Earlier today, the New York outpost of TheLawyer.com, a British publication, reported on personnel reductions at Simpson Thacher & Bartlett. The report was of keen interest to us because we’ve been hearing rumors — generally vague and unsubstantiated, but persistent — of “stealth layoffs” at STB.
The folks over at The Lawyer seem to be hearing similar gossip, some of which appears in their report:
[Simpson Thacher ] has taken the unusual step of introducing a mid-year performance review for its associates. It is understood that the benchmark for associates to reach in order to keep their jobs is significantly higher than in previous appraisals.
Market sources have suggested that up to 30 associates have been asked to consider their positions as a result of the review. Simpson Thacher chairman Pete Ruegger denied the firm was making credit crunch-related layoffs.
This report appears to be erroneous, at least in a few respects. We spoke with Simpson partner James D. Cross, co-chair of the firm’s Personnel Committee, who described it as “wildly inaccurate”:
It’s business as usual here as far as reviews. We have not changed our standards, and we have not changed our process. We’ve always had a midyear review process. I don’t know where someone came up with the number of 30 [affected associates].
A second STB source echoed Cross’s statement, telling us that “no new mid-year process was introduced.” The firm has long conducted midyear reviews for (1) first-year associates and (2) more senior lawyers who received negative annual reviews. According to this source, “if a more senior lawyer gets a negative annual review, that person will often be slated for a midyear review so that progress can be checked after six months, not just annually, and so that the firm makes sure it is doing all it can in terms of additional training and mentoring.”
Additional discussion, after the jump.
More about the review process, from a third Simpson source:
TheLawyer.com article is totally false in saying we have new mid-year reviews that we did not have before.
[W]e have been pretty frank with people that we are trying to bring more substance to the review process, and some people here may be wrongly interpreting that as stealth layoffs. The only people advised to start to look for another job are ones with way below average performance reviews, not even close calls. The truth is not as exciting as the rumors, but not much we can do about that….
What counts as a “below average” review? Some Simpson tipsters claim that review standards have ratcheted up a bit lately. The item in The Lawyer quotes a Simpson “insider” as follows:
“What we’re doing is being harder in our performance review process. People who are viewed as not performing have been given the opportunity to find another job.”
The insider added that, while Simpson Thacher’s core practices were “still active”, its 2008 revenue is expected to be noticeably down on 2007′s.
“There’s a definite slowdown,” the insider said. “We will not make layoffs. We feel we’d rather take the hit during a downturn than get rid of people because there isn’t enough work to do.”
This is similar to what an ATL tipster told us (perhaps we have the same source as The Lawyer):
It is true that in the absolute boom times you carry associates that are not very good and have no partnership potential because you need the bodies. In the non-boom times, we are being more candid with people in the review process. But there is no directive to cut numbers, and no target exists. It is just doing what frankly should have been done during the boom times as well.
I think what the peer firms all have to deal with is having more people than needed at the same time that attrition falls way off in a down economy. We have more lawyers than one year ago or than are needed, but we are fine with where we are and where we are going, and we would rather make a little less than lay people off.
The foregoing is basically consistent with the analysis of Matt Byrne, over at The Lawyer:
If Simpson Thacher, as it appears, is adamant that the lawyer reductions it is making are all performance-based, it is an admission that during the boom time it lowered its recruiting standards in order to staff deals. (Sorry Simpson Thacher, but you can’t have it both ways.)
According to Byrne, 2008 will probably still be a very good year for STB, even if not as good as 2007:
Simpson Thacher is anticipating its 2008 financial results will be significantly below those seen last year, when revenue hit $966m (£483m) and partners took home around $2.87m (£1.43m). Sources suggest this year’s figures will look a lot more like the firm’s results in 2006. Hardly a calamity, but requires action.
One rumor making the rounds is that 25 to 30 Simpson lawyers have been asked to leave, with cuts centered on the real estate group. Several of our sources dispute this. From partner James Cross:
I don’t have a tabulation of the practice areas affected. But as in other years, our review standards and decisions have not been influenced by the practices areas of the particular associates under review.
From another Simpson source: “Certainly nothing [in the reviews is] targeting one area or another. Our real estate department is not that large to begin with, and they stay busy.”
It’s clear, however, that some dismissed associates are unhappy — and speaking out about what they perceive as poor treatment. From one Simpson associate who received a poor review (various potentially identifying details redacted):
I just spoke to a recruiter, and he informed me that it is becoming more widely known that STB is [letting go of] associates (he said that a colleague of his is repping someone who was just fired by STB yesterday)….
[In the spring], I had my annual review, and it was very good…. I was told that I’m where I should be as a mid-level associate…. Since then, I’ve only done [a few] deals, on none of which I got any indication that I screwed up, nor did I do anything differently on these deals. I generally have received positive feedback for as long as I’ve been here.
[In the summer] I got a call from a partner in the personnel committee for a meeting. I was told that, despite my positive annual review, I was now falling behind my class in development and that this meeting was the precursor to the meeting in which I’m told to look for another job. Strangely, this meeting was with the same partner who gave my annual review, who seemed a little embarrassed about this very sudden about-face…
During this meeting, the partner informed me that it is the nature of law firms to have large classes of first and second year associates, fewer third associates, and still fewer associates as one moves up. I’m guessing that our group seems to be in a bit of a bind because we staffed up during the boom years, and while the credit markets are reaching an equilibrium, they will never be what they were. So I think they have to trim the ranks, and they are being careful about doing so (they couldn’t just go from a positive annual review to “start looking,” so this is just part of their ass-covering)….
I feel awfully betrayed, and I’m very angry. I went from being wined and dined [several] years ago, to being shat upon now.
And from another such associate:
I am one of the Simpson Thacher associates who have been told to find other employment…. [T]he rumors are true. I am in the RE group in the NY office and know that this is happening at various levels in the group. I think it is affecting various seniority levels….
In the past there were senior people who were asked to leave as partnership was not in their future, but this is different. Work is slow; business is down. There are no severance packages — it is try to find a job by X date.
So there you have it; we’ve given you both sides of the story. Some claim performance-based dismissals, while others claim stealth layoffs; some say review standards remain the same, while others say they’ve been tightened.
The picture is less than pellucid, but that’s life. We all have to make our peace with ambiguity and incomplete truth.
Regardless of what’s going on with full-time associates, one thing lies beyond dispute: Simpson put on a great show for its summer associates this year. As we reported last month, their summers got a sneak peek at The Dark Knight.
Later in the summer, there was an absinthe tasting. How cool is that? Cheers!
Update: Simpson vigorously denies that it’s engaging in layoffs. For more, see the National Law Journal.
Simpson Thacher gets tough on associates [TheLawyer.com]
Simpson ditches dead weight [TheLawyer.com]