By MATT CHANDLER
mchandler@bizjournals.com | 716-541-1654

In the best of times, Western New York is considered a challenging place to operate a business. High taxes, cumbersome bureaucratic policies and a dwindling population make growing a business a daunting proposition.

If that's the grim reality in the best of times, the proposition is downright ghastly in an economic free fall like what the nation has endured in the past 24 months.

With that as a backdrop, we sat down with leaders of the three largest law firms in Western New York - Gary Schober of Hodgson Russ LLP, David McNamara of Phillips Lytle LLP and Peter Marlette of DamonMorey LLP - to discuss the challenges of managing a major law firm these days and what it takes to not only survive but thrive in the dog-eat-dog legal arena.

Let's start with your thoughts on the state of the legal community in Western New York today. Is the worst over?

McNamara: We've been very encouraged with what we are seeing in the first half of 2010. We maintained a very high level of business through 2009, which was surprising. We were bracing ourselves for a much slower year, but 2009 was a good year for us.

Schober: The good news is, I think the recession is winding down. However, before I get too optimistic, it is important to say up-front that the economy is in a very delicate state. All you need is Iran or Israel to do something drastic in that part of the world, the Afghan war to go badly for us - any number of global issues can set us right back to where we were.

I do think we are going in the right direction. We are seeing more corporate activity, more transactional activity - as we lawyers like to call it - at all levels and in all areas of practice. My best, or maybe worst, prediction is that we will begin to see a more sustained recovery in the fourth quarter of this year.

Marlette: Knock on wood, but we have weathered this economic downturn very well. Revenues continue to go up, which is remarkable given the industry both locally and nationally. We did not lay off, continued to give people raises and we continued to hire. We did take a hard look at our expenses and tried to cut as much as possible, but I think our move into the new building (the Avant) helped us in that regard because we were doing those types of things expecting that we would need to in anticipation of the move. What the other firms had to do because of the downturn, we had already started doing a couple of years ago because of the move.

How did the recession challenge your management style, and did it force you to adapt as employees looked to you for leadership and direction?

McNamara: From a management standpoint, we had to communicate to our people that we weren't going to make short-term decisions based on the then-economic conditions that will affect us in a negative way down the road. We focused on redeploying some very talented lawyers to other practice areas. The combination of providing assurance and the introduction of new opportunities to underutilized lawyers helped us through those tough times.

Marlette: There are always opportunities, even in a down economy. As long as you're financially well-positioned and your partnership, your management, is willing to take some risks, you can take advantage in an economic downturn. You've got to make tough decisions, but you can't make those decisions in a vacuum. It's all based on trust, and I think that comes from communicating with them and being receptive to their ideas. This can't work if it is a dictatorship; it's different than a corporate structure, and I don't have the luxury that a CEO has. You've got to build consensus.

With all of the different personalities in your firm, how do you manage the people part of the job?

Marlette: Constant communication. Trying to anticipate issues before they come up. Eighty percent of the people don't need a lot of hand holding. That 10 to 20 percent may need more tender loving care than the others, and you've got to recognize that so they feel included in the process. You've also got to have a good administrative staff in a large law firm, but ultimately, it comes down to communication.

McNamara: There are challenges because people come into any organization with different styles and ideas. It is a bit of a challenge to manage the people side of it, but I would say that a lot of it has to do with the front-end process and the type of people we look to attract to the firm. We work to make sure they have an understanding of the culture of the firm and what we are trying to do here. And that helps keep an even keel in terms of the personalities and the overall culture of the firm.

Let's shift gears. Where do you see the best growth in your firm in the next 12 to 18 months?

Schober: I would love nothing better than to be able to talk about something other than the economy and the recession. It has been 24 months of talking about it and planning around it, and while it has been necessary, it is not particularly productive in the sense of growing your organization and moving forward.

The best example I can give you is New York state is very aggressively pursuing people it believe owes them tax revenue and that pursuit is turning from civil to criminal matters because the state is hoping to put increased pressure on what it considers to be delinquent taxpayers. Over the last 24 months, we have begun to focus more on representing our clients on white-collar criminal matters.

McNamara: We've seen a couple of practice areas really grow in our firm over the last two years. Communications and pharmaceutical defense are very large practices in our firm. We are generally pretty bullish in what we will see over the next 12 to 18 months in terms of the overall opportunities to grow the business.

Share a nugget of your leadership style that you feel makes the firm stronger. In particular, a philosophy that translates to other business models.

Schober: I've got a theory that you don't really know what type of person you are, and in the case of a business, you don't really know what your culture is until it's challenged. A lot of organizations claim to have a certain culture, and then when the pressure is applied, it matters as much as when it was a theoretical issue. For us, we believe you treat each individual with respect and we take the team approach to practicing law. Every person here, from the secretaries and the mailroom staff to the most senior partners, (is) important to what we do. And that is a belief that we follow throughout the process.

Marlette: We have always been a firm that believes in giving our younger people more rope, more opportunities, than other firms do. There is kind of an entrepreneurial side to it. We try to advance our young people more and get out of that older strategy of advancement.

The approach has always been in the larger law firms, both locally and nationally, you work hard, you do a good job and you step up with your age and make a nice life for yourself. That's great, but the younger, more-aggressive attorneys aren't satisfied with that. They want to move up more quickly, and we want them to do that.