It may be the largest law firm in the world, but in terms of profits per partner, Baker + McKenzie is a lowly 75th in the US alone. So what’s wrong? And what is the world’s most successful law franchise doing?

When Abbott Laboratories planned the recent spinoff of its hospital products division, the company had the daunting task of setting up legal entities in more than 40 countries.

To help accomplish the task, Abbott turned to Baker & McKenzie, a law firm based in Chicago that is the world’s largest, with more than 3,200 lawyers in 38 countries. No other law firm comes close to matching its global reach.

But as more U.S. law firms have established foreign outposts, partners at Baker & McKenzie decided they had to reshape it into more of a corporate firm from what had been a loose federation of law offices in which quality of work and compensation formulas varied from country to country.

Today firms such as Abbott like the changes at Baker & McKenzie. The North Chicago-based health-care company is giving Baker more business in areas such as international patent and employment work.

“I perceive a greater sense of urgency and responsiveness on their part,” said Jose de Lasa, Abbott’s executive vice president and general counsel. “They seem to be getting their act together and making sure they can provide focused advice despite that advice coming from a multitude of offices.”

The huge job of transforming Baker & McKenzie was entrusted to Christine Lagarde, a partner in the firm’s Paris office who has a background in labor and antitrust law.

When she was elected chairman in 1999, competitors derided Baker & McKenzie as “McFirm.”

Today Lagarde, who splits her time between Paris and Chicago, contends the description was more perception than reality, but acknowledges that she took steps to more tightly integrate the firm, particularly in North America.

She pushed to consolidate back-office administrative functions among its nine North American offices, saving $7 million a year. Departments were reorganized around specific industries and every key corporate client was linked to a partner who can be called upon regardless of the advice needed.

Her most difficult challenge was selling a radical change in compensation for North American partners. In addition to the traditional emphasis on billable hours and seniority, the new system added subjective contributions, such as client service and professional development of young associates.

The belief is that by sharing revenues instead of an “eat what you kill” approach, the firm will transcend parochial interests and encourage attorneys to work closer together, Lagarde said.

From a profit perspective, the Baker model is inefficient. The firm has almost twice as many lawyers as Skadden, Arps, Slate, Meagher & Flom, but trails Skadden in total revenue. Skadden led all U.S. firms last year, with revenues of $1.3 billion; Baker was second at $1.1 billion.

Moreover, Baker’s firmwide profits per partner of $595,000 ranked 75th among the largest U.S. law firms, according to a recent survey by American Lawyer magazine.

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