jerry Abramson or Mayor David Armstrong, who are both very dedicated public servants. They were honest, smart, experienced and cared a lot about this community. Not that the next mayor won’t.
EL: What do you think will be Mayor Abramson’s legacy?
KH: Part of the legacy is going to be a sustained golden age for Louisville. I can’t image Louisville without Jerry Abramson and to some degree David Armstrong at the helm. The one thing that is probably going to be remembered, in the short term, is Louisville Metro Government. The other is the airport expansion and UPS. Maybe those will be the twin things in terms of their huge impact.
Mayor Abramson took enormous risks to get out in front and lead the airport expansion effort. It was not popular, people were dislocated from their homes, businesses were moved, on and on. Now Louisville has UPS here, the largest employer in the state, and where would our communities be without UPS? That’s enormous. Similarly, with metro government, Abramson got out and became the spokesperson. He was identified and became the image of metro government.
For me, it’s a personal prejudice. I put less stock on bricks and mortar than on issues that impact people for the long term. The merger of city-county government and the airport expansion – I see those in a whole different order of magnitude. The arena is important; the support for Operation Bright Side (water front revitalization) – this award-winning effort is important. One of the most creative, brilliant and bold things Abramson did was to offer to buy Louisville Gas and Electric when he thought the utility would be sold by E.ON. That was incredibly imaginative and bold. Jerry Abramson has a lot of courage.
EL: How do you rate the performance of Greater Louisville Inc (GLI)?
KH: GLI has worked very hard on its agenda. Given the financial resources at its disposal and current economic environment, GLI is doing a good job and is highly respected by its peer chambers. GLI and its senior leadership are all very professional; they know what they are doing.
EL: Can you comment on Gov. Steve Beshear?
KH: Steve Beshear and I have been friends for 20 years, since he came to Stites & Harbison. I have a huge amount of respect for him, his integrity, intelligence, work ethic and judgment. Steve was our office executive partner in Lexington; I put him in that position when I became managing partner. I’m very biased because he and I have worked together for a long time; I think the world of him.
He’s playing the cards that were dealt to him very well. The people working with the governor on a specific issue or problem say he is really a bright, thoughtful person who’s trying to do the right thing. And I’ve heard that from people all across the political spectrum and all across the state.
My point is the governor was a fine lawyer when he joined Stites & Harbison, and he had a great career and was a leader of our firm. I think he’s doing a great job as governor under the circumstances.
EL: How are UofL initiatives helping support the growth of the greater Louisville region?
KH: The University of Louisville Foundation is a big player in all of those initiatives. UofL President James Ramsey is doing a great job in terms of implementing House Bill 1 and trying to move the university forward. He recognizes the importance of the university in the life of this community and the state. UofL has economic importance in healthcare and in bringing ideas not just to the marketplace but to the place where they actually help people. Ramsey’s been a wonderful leader for the university. I think the world of him.