Biglaw

Managing Partners Expect Associate Head Count To Remain Stable: ATL Expects Associate Head Count to be a Useless and Misleading Statistic

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American Lawyer released their annual survey of managing partners at top law firms. Despite a high level of uncertainty, managing partners still remain optimistic about the future.

Really.

You’d think all of the layoff news, dissolution rumors, half-bonuses, and the terrible American economy would make Biglaw chieftains more than a little worried about the future of the industry. But no! Everything’s going to be fine. Pay no attention to the man behind the curtain:

But managing partners are still reluctant to throw away their head cheerleader pompoms. Even as uncertainty clouded the responses of the 112 firm leaders who answered this year’s survey, they remained surprisingly upbeat about their firm’s prospects. Make no mistake: Firm leaders know the boom has busted; most of them responded to the survey after September 15, the day that Lehman Brothers Holdings Inc. filed for bankruptcy and Merrill Lynch & Co., Inc., was sold. Few, however, were willing to say–at least for now–that their business will be dramatically different as a result. Even in a time of financial turmoil, they’re counting on clients to continue to demand high-end legal services.

The results are really not that surprising at all, once you become accustomed to the never ending flow of BS that law firm managers spout right up until profits per partner take a significant hit.

But it is always funny to see the disassociation between a firm’s public statements and their internal machinations. Obviously, all of this public backslapping is for the benefit of clients who are not paying enough attention:

Still, one aspect of firm management may never change. In one of the most interesting responses, law firm leaders reported that they are still planning to raise billing rates in 2009. Ninety-eight percent of respondents to our survey said that their rates will be higher next year, though 63 percent said the rise will be 5 percent or less. (By contrast, 62 percent reported in 2007 that they’d raise rates by more than 5 percent.) It may seem counterintuitive to raise rates when clients are hurting, but in interviews, managing partners insist that, for most clients, value trumps rates.

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That makes perfect sense. Charge more + Pay less (bonuses) = Stable PPP notwithstanding an economic crisis of global proportions. “I love this plan! I’m excited to be a part of it!”

After the jump, let’s bring out the Stay Puft “Straw” Man.


Over the past few weeks, we’ve seen many law firms explain away “layoffs” as “natural attrition,” hoping that associates (and more importantly: law students) are too stupid to know the difference.

The most consistent statistic firms refer to is “associate head count numbers.” When pressed by AmLaw, the firms apparently fell back on that misleading number one more time:

Perhaps the best indicator of this business-more-or-less-as-usual attitude is the relative stability our survey respondents projected for head count in 2009. Even amid reports of layoffs and recalled offers to summer associates, 72 percent of firm leaders said that they plan to increase head count–not growing as robustly as in previous years, to be sure, but growing nevertheless.

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It’s almost as if firms really think that attorneys cannot comprehend basic math. If you bring in 45 first years, and fire 40 people who have been there longer — and are more expensive — then yes, “head-count” will go up. But that doesn’t mean that there is either stability or security. AmLaw brings up the problem that nearly every firm is complaining about:

Another reason for head count growth is less salutary. According to [Bingham McCutchen chairman Jay] Zimmerman, fewer associates are leaving firms these days unless they’re pushed out. So as firms add new first-year classes, they’re still carrying senior associates who, in better times, would have departed for other jobs. The drop in attrition rates is why firms have had to become more aggressive about weeding out unproductive lawyers. “Quite frankly, I think that there are a lot of law firms out there that are not doing any kind of layoffs or reduction in force, but I think every law firm is looking at its annual evaluation process and being pretty hard-nosed about that,” says a chairman of a large global firm.

The firm double-speak is infuriating. Firms are “not doing any kind of layoffs,” but their being “pretty hard-nosed about” the associate evaluation process. Well, why? Why are firms so committed to giving associates bad reviews if not for the purpose of firing those associates that receive those “bad” reviews? The fact that the firm can bring in an army of new, cheap, first-years is largely irrelevant.

Why is it so hard for some firms to just admit that they are firing people due to the bad economy? Why can’t firms grant their departed colleagues the dignity of acknowledging that market factors beyond anyone’s control lead to their dismissal? White & Case did it. Orrick did it. Mayer Brown did it.

“When the fall is all that is left, it matters a great deal.”

Hopefully, nobody is fooled by the soft deceit that has been adopted at an industry level. Actions really do speak louder than words. If a law firm is firing people and skimping on associate bonuses — while profits per partner remain stable or even grow — you’ll know exactly why so many managing partners are “optimistic” just at the moment.

How Full? [American Lawyer]

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