Cleary Gottlieb’s leader is aiming for the law firm to significantly increase its revenue without substantially growing its headcount or changing its single-tier partner pay system.
Michael Gerstenzang’s ambitious goal is to position Cleary among the Top 20 firms by gross revenue. This would require a leap of approximately $500 million from last year, a 36% gain from their previous No. 30 ranking in gross revenue among US firms.
His drive for revenue growth comes at a time when some firms are making big moves to attract top talent, resulting in what Gerstenzang described as an “incredible frothiness” in the lateral partner market.
At a time when some firms are going to great lengths to hire top talent, Gerstenzang stated in an interview that “Within the last year you’ve had some eye-popping numbers,” referring to compensation packages for partners switching firms. He also remarked that the lateral market is “in the storyline of everyone’s head” and added that “Comparison is the thief of joy.”
Gerstenzang did not cite specific hires, but it was reported that a trio of Kirkland & Ellis partners who joined Paul Weiss could each earn upward of $20 million annually.
Culture Not ‘Ruthless”
Renowned for their M&A work and high-end global antitrust practice, Cleary Gottlieb is among the country’s most profitable firms with their partners earning $4.3 million on average in 2022.
Gerstenzang, who has been Cleary’s managing partner since 2017, revealed that the firm has 196 partners who all profit share. This partner count is almost double of exclusive firms like Wachtell Lipton Rosen & Katz or Cravath, Swaine & Moore, but similar to other Manhattan firms like Sullivan & Cromwell, Debevoise & Plimpton, and Milbank LLP.
In contrast with other firms, Cleary decided against adopting a nonequity tier in 2020, citing its “culture” not being prepared to be as “disciplined or ruthless” to manage non-performing income partners.
Leveraging AI
Gerstenzang is confident that AI will help him leverage a smaller pool of lawyers to compete with bigger firms. He also mentioned that the advances of generative AI in law firms is something he has been closely watching and that Cleary is testing training models through a subsidiary technology and project development incubator called ClearyX, launched in 2020.
He expressed that over time, generative AI will reduce the need for huge numbers of lawyers using “brute force” on projects and that it will also move law firms away from the billable hour toward value-based billing. He also said that generative AI is relatively inexpensive, and he does not need to develop it himself.