Business

Some KC law firms wonder if recruitment was economic development or raid on existing business

Russ Welsh of Polsinelli.
Russ Welsh of Polsinelli. The Kansas City Star

Business and civic leaders usually are thrilled when new companies come to town.

But Russ Welsh, the head of Polsinelli, one of Kansas City’s largest law firms, is unhappy that the Kansas City Area Development Council has recruited two West Coast-based law firms to move their administrative operations — about 375 jobs — to Kansas City.

In protest he said he’s withholding Polsinelli’s 2015 development council dues, at least for the time being.

Welsh, a former chairman of the Greater Kansas City Chamber of Commerce — who otherwise might take an economic booster’s role — has also shared his concerns with the chairmen or managing partners of several other large Kansas City firms and asked for a group meeting Tuesday to talk about it.

“We have all enjoyed a cost advantage over our competitors because of our location in Kansas City,” Welsh wrote recently to the other law firms. “But I am concerned that this move will increase our employee costs and may drive some of us to move our core administrative functions to other cities.”

Representatives of some of the other law firms said Welsh wasn’t seeing the big picture.

“Any time we attract new businesses — unless the new employer will hire only unemployed people — there may be adverse effect on existing businesses, but the alternative is almost guaranteeing a stagnating economy,” John Murphy, chairman of Shook, Hardy & Bacon, said in a telephone interview Monday. “Our position is that, obviously, we’re in favor of continuing economic growth in the Kansas City region.”

The Kansas City Area Development Council, the agency charged with recruiting businesses to the metro area, led successful efforts to attract new administrative offices to Crown Center of the Littler Mendelson and Sedgwick law firms, two large national firms.

Together, the two firms plan to employ about 375 back-office workers in Kansas City. Such offices generally handle information technology, finance, litigation support, human resources, marketing and research operations for the firms.

Sedgwick’s recruitment was announced early last year. Littler’s move was announced earlier this month.

Both Sedgwick and Littler said they chose Kansas City because it had a wealth of the workforce talent that they want.

Sedgwick already has hired some talent away from Kansas City firms, and Littler’s arrival suggests more movement to come. Sedgwick and Littler, with West Coast roots, have been accustomed to paying higher wages, and the effect on the Kansas City market hasn’t yet played out.

Welsh, in a telephone interview Monday, said he was concerned that the Kansas City area lacked enough of that skilled workforce, particularly in information technology, to meet the needs of Sedgwick and Littler as well as those of the local law firms.

He likened the situation to “raiding each other” to induce companies to move across the state line between Kansas and Missouri, which fails to create net job gains for the area.

“Are we doing the right thing strategically?” he said. “I don’t want our agencies to work at cross purposes.”

Bob Marcusse, the development council’s president and chief executive, said Monday that the topic deserved community discussion. But he said “a broad coalition of interests” — including states, counties, cities, real estate firms and utilities — “wants to grow the economy of the region.”

The development council expects the area to gain more residents and workers from the recruitment, he said.

“We now have 109 Littler employees committed to a relocation visit to KC on one of four weekends scheduled for the next month,” Marcusse said. “Seventy percent have stated they would move with a significant other who will be looking for employment, thus allowing us to bring additional talent from all sectors of the economy into the KC workforce.”

Jeff Simon, responding for Husch Blackwell, said in an email to Welsh that his firm supported the development council’s recruitments “because we think they have been an important part of the remarkable Kansas City renaissance we have seen unfolding around us in the last several years.”

Simon wrote that, “While it may cause our firm some short term headaches and expense, we think this is a burden worth bearing for the good of the whole.”

At the Kansas City office of Bryan Cave, managing partner W. Perry Brandt said in an interview Monday that his firm took “the larger view here that a rising tide lifts all ships and that, basically, it’s a market economy and law firms will respond accordingly.”

But Welsh’s email did reach some who shared his concerns.

Mark Hinderks, at Stinson Leonard Street, said in an email response earlier this month to Welsh that he’d already expressed an “unfavorable view” about six weeks ago to Marcusse concerning the Sedgwick recruitment, which preceded the Littler announcement.

But Hinderks clarified Monday in an email to The Star that his “firm and I have been long-time supporters of KCADC. … However, it is always appropriate for any business or firm to discuss and evaluate the goals and actions of every organization it supports for congruency or disharmony with basic business goals, and then to either attempt to align the two (by advocacy or discussion within the organization) or consider some other approach.”

Welsh’s role as a past chamber chairman points out the economic development difference between the chamber and the development council. The chamber primarily focuses on retaining, advocating for, and celebrating metro-area businesses. The development council works to recruit out-of-town entities to move to the area.

The state of Missouri provided modest incentives for the law offices’ moves, but local agencies and the city of Kansas City said no municipal tax breaks were given for the law firms to move their administrative offices.

Several Kansas City law firm partners have board positions with the development council or the chamber or both. In those dual capacities, there is a balance between retention of existing enterprises and recruitment of out-of-town businesses.

Murphy, the Shook, Hardy leader, for example, became co-chairman of the development council after the Mendelson and Littler recruitments were cemented. He said he understood the push-pull of economic development.

“If you’re an existing business thinking with your heart you may say, golly, we may lose some people (to the new arrivals), but if you think about it with your head, it’s a good thing,” Murphy said.

Welsh said Monday that he expects the issue to produce “a dialogue” at a private Tuesday meeting among law firm leaders.

To reach Diane Stafford, call 816-234-4359 or send email to stafford@kcstar.com. Follow her online at kansascity.com/workplace and @kcstarstafford.

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