Marty Klaper

Introduction

Weeks 1-10 of Business Planning covered nearly every stage of a closely held business, from early startups through successful growth, late-stage startups, and liquidation events. Along the way, we also learned about investment banking, with a focus on sell-side, as well as real estate development, and even an introduction to the family office sector. These case studies shed light on a myriad of legal and structural planning challenges that closely-held businesses routinely encounter.

We learned from founders, key employees, and individuals involved at different business cycle stages. Finally, on November 2, 2023 (week 11), we heard from Marty Klaper, a law firm lawyer, who built his practice counseling closely held businesses.

What is this case study about?

This case study provides a strategy and roadmap for building a law practice serving closely held businesses as clients. The case study explores Marty Klaper’s successful career as a labor and employment attorney, showcasing his strong preference for working directly with owners and managers rather than engaging with in-house counsel or legal departments.

In this capacity, Marty advised his clients on both legal and nonlegal issues, eventually becoming a trusted business advisor to an array of closely held businesses. Marty’s stories and insights were a fitting way to conclude the course, as many students were drawn to Marty’s authentic style and the strong client relationships it often produced.

This Case Study is organized into the following sections: 

1. Closely held businesses: Explore the distinct opportunities afforded by working with closely held businesses, where lawyers must blend legal expertise with business acumen. Develop a deeper understanding of the role attorneys play actively contributing to problem solving, forging intimate client relationships, and cultivating enduring connections, all while paving the way for a career that can provide both financial security and personal satisfaction.
2. The Marty Klaper story: Embark on Marty Klaper’s journey from working in a steel mill to becoming a successful labor employment lawyer, revealing the transformative influence of personal values and genuine connections in strategic business development. Explore the narrative that subtly invites reflection on Marty’s commitment to effective problem-solving and preference for authentic relationships with decision-makers, showcasing the profound significance of trust and loyalty.
3. Compensation: The benefits of client-centered fee arrangements: Learn how client-centered fee arrangements, rather than the conventional “Billable Hour” model, not only enhance client satisfaction but also can unlock new business opportunities for attorneys.
4. Marty Klaper’s endorsement of the Getting Naked Model: Explore how Marty Klaper’s successful career was essentially built on the Getting Naked Approach. Discover challenges faced when attempting to introduce a new culture.
5. Final Lessons, Final Thoughts: Embarking on a legal career calls for a subtle focus on learning, skill honing, and cultivating relationships. Reflect on student’s key takeaways and Marty’s guidance, highlighting the significance of acquiring experience, seeking mentors, and shaping one’s practice in alignment with personal values.

1. Closely held businesses

A. Definition

For many reasons, someone would enjoy working with closely held businesses. But first, what is a “closely held business”?

A closely held corporation is defined as “a business that has more than half of its stock owned by a few people.” Adam Hayes, Closely Held Corporation: Definition, Types, and Examples, Investopedia (last updated June 26, 2021). The shares are typically held for a long time, and the shareholders possess significant control or influence in the company. Id. Closely held is different from a publicly held corporation, which typically has many shareholders with limited influence on the business’s operations and can freely buy and sell shares listed on the public stock exchange platforms. Id.

Closely Held Businesses can also be private companies that “may issue stock and have shareholders, but their shares do not trade on public exchanges.” James Chen, Private Company: What It Is, Types, and Pros and Cons, Investopedia (last updated May 27, 2022).

B. How client type affects lawyer’s role

Working with closely held businesses allows, and many times necessitates, attorneys to be both legal counsel and a trusted business advisor. Therefore, not only does the attorney need to know and understand the law, but also requires some business acumen, communication skills, and even a touch of personality.

i. Solving significant problems and having a real impact

According to Dwight Drake, closely held businesses “are the backbone of the American economy” and “they are the absolute best clients for the lawyer who wants a healthy, vibrant practice that offers real independence, real financial security, and the personal satisfaction of being able to provide constructive, positive value-added services that really matter-that make a difference.” Dwight Drake, Business Planning: Closely Held Enterprises (5th ed 2018), at 673. 

Serving these clients enables lawyers to work closely with decision-makers facing significant problems and become an integral part of the processes of finding or creating effective solutions that produces real value for the client.

ii. Deeper, more intimate relationships

Strong relationships with client leadership teams can create opportunities that otherwise would not be afforded and can eventually create more business through referrals. Over time, the attorney-client relationships can also develop into meaningful and long-lasting friendships—that was certainly the case with Marty Klaper.

Developing relationships with the clients’ employees at all levels, not just with the executive team or top employees, can also help propel someone seeking this career path. One way of doing this is by spending time working in clients’ various departments or factory lines free of charge to gain a deeper understanding of business operations and how to best serve the client. This is something not many attorneys do. Yet, doing so earns respect across organizations, not just from higher-ups. This act demonstrates a commitment to the client’s best interest, not just its money.  

2. The Marty Klaper Story

A. Marty’s Background

Martin Klaper, “Marty,” was born in the suburbs of Chicago to an Eastern European immigrant father. His parents came from humble beginnings; his father worked as a barber, while his mother was a beautician. Marty grew up in Gary, Indiana, when the steel mills were a huge source of employment within the community. The mills offered employment opportunities to people of all levels of education. Marty worked at the steel mill long enough to gather the financial resources he needed to pursue a college education. Being an Indiana resident, he decided to attend Indiana University’s Kelley School of Business.

Marty’s first-hand experiences working in the steel mill—and facing employee relations challenges—were his biggest motivation for applying to law school. He decided that there had to be more effective ways to solve such problems. Fueled by this belief, he pursued a labor and employment law career. This commitment persisted through law school and continued to influence his mindset in post-law school job interviews.

B. Early Career

Marty’s law school experience was unique because he completed all his credits and graduated in just five semesters. Due to his stellar grades and friendly disposition, Marty had multiple offers from law firms in California, New York, Oregon, and Indiana.

Ultimately, he chose to join Ice Miller, a big law firm in Indianapolis, Indiana. His reasoning was simple: he liked the people who interviewed him, and he could see himself work in the labor and employment practice group. He was also confident that they would embrace his idiosyncratic personality.

Marty quickly identified the practice group’s most successful and influential partner, or as Marty fondly titled him, the “Big Bear.” Marty proactively sought out the Big Bear’s mentorship and spent as much time around him as he allowed, trying to soak up everything possible like a sponge. This is a delicate balance, as Marty explained, “The difference between a brown noser and a shithead is depth perception.” Marty was determined to learn from the best while benefiting from Big Bear’s impressive practice, which for the most part consisted of publicly traded corporations.

C. Advising GCs versus HR executives

The Big Bear took Marty under his wing, enabling Marty to gain experience working
with a wide range of clients. This experience was invaluable as it helped Marty gain insight into the operations of different clients, finding that he preferred clients that allowed him to report directly to decision-makers. Marty reflected upon his experiences in an email:

The graphic below summarizes the six different types of law firm clients.

Generally speaking, Marty preferred working with Types 1 and 2. For Marty, large, publicly traded companies (Types 3-6) had too much bureaucracy, and he struggled to get his unaltered advice to the decision-makers.

Marty enjoyed working with the three big corporate clients, and built relationships with the VPs overtime, which afforded Marty opportunities to work on projects that expanded his skill set. Those VPs also helped Marty build his book of business through their referrals, including to a number of their suppliers. Many of the suppliers to the major manufacturing organizations were small, closely-held businesses. Working with such clients tends to be much more intimate as they have smaller management groups. Often the Owner, CEO, and President would be the same person.

As the referrals increased, Marty began building a book of business independently from the Big Bear’s portfolio. Fortunately, the Big Bear supported Marty’s autonomy and offered guidance whenever needed. Marty’s ability to be honest with his clients, coupled with the support and encouragement of his senior partner, helped him grow his practice and build credibility with his clients.

E. Public speaking strategy that really worked

As Marty gained experience and grew more confident in his skills, he formulated a business development strategy around public speaking. In addition to speeches to industry group, which likely had prospective clients in the audience, it also included continuing legal education (CLE) programs for lawyers. This strategy focused on doing at least two speaking engagements each month. Marty chose subjects within his skill set that he believed could lead to business referrals. 

In each instance, Marty’s goal was to engage the audience, encourage questions, and establish meaningful connections with attendees. In his approach, Marty chose not to pitch his services. Instead, he interacted with each individual as though they were already valued clients. As Marty explained, “From the day I became a Partner, I never sold. I consulted from the get-go. I started serving prospects as If they were already my client[s] and existing clients as prospects.”

According to Marty, this approach, which practically mirrors a core principle of the “Getting Naked”/Lighthouse approach discussed below, creates genuine connections and establishes trust with the audience. This is the first step towards building long-lasting relationships.

One extremely fruitful example of the benefits of this approach began when a young attorney asked Marty a complex, not-so-hypothetical question during a CLE presentation. The question was so complex that Marty suggested the audience member find him during the break, which he did. Marty advised this individual on his issue without any expectations.

Fast forward six-seven years, that young lawyer became the governor of Indiana and inherited a range of labor and employment issues from his predecessor. The new governor called Marty and requested his assistance. This engagement lasted 24 years, extending through three subsequent governors, irrespective of their political affiliations. The serendipitous nature of that connection was pivotal, and it highlights the value of being candid, honest, and building trust with individuals from different walks of life. It also demonstrates the unexpected opportunities that flow from treating every question as if it came from a valued client.

Although this particular undertaking didn’t emerge as Marty’s most financially lucrative venture, assisting the state was still incredibly rewarding in other ways for Marty. This serves as a compelling illustration of recognizing value beyond monetary compensation.

Yet, the story does not end there. Marty’s work for the state led him to represent a client who started running the first riverboat gambling business in Indiana. The new client reached out to Marty under the theory that if Marty was good enough for the state of Indiana, then he must be pretty darn good. This new relationship deepened over time and paved the way for diverse work, from union prevention training to sexual harassment prevention at the client’s multiple casinos across the country.

The trust between Marty and the client ran so deep that Marty found himself in the exclusive “inner circle of advisors” when the owner successfully sold his casino business for over a billion-dollars.

3. Compensation: The benefits of client-centered fee arrangements

A. Structuring fees

Many law students aspiring to work for law firms dread dealing with the “Billable Hour” compensation model. This model typically entails attorneys establishing an hourly rate and invoicing clients for the time dedicated to legal tasks on a particular matter.

However, not all time expended is billable, including the time invested in tracking and calculating billable hours, adding an additional layer of complexity to the system. See Sharon Miki, “How to Track Time with a Billable Hours Chart,” Clio.com (2021) (explanation of Billable Hours). However, Other compensation structures are available that provide a better system for the client and the attorney. 

Marty believes the billable hour structure is a broken system. During class, Marty described the system as partners deciding how much money they want to make that year, then calculating how many hours everyone in the firm needs to bill and at what rate to reach their goal. According to Marty, this arbitrary and rigid structure goes against the client’s interests while also leaving money on the table. Yet, Marty warned that, depending on organizational structure and culture, these norms may be difficult, if not impossible, for one person to change.

Other less prevalent fee structures include flat-rate and contingency fees, which are more common in certain practice areas and specific matters. See, e.g., Modern Family Law, Making Sense Of Legal Costs: A Guide To Attorney Fee Options (July 25, 2023). In the context of flat-rate fees, attorneys charge a predetermined amount for specific types of legal matters. On the other hand, contingency fees are calculated as a fixed percentage of the outcome achieved in a given case.

Marty used an alternative, unique approach in which he “never discussed fees unless the client insisted and always tried to avoid hourly rate agreements because they generally did not serve the client’s best interests. [Marty] would move the discussion of what value should be assigned to what outcome.” Marty’s Email. It is interesting to note that Marty would bill his clients with an explanation of “for services rendered.”

Marty admitted that his contrarian billing practices did not always align with firm policy, and created discomfort between him and other partners at the firm throughout his career. Yet, Marty was willing to live with that because he knew that his clients were happy, and that he was bringing in plenty of money and work into the firm. This payment structure enabled Marty to do things that others could not, such as sitting in on some of his clients’ internal meetings, which traditionally would not count toward billable hours. 

B. Shelf products

Marty stressed that one should not underestimate the amount of income that can be generated by creating and teaching legal systems and programs, what Marty refers to as “shelf products.” Shelf products are programs or processes addressing legal, and seldomly non-legal, issues that can easily be sold to multiple clients. These products can be implemented by the client with or without the attorney’s direct help. This allows a solution to a client’s problem to be sold with little work necessary, but also attracts further business, as clients often seek assistance for seamless implementation of these solutions. Therefore, shelf products can be significant sources of long-term revenue that require minimum effort once created, thus resulting in a high profit margins.

Opportunities to create shelf products arise when clients have a recurring problem or when multiple clients face similar issues. For Marty, this typically involved attempted unionization of the workforce or information on how to update current policies and procedures after the issuance of new regulations.

These opportunities allow for greater expenditures of time and effort into developing solutions, while charging the original client less because the difference will be made up for by selling the shelf product overtime. This does not work, or at least would not be lucrative, under the traditional billable hour model because the first client would be charged an exorbitant amount, while the subsequent clients would have little to be billed for since the time and energy spent is already a sunk cost.

One example Marty provided was his creation of a shelf product resulting from helping a client who operated a manufacturing facility. After spending months with the client, Marty himself working in several positions at the facility and sitting in on meetings to better understand the situation, Marty was finally able to explain what he thought the problem was and offered to do more research into a solution.

Months later, Marty finished creating an extensive supervisor training program and team-based work system that was entirely compliant with the National Labor Relations Act. The facility supervisors expressed to their bosses that they were incredibly grateful for the training and that it was a huge success within the workforce. 

When it came time for Marty to bill the client for services, Marty went with a number that reflected the value his product created for the client. He did this by asking the client what that number was rather than billing for the total time spent. The client was one of Marty’s smaller clients, and had Marty billed the client for all the hours he put in, it would have been a much greater number than the value the client actually received or could afford.

Nonetheless, this worked out well because the client, during a golf outing, sang Marty’s praises to his good friend who was the President/CEO of a multi-state manufacturing company struggling with similar issues. The CEO quickly called Marty for help. Marty treated the CEO as if he was already a client, explaining the program and answering all his questions.

The CEO liked what he heard, so he introduced Marty to two leading industrial psychologists who were working with the company on its expansion plans. Marty was asked to join the team, thus helping redesign the employee intake process, union prevention training, and the hiring and training of the supervisors of each plant.

Moral of the story: Innovative work for a smaller client eventually turned into enough work to keep Marty busy over the next five years. This would never have happened had Marty focused on billing hours rather than solving the clients’ most pressing problems.    

4. Marty Klaper’s endorsement of the Getting Naked Model

A. The Lighthouse story

The book Getting Naked by Patrick Lencioni tells a business fable demonstrating the key points of what Lencioni coins, the Getting Naked Approach. The lessons from the book align almost perfectly with how Marty conducted his practice throughout his career. In fact, Marty himself admitted, “I did not realize it, but I spent my entire career taking my clothes off [getting naked] in front of my clients.”

In the book, Jack Bauer, a management consultant at a large consulting firm Kendrick & Black (“K&B”), is tasked with ensuring a successful merger between his firm and one of its competitors, “Lighthouse,” which K&B purchased without any due diligence. Lighthouse is a smaller, boutique firm that had great success operating under a significantly different culture and approach to consulting compared to K&B.

Jack is forced to spend time learning the ins and outs of Lighthouse. At first, Jack finds everything about it to be ridiculous, but eventually buys into the culture and values after seeing the undeniable success of the Getting Naked Approach. Eventually Jack explains the Getting Naked approach to the partners at K&B and advises them to implement the approach, yet K&B decides it is not willing to make such substantial changes. 

The book describes the concept of the Getting Naked approach, and breaks it down into a model based on three fears that sabotage client loyalty: (1) fear of losing the business, (2) fear of being embarrassed, and (3) the fear of inferiority. It also provides insights into how to overcome these fears, which leads to elevated client loyalty and trust.

These principles apply to all service providers, especially to those, “whose success is tied to building loyalty and sticky relationships with the people they serve.” Getting Naked, pg. 196. This clearly includes the legal field.

B. Marty’s career Getting Naked

Marty spent his entire career embodying the Getting Naked approach, and believes those key principles helped advance his career while increasing value for his clients. Marty never feared losing business or giving away free advice. Instead, he subscribed to the philosophy that if he was going to lose business, then he probably shouldn’t have had it in the first place.

One example of Marty “entering the danger” was during one of his client’s meetings with all the department heads. In the meeting, the group leader whose group was not performing well explained how he typically addresses issues with his subordinates. Marty simply looked at him and asked, “Do you really talk to people that way”? The room fell silent—everyone looked down at their shoes. The group leader was surprised but quickly responded saying, “Well, yeah, you know. This is how you let them know they’re accountable.”

Marty quickly realized that every person in the room knew how this leader behaved and had likely been on the other end of his harsh criticism at some point. Marty decided that this behavior needed to be addressed, so he began a discussion that allowed the group to deal with it instead of sliding it under the rug. The client was grateful for Marty’s ability to say what needed to be said even if it made everyone uncomfortable at first.

This example demonstrates the difficulty and importance of many of the principles of the Getting Naked approach. Instead of avoiding potential conflicts or challenging conversations, trusted business advisors/lawyers who “enter the danger” courageously confront issues, provide honest and direct feedback to clients. This builds trust and intimacy with the client. 

Marty also gained his clients’ trust and respect by being willing to take a bullet for them. For example, Marty encouraged one client to change its scheduling system based on sound business reasons. Upper management was convinced, and the system was implemented without consulting the workforce. Shortly after, Marty received a distressed phone call from the client, who explained that the entire organization was in turmoil because of the employees’ negative response to the new system.

Marty promptly responded by admitting, “This was my idea. I am to blame.” This took the heat off management, despite their involvement in the decision-making process. Ultimately, the client was grateful for Marty’s accountability.

This example demonstrates Marty’s relationships with his clients. Marty developed relationships that were “more than one mistake deep,” a characteristic of a healthy attorney-client relationship that is built on trust and loyalty.  

C. Law students desire a Lighthouse culture, but firms struggle to replicate it

Before class, students were instructed to articulate their preference between the Lighthouse culture and the K&B culture by jotting down their thoughts on a piece of paper. Interestingly enough, every one of the 17 students anonymously agreed that they would prefer to work in a firm like Lighthouse.

Marty was thrilled by that response because he had worked very hard to create a culture similar to that of Lighthouse in his own practice. However, he did warn the class that finding such a culture is not an easy feat, especially at a big law firm. 

Marty developed an impressive labor and employment practice over many years. Throughout his career, and especially towards the end, Marty was approached by firms that wanted him to jump ship and join their firm, but only if he brought his clients with him. Marty had never considered leaving Ice Miller during his practice, however, he was intrigued by the opportunity for a fresh start—helping another firm—as he neared retirement.

Marty had years of experience and profound knowledge of the law and business, which put him in a terrific position to pass that knowledge on to others helping them develop their own practice. Yet, none of the other firms saw value in this wisdom. Rather, Marty was approached only for his book of business, instead of his knowledge on how he built it. 

Eventually, Marty decided to join a larger law firm in their New York office. He thought he could share his advice and help the firm and its attorneys grow their practice. However, Marty overestimated the firm’s commitment to long term practice building—instead the firm operated significantly on the billable hours model. Marty described the operating structure as having an impractically high minimum billable hour requirement that made it nearly impossible for anyone to meet.

The firm’s billing policies made it challenging for attorneys to deliver the value clients deserved, maintain a healthy work-life balance, and, most importantly, hindered the ability to build a successful practice. Marty did not stay for long once he realized he could not change the system or culture. 

This experience was similar to that of the protagonist, Jack, in the Lighthouse story. Just like the story, the big guy here liked how the numbers looked on paper but was not willing to integrate the culture that was the secret sauce to success. This is also one of the reasons Marty believes that in this day and age starting a career in a 30-something attorney law firm is much more ideal place to build the kind of practice he had. 

5. Final lessons, final thoughts

A. Marty’s advice to the class

Marty provided key insights into building a practice with a strong and positive culture while serving the type of clients where one can make a real difference. However, he explained that no one is able to build that type of practice on their own immediately after graduating law school and passing the bar exam. Marty advised taking the first three to five years of practice to learn; develop processes, relationships, and a library of forms; and get experience meeting clients.

Further, it is extremely important to find good, reliable mentors and soak up as much information and resources as possible early in one’s career. Marty also stressed the importance of continued learning and growing along the way, but explained that the beginning is critical because taking advantage of resources early on, as he did with the Big Bear, can pave a way for a future of your choosing.

Marty emphasized that focusing on developing a “bag of skills” with the intention of switching jobs or careers should not be a source of guilt or shame. He explained, “If you decide that the fish bowl you’re in is the wrong fish bowl [then] you shouldn’t feel any guilt about it at all.”

Marty provided the class with a rough strategy, using his own professional career as a roadmap, that can be implemented by anyone at all types of firms. He did warn, however, that due to the potential of a culture clash, his strategies may be much more difficult to implement in some environments than others.

In addition to the roadmap, Marty shared what he thought were the key character traits that help a law student in their journey to success. Coincidently, these traits happen to align quite well with the Getting Naked approach.

Firstly, Marty encouraged embracing challenges without succumbing to the fear of failure. Instead, failure should be viewed as a learning opportunity that will not be repeated in the future. It is important to be persistent and resilient, especially when dealing with failure. Next, Marty stressed the importance of honesty, even when it is difficult. Honesty builds trust, which is essential for becoming a trusted advisor. Finally, Marty explained that successful people own up to their mistakes. Clients are more forgiving of someone who admits their mistakes.

B. The authors’ reflection on Marty’s advice

As a student that one day hopes to develop my own practice working with closely held businesses, Marty’s advice was invaluable. Marty’s advice serves as a guide on how I can build my own career tailored to my personal interests and career plans. Marty provided hope for being able to do what I came to law school to do: help business decision-makers solve real problems efficiently and effectively.

As an international student, who has had to quickly adapt to a different work culture in such a short period, Marty’s advice and strategy on navigating the initial three to five years as a young lawyer has equipped me with the confidence to assert control over my career trajectory. Marty dared to go where no one else did, so, despite my limitations, I am inspired and ready to build my practice in a way that is authentic to who I am and where I’m from.

Conclusion

Students gained valuable insights into the practice of developing a book of business of closely held businesses through Marty’s anecdotes and advice. Marty proves that making a real difference by working closely with decision-makers is possible. In addition, Marty shared a roadmap and strategy for how to go about building a career similar to his and this perspective was extremely valuable to have at the end of the semester; especially, after learning from so many incredible founders, and lawyers involved in the business-side of similarly structured businesses. 

We also learned how to derive value from our legal education and early careers regardless of the kind of clients we end up serving. Marty stressed being resilient, bold, and most importantly, building trusting relationships over time. These are lessons rarely taught in a law school classroom. And for that, we are truly grateful. 

Connecting to other case studies

Marty’s success story regarding fee structures beyond the traditional billable hour was not an isolated occurrence. We learned from Brian Powers that he was able to offer flat fee rates for securities filings, which he became quite efficient and effective at, leading to a much higher “effective hourly rate” than he ever could have achieved billing hourly. This not only proved to be financially rewarding for Brian but also ensured client satisfaction, as they were provided with clear upfront information about the cost of specific services. It is worth mentioning that Brian was able to do this using forms and knowledge he acquired while working as an associate at a medium-sized firm in the early days of his career before going about on his own. VisaNow is another example of an earlier case study that uses a flat fee compensation model. 

Finally, IU Maurer Professor Robert Meitus also shared with the class an actual client testimonial praising the percentage-deal fee structure. Robert’s client explained that not having to worry about paying bills based on hourly rates or having Robert keep track of all his time made both of their lives easier, describing the fee structure as a “life saver.” They agreed on a fair amount that would benefit both of them when the deal was complete and never looked back. Robert predominantly serves clients within the entertainment industry, where the utilization of fixed percentage-based fee structures contingent upon the successful completion of deals is a widespread practice.