June 26(Reuters) – (The opinions expressed here are those of the author, a columnist for Reuters.)
Difficult decision. Economic headwinds. Right-size.
Announcing layoffs is never easy, so perhaps it’s not surprising that law firms tend to fall back on similar platitudes in delivering the news. Still, there are subtle and telling differences in how Big Law leaders have handled the process.
At least a dozen large U.S. law firms in the last seven months have confirmed cutting lawyers, staff, or both, according to reports by my Reuters colleagues, while other firms are suspected of so-called “stealth layoffs.”
Most recently, Orrick, Herrington & Sutcliffe, and Reed Smith earlier this month acknowledged reductions in force. Other firms that have admitted layoffs include Bryan Cave Leighton Paisner, Cooley, Davis Wright Tremaine, Dechert, Goodwin Procter, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, Lowenstein Sandler, Perkins Coie, Shearman & Sterling, and Stroock & Stroock & Lavan.
“How firms make cuts — and acknowledge making them — matters in the long run,” legal recruiter Isabel DuPree of VOYlegal in Atlanta told me. “The market remembers.”
She speaks from experience. DuPree started her law career as a corporate associate at the firm now called Troutman Pepper at the onset of the last major downturn in 2008 and 2009, when several thousand lawyers throughout the industry lost their jobs.
Latham & Watkins in particular took a reputational hit for firing 190 lawyers and 250 other employees in 2009 — to the point where the term “lathamed” became an entry in the Urban Dictionary. (“To layoff the majority of First Year Associates in one office after only several months of work, before they even have any real written reviews.”)
A Latham spokesperson declined comment.
What’s happening now appears to be more limited, with technology sector-focused firms feeling the biggest pinch.
At Orrick, for example, chair Mitch Zuklie earlier this month co-led town hall meetings to announce that about 40 lawyers and 50 staff members would be let go.
“This was a difficult decision to have to make,” Orrick’s chief communications officer Jolie Goldstein told me. “Once we did, we wanted to talk directly with our team and describe what we were doing, why, and that we deeply regretted having to do it.”
In a public statement, the firm also stressed that those affected “have contributed meaningfully to our firm — this is not a reflection on any individual.”
It’s an affirmation that’s missing from most other announcements, which tend to spend more time pointing to things such as “macroeconomic forces” and “the changing needs of our business and our clients.”
Dodging blame might be tempting, but legal PR and crisis management consultant Dave Poston of Poston Communications said firms are better served if they focus their message on how they “got there, what the layoffs will accomplish to stabilize the firm, how the firm is trying to help those being laid off.”
Cooley chair Joe Conroy, for example, struck me as refreshingly candid in taking responsibility for decisions that led to the cuts.
“Simply put, we hired more talent than we can reasonably develop, train and deploy against current and anticipated client demand,” he wrote in November in an internal memo obtained by Reuters when the firm shed 78 lawyers and 72 paralegals and staff. A Cooley spokesperson declined further comment.
Goodwin Procter leaders also showed a welcome degree of openness when the firm in January announced it would lay off about 5% of associates and professional track attorneys, as well as paralegals and other business professionals.
“We are purposefully choosing to be transparent and conduct a reduction in force, rather than engage in reductions through our performance management process,” wrote Goodwin chairman Rob Insolia and managing partner Mark Bettencourt in an internal memo.
A firm spokesperson did not respond to a request for further comment.
Quietly culling lawyers following negative performance reviews is business as usual. What’s less clear is when doing so becomes a cover for layoffs.
“In the high demand cycle of 2021-22, firms were less rigorous about performance management but now are turning back to normal practices,” legal consultant Lisa Smith of Fairfax Associates said via email. “So the number of people being counseled out may be higher than it was the last couple of years.”
Which brings us to Kirkland & Ellis — the largest law firm in the world by revenue — and which in online workplace forums like Fishbowl has been accused of stealth layoffs by anonymous posters.
Kirkland’s U.S. headcount as of June 21 dropped by about 200 lawyers, or 7%, since the start of the year, according to a report provided exclusively to me by legal data intelligence company Leopard Solutions, which scrapes law firm websites for attorney listings.
The firm declined comment on the Leopard numbers and in a statement said it has not conducted layoffs. Any cuts it has made “were performance-based decisions resulting directly from our attorney review process, just like we do every year for all attorneys at all levels.”
Following their annual review, some firm associates get a follow-up mid-year review in March or April. Those who don’t meet expectations are let go, according to a source familiar with the firm. This process remained unchanged even during the 2021 and early 2022 boom. The only difference now, the source said, is that hiring has slowed.
The source added that the firm is currently hiring associates laterally and is expecting 450 new associates to start — on time — this fall.
Periodic law firm layoffs are to be expected, said Penn State Law professor Tom Sharbaugh, a former managing partner of operations at Morgan, Lewis & Bockius. After all, they are profit-focused businesses.
“No one would be surprised if a public company laid off workers in a line of business that was suffering through a period of low demand. In fact, its stock price would likely rise as investors applauded the decision to reduce costs,” he said via email.
In the old days, a firm might have ridden out a downturn, he said. “However, with law firm managers under constant pressure not to have a ‘down year,’ it is not surprising to see them react to slow periods in the same manner as the CEOs of public companies.”
Reuters reporter Sara Merken contributed to this report.
(This story has been refiled to include a disclaimer that this is a Reuters column and to indicate the same in the headline)
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