In the language of layoffs, a few law firms stand apart

Goodwin

26/06/2023 10:00

By Jenna Greene
       (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