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Cost Cutting At Schiff Hardin

Wednesday, April 8, 2009 2:14 PM - By Elie Mystal

Schiff Hardin logo.JPGRonald S. Safer, managing partner of Schiff Hardin, emailed associates last week about all of the cost cutting measures the firm was undertaking to preserve associate jobs.

The memo starts with the words every associate is looking for:

I know you have read with interest, and undoubtedly some trepidation, the news of law firms slashing personnel, lawyers and staff alike. We have no intention of following that lead. We do not part with our most valuable assets - our people - lightly.

You’d think that with that kind of opening most Schiff associates would have to change their pants before they could continue reading the memo.

Sadly, the tone of the memo changes pretty quickly:

Nor are we immune from the economic downturn. Our clients are affected by the credit crunch and decreased activity in almost all sectors of the economy, and our success is aligned with theirs. Nonetheless, our business model is sound. Unlike some of our competitors, our practices are diverse. We have grown within our means. We have no long-term debt. We have focused our efforts on strategic planning to grow our business. We are well-positioned to weather this storm and thrive as we have for over 140 years.

Whenever a firm announces the absence of “long-term debt,” you can be sure that bad things are about to happen for its employees. It’s like an owner giving his manager a “vote of confidence.”

After the jump, we get into just what Schiff is cutting.

As we’ve seen time and time again, the staff are the first people to be gently nudged out of the door:

[W]e are offering a Voluntary Early Retirement Option (VERO). All staff who will be sixty years of age as of 6/30/2009 will be eligible to participate in early retirement.

Haven’t we proven that voluntary departure programs don’t work?

Law students (both incoming first years and incoming summer associates) are also getting nailed:

We will make changes involving some personnel who have not yet joined the firm. We will curtail our summer associate program by shortening it to 8 weeks and making the program more content focused. We will delay the start date for our Fall Associates to January 1, 2010. As always, we will critically assess the performances of everyone at the firm - partners, associates and staff - as part of our commitment to professional excellence.

Meanwhile, while Schiff might value its attorneys, it doesn’t necessarily need them to be healthy:

We have adjusted our ALAS coverage and will defer our involvement in the History Makers Program for this year. Associates, like Partners and Of Counsel Attorneys, will be responsible for 100% of the premium for health and disability insurance.

A tipster breaks down the extra costs like this:

All associates must now pay for their long-term disability: $24/month
All associates have the choice of short-term disability coverage: $60/month
Both of these were previously provided by the firm. So, that’s about $1000 per year….

The firm provided subsidies at the following rates:

singles: approx $2500/yr
single + spouse: apprx $5000/yr
Family: approx $7500/yr

In essence, the firm has cut the pay of associates, by passing these costs on to them effective May 1st, by anywhere from $3500 - $8500 depending on who was getting insurance through the firm.

Obama is going to fix that, right?

But Mr. Safer assured associates and staff that they were not alone:

[T]he owners of the firm - the partners - believe they should share the cost of the economic downturn. They believe we should not sacrifice those who have the most to lose in this environment and who have loyally served the firm for years, to boost their profits. That stands in stark contrast to many of our competitors. It is, in my view, one of the critical factors that makes our firm a different and wonderful place to work.

Partner Emeritus is not going to be happy about that.

Every single one of these cost cutting moves would probably be supported by associates, if the no layoff promise holds up. But has Schiff already made cuts? There are all sorts of stealth layoff rumors swirling around the firm, but we haven’t been able to confirm any of them.

Schiff Hardin did not respond to our immediate request for comment for this story.

We fully support maneuvers that help people hang onto their jobs in this tough market. Read the full memo below.

SCHIFF HARDIN — MEMO — COST CONTROL MEASURES

I know you have read with interest, and undoubtedly some trepidation, the news of law
firms slashing personnel, lawyers and staff alike. We have no intention of following that lead. We do not part with our most valuable assets - our people - lightly.

Nor are we immune from the economic downturn. Our clients are affected by the credit
crunch and decreased activity in almost all sectors of the economy, and our success is aligned with theirs. Nonetheless, our business model is sound. Unlike some of our competitors, our practices are diverse. We have grown within our means. We have no long-term debt. We have focused our efforts on strategic planning to grow our business. We are well-positioned to weather this storm and thrive as we have for over 140 years.

Part of the equation that makes us successful is conservative management and cost control. Efforts in these areas are very important in these challenging times. We will not sacrifice client
service or our culture of respect for the contributions that everyone in this firm makes to that service.

We must cut costs while honoring these core values. We will do so with the transparency that
characterizes our management of the firm. We will make changes involving some personnel who have not yet joined the firm. We will curtail our summer associate program by shortening it to 8 weeks and making the program more content focused. We will delay the start date for our Fall Associates to January 1, 2010. As always, we will critically assess the performances of everyone at the firm - partners, associates and staff - as part of our commitment to professional excellence.

As suggested by our staff, we will eliminate this year’s Staff Appreciation Luncheon and Picnic. We will not have Holiday Parties this year. Similarly, the Attorney Dinner Dance will not be
held this year. The Equity Partners’ Retreat will be replaced by a business meeting which will be held in Chicago. We will, however, hold our Service Recognition Luncheon for staff again this year. Although an admitted “luxury,” this event honors and recognizes the loyalty and dedication of those who have given so much to this Firm for so many years. That event, and the attributes it honors are invaluable in our view.

We have adjusted our ALAS coverage and will defer our involvement in the History
Makers Program for this year. Associates, like Partners and Of Counsel Attorneys, will be responsible for 100% of the premium for health and disability insurance. We will continue to share this cost with members of our staff. There will be an associates meeting on April 1st in room 7203/05, with video from other offices, at noon cdt for all who wish to discuss these measures or any other issues.

Finally, we are offering a Voluntary Early Retirement Option (VERO). All staff who
will be sixty years of age as of 6/30/2009 will be eligible to participate in early retirement. We will have an informational meeting on April 1st in room 7203/05, with video from other offices, at 11:00 AM cdt for all staff who meet the age requirement. Full details of the plan will be given at this meeting.

These are the significant changes to our cost structure we have made in response to the
current economic environment. In addition, we will continue to try to become more efficient in the
utilization of our resources across all our offices. In an ideal world, we would take none of these steps, but we must deal with the world as it is.

I know that you will note that these changes are minor relative to the drastic measures taken by many other major law firms. There are two reasons for that. First, as noted above, we are
economically sound and well-balanced. We do not believe drastic measures are necessary at this time.

Second, the owners of the firm - the partners - believe they should share the cost of the
economic downturn. They believe we should not sacrifice those who have the most to lose in this
environment and who have loyally served the firm for years, to boost their profits. That stands in stark contrast to many of our competitors. It is, in my view, one of the critical factors that makes our firm a different and wonderful place to work.

We are proud of the performance of our firm in the current economic environment. We remain confident in our continued success. We are hopeful that the adjustments I have described will
accomplish our goal of responsibly controlling costs, but we will continue to monitor our performance closely as the year unfolds. The most constructive steps that all of us can take from this point forward are to continue to do our jobs with the commitment, skill, efficiency and client focus that have always characterized our work.

Thank you for your consideration and understanding.

Ronald S. Safer
Managing Partner

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