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Deutsch credits firm's longevity to smart growth, 'no jerk rule'

Caution in hiring and expansion have been key to growth plans

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One of the secrets to McElroy Deutsch's success, according to co-founder Ed Deutsch, is its strict 'no jerk rule.' The firm has fired partners 'because they didn't treat people with respect and courtesy,' he says.
One of the secrets to McElroy Deutsch's success, according to co-founder Ed Deutsch, is its strict 'no jerk rule.' The firm has fired partners 'because they didn't treat people with respect and courtesy,' he says. - (Aaron Houston)

McElroy, Deutsch, Mulvaney & Carpenter grew from two partners nearly 30 years ago to the largest firm in New Jersey today by weathering recessions without layoffs; carefully avoiding over-exposure to volatile areas, like mergers and real estate; and cultivating a reputation as a collegial place to work.

It also helped to have "the no jerk rule."

"It only takes a few bad apples to cause a lot of problems, and if you get rid of the bad apples and do it quickly, you can really stay focused on collegiality and civility and professionalism," said Edward B. Deutsch, the co-founder, who said he won't tolerate yelling and screaming. "The first time it happens, we tell people, 'If you do it again, you're gone.' We had partners we let go because they didn't treat people with respect and courtesy."

By all accounts, much of the credit for the Morristown-based firm's success goes to Deutsch, the managing partner throughout its history, whose DNA seems to be a rare blend of trial attorney and businessman. Colleagues and competitors say Deutsch is equally adept at the business development and executive leadership skills required to profitably manage a large firm with 308 lawyers in seven states, including 211 in New Jersey.

At some firms, running the business side as managing partner "may be the largest cross you'll ever have to carry, if you aren't into it. But Edward likes doing it, and he is very good at it," said Jerome J. Graham Jr., of the Morristown firm Graham Curtin.

Management consultant Howard Guttman coaches senior executive teams, including those at big law firms. Problems arise, Guttman said, when an excellent lawyer with strong technical skills moves into an executive role, but lacks leadership skills. He said the main issues he finds when coaching top law firm leaders is "they often come across as not user friendly — they cross the line and get too aggressive. They don't tend to collaborate well." Hearing about Deutsch, Guttman said he "sounds like an unusual guy, coming with both technical and leadership skills from the legal profession."

Deutsch and James Mulvaney were litigators who became friends in the late 1970s while spending a couple of years on opposite sides of a big construction case. In 1983, they quit their respective firms — Connell, Foley & Geiser, of Newark, for Deutsch; and Harper, O'Brien, Mulvaney, of Morris Plains, for Mulvaney —to start their two-man operation. Over time, the firm accelerated its hiring, and did its first merger in 2004 with Newark's Carpenter, Bennett & Morrissey, which brought a major employment law practice on board. In the mergers that followed, Deutsch looked for firms "that had very good lawyers, and very good clients, but had lost good management. They liked our management, and they could come to us and just focus on practicing law."

Mulvaney, who continues to do commercial litigation, said the culture of the firm reflects Deutsch's personality, and the personalities of the lawyers who've been carefully chosen to join the firm. "We don't have controversies that well into major problems," he said.

By diversifying into a wide range of legal practice areas, the firm hedges itself against the ebbs and flows of the economy. Right now, health care law is a growth area, and Deutsch said insurance is strong in good and bad economic times — the firm represents every major surety and fidelity bond company. Others specialties include bankruptcy, construction and securities law. The firm intentionally maintains a small merger and acquisition department, and has kept its real estate practice "efficient … to withstand the vagaries of the marketplace," Deutsch said.

Deutsch said the biggest challenge he faced was making sure the firm's culture didn't deteriorate as it grew. "You can get very tempted, when you are busy and growing, to take the easy way out and hire people you maybe shouldn't hire," he said. So as the firm grew via mergers, "the people who have joined us have either bought into our system, or they are gone."

Deutsch also engenders loyalty. Tom Considine, a former state banking commissioner and a close friend, recalled that about two months ago he needed to get a flight back to New Jersey in a hurry to attend a funeral, only to have his flight canceled. He sent a text message to Deutsch — who 30 seconds later sent a text message saying "go to the airport, I'll have a plane pick you up."

Considine, now with MagnaCare, said he got on a regular flight. "I wasn't going to let him charter a plane for me, but it just shows the kind of person he is. He will do anything for a friend, and he has an unbelievable problem-solving mentality."

Deutsch, 66, has strong Republican ties. He served on Gov. Chris Christie's transition team, heading the committee that studied the state Department of Banking and Insurance, and serves on the state Red Tape Commission. Deutsch also hosted Mitt Romney at his home in April for a fundraiser for U.S. Senate candidate Joe Kyrillos.

Deutsch said he runs an apolitical law firm. "If anybody tells you they can get something done because they know this guy, and he's a Republican or a Democrat, in my view it is utter baloney, for the most part. What you want as a client is access. If we call (Department of Banking and Insurance) or the Department of Health, we will get a call back, and if there is a problem we can go down and talk about it. You may not like the answer, but you'll get an answer."

Graham agreed: "If they get business in areas that are political, it is because the politician is smart enough to pick a good firm."

Still, Deutsch seems to have a mind-set, including for political issues, that helps his clients. "If you have a challenging legal, business or political issue — or a combination of all three of those things — talking it through with Ed and soliciting his advice is time very well spent," said Bernard Flynn, chief executive of New Jersey Manufacturers Insurance, which has been a client for decades.

And the advocate of the "no jerk rule" seems to practice what he preaches.

"Ed is a gentleman to his adversaries," U.S. District Judge Dennis Cavanaugh, in Newark, said. "He is a very bright guy who takes reasonable positions and stands up for his clients. He does the right thing."

E-mail to: beth@njbiz.com

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Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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