Pic: U. Chicago
Alright, this is getting ridiculous. Last week, no real layoffs until Ropes & Gray got busted doing stealth layoffs at 11:00 on Friday morning. This column closes Friday afternoon, usually. We actually submitted yet another version celebrating the first week of the year without layoffs. Then Weil Gotshal went and laid off 79 staff. We’ll have to save the celebration for next week (hopefully – although we’re planning to be on the golf course, not writing).
So back to the usual roundup.
As in the general US market, the rate of law-firm layoffs (or first-time benefit applications) continues to drop, even though unemployment numbers continue to rise. So most of the cutting may be behind us, even if the growth and hiring haven’t kicked in yet. Still, this recession is far and away the worst of the past 40 years, from a jobs perspective. Check out Clusterstock for interesting chart that shows employment levels are continuing to decline 15 months after the current recession began, a point by which the 1980 recession had completely reversed its losses, 1974-76 was almost back to pre-recession levels, and the others had at least flattened out if not started trending upwards. Elie will continue to monitor Latvian hookers for signs of life. In the economy.
After the jump, there were a few other near-layoffs this week and the usual non-layoff cost-cutting measures.
On the plus side, this week does set a new record low for the year. We came close last week, with just 148 layoffs. Coincidentally, that was the same number as the first week of the year (and the first edition of This Week in Layoffs). Prior to this week, the week ending April 17 was the lowest, when 121 people were laid off from major law firms.
There were a few “near” layoffs this week (although an inch is as close as a mile to those who have been affected – pardon the expression).
- Clifford Chance almost certainly will be announcing layoffs of NY litigation associates. The firm’s litigation head resigned in connection with the news. The firm has already had 11 diferent layoffs, far and away #1 on the ranking of firms by the number of rounds of layoffs. They’ve also laid off 426 people in total, 225 lawyers, 201 staff – good for #4 on the total layoff list, and #3 by number of lawyers laid off. There are 29 associates in the group, who, together with the staff supporting them, have been notified that layoffs are imminent.
- Covington & Burling is cutting back its staff-attorney program. The firm said ” As competitive marketplace alternatives to the staff attorney model have increased, we have fewer projects and have released staff attorneys we are unable to assign.” That means one of two things: there isn’t enough work for associates, so they’re getting some of the work that would have gone to staff attorneys, or the work isn’t going to the firm at all, as clients are outsourcing. Either way, we don’t have a solid number yet, although the affected are being paid modest severance. (Law Shucks treats staff-attorneys as staff, as opposed to attorneys, for the Layoff Tracker, by the way).
- Stealth layoffs continue unabated. This is something we wrote about a long time ago, and ATL has further anecdotal information about the vagaries of performance standards in tough markets in the wake of Ropes & Gray’s outing. A few of the comments in that thread are particularly worthwhile, so if you’re feeling bold, venture in.
- This one is purely clerical, but Herbert Smith completed its redundancy consultation, laying off 84 people (82 volunteered, 2 didn’t). We just don’t have the heart to sully this week’s no hitter with a technicality. Also for the record, when numbers like this are finalized, we update the original number in the tracker as of the date of announcement, so it doesn’t get counted twice.
As usual, the analysis continues on Law Shucks, with updates on other cost-cutting measures taken by law firms this week, plus the updates on the weekly, monthly, and annual total. Also, the monthly recap will probably get written at some point this weekend, so keep an eye out for that.
First quarter results weren’t pretty (no surprise there), according to Citi’s first quarter Flash Report, and the outlook isn’t much better.
Coming into 2009, law firm leaders were worried, and they got more worried as the first quarter progressed, according to data from Citi Private Bank’s Managing Partner Confidence Index (MPCI). Seventy-one percent of the respondents to Citi’s first-quarter MPCI believe that demand for legal services will be flat or down in the next 12 months, compared to 66 percent in the fourth-quarter 2008. The same was true for profits: In the first-quarter 2009, 71 percent of respondents predicted that 2009 profits would be flat or down, versus 54 percent in fourth-quarter 2008.
Interestingly, head count is up, but productivity is down.
Head count, while moderating, is still up 2.5 percent for the broad sample. It’s important to note that the full impact of first-quarter layoffs is not reflected in that number. But the continued growth in head count, coupled with declining demand, pushed productivity (average hours per lawyer) down by more than 8 percent. And while we do not collect precise rate information, it appears likely that rates increased, but by lower-than-average levels. While we collect realization data only at year-end, every indication I have is that discounts have increased.
Despite over 10,000 layoffs, the net is still up. While it might seem counter-intuitive at first, it’s just the result of new hiring back in September at pre-recession levels and net growth from larger firms acquiring niche players from outside the AmLaw 200.
And, since this column is all about the law firm layoffs, what’s Citi’s advice on that front?
• Be sure you’ve cut enough. I fear there may be the need for more layoffs. Even if we’ve touched bottom, there’s no guarantee that demand will ramp up quickly, so current head count growth must be addressed.
• Weed out your underproductive lawyers. Apologies for the unkind metaphor but marginally productive lawyers are like plaque building up in the arteries of law firms. Many firms have tolerated this buildup during the high-demand years but it’s dangerous to their health if it’s not addressed now.
The other activity this week was mostly in salary, which is back in flux (if “always being cut” can be considered flux).
The partners at Ballard Spahr, having seen their own comp drop by almost 25%, and they can’t stands no more. They’re not going to run the firm like a “prep school” – lockstep be damned, they’re going to a merit-based structure at both associate and partner levels. Also, we’ve got some digging to do – he’s now admitting the firm has laid off 170 support staff positions and “some lawyers” including partners – but they’re only in the Tracker for 78 staff.
“Compression” was an issue several years back when the race to $160 began. The problem was the more-senior classes were getting disproportionately lower raises as incoming classes’ bases went up. And now it’s back in spades at Sonnenschein. First years are taking a 10% cut, but senior associates are getting hit for 15%. So what was already too-close a gap between classes has narrowed even further. What makes the move even less comprehensible is the fact that most clients would prefer to pay a premium to have senior associates and partners do the work and avoid junior associates like the plague. So the firms are paying the least-desirable assets the most money? Only in BigLaw, friends.
Some firm called Allen Matkins, which was paying first years $160, cut them and the incoming class back to $145 and senior associates 20%. Now they’re cutting paralegals’ compy by 20% too (sure, treat them like senior associates when you’re taking something away – damned if you do, damned if you don’t). Aside from the awkward manner in which they’re doing it, is anyone surprised that a firm we’ve never heard of couldn’t sustain a $160 salary model?
Staff aren’t safe at Jones Day, either, but they shouldn’t be complaining. A salary freeze is pretty much the best anyone should hope for these days.
Meanwhile, the National Law Journal outed Philadelphia’s Post & Shell’s logical practice of aligning attorney comp with the value placed on it by clients – if clients pay more for certain practice areas, the lawyers in those practices get paid more. Now that that’s out there, some lemming firm will surely follow.
Back in BigLaw: McDermott Will & Emery is paying summers based on a pro-rated $135 scale (first years are on $160). That’s a bit cheap – they should probably be at $145, and the firm (still) hasn’t announced salary cuts for associates.
So close, and yet so far. May has passed
Numbers
With over a week to go, May has passed April – 1204 to 1148.
79 laid off this week (all staff)
1,204 laid off this month (338 lawyers, 866 staff)
10,240 laid off this year (3,881 lawyers, 6,359 staff)
Related posts:
“Compression” was an issue several years back when the race to $160 began. The problem was the more-senior classes were getting disproportionately lower raises as incoming classes’ bases went up. And now it’s back in spades at Sonnenschein. First years are taking a 10% cut, but senior associates are getting hit for 15%. So what was already too-close a gap between classes has narrowed even further. What makes the move even less comprehensible is the fact that most clients would prefer to pay a premium to have senior associates and partners do the work and avoid junior associates like the plague. So the firms are paying the least-desirable assets the most money? Only in BigLaw, friends.
THIS IS VERY TELLING AND PRESCIENT COMMENT, LS – YOU'RE RIGHT, COMPLETE AND UTTER STUPIDITY. WHY VALUE THE WEAKEST ASSETS SO CLOSE TO THE STRONGEST ASSETS – CHANGE THE PARADIGM, BLOW UP THE MATRIX BIG LAW
!!!!!!