This Week in Layoffs: 05.11.09

[Ed. note: Above the Law has teamed up with Law Shucks. Law Shucks has done excellent work translating all of the layoff news into user-friendly charts and graphs: the Layoff Tracker.]
Indulge us at Law Shucks for a brief editorial. Two recent tragedies compel us to provide some context. We don’t write this series and maintain the Layoff Tracker because of some sense of schadenfreude. We do it because of frustration with the lack of transparency into the firms’ layoffs and the absence of any useful data to put those layoffs into context. If nothing else, we would hope that those affected have a better understanding of the larger events that factored into the layoffs of particular individuals. You are not alone and being laid off is not a reflection on your value as a person or your intrinsic self-worth.
On to the news (and the inevitable flaming in the comments).
In the broader US economy, unemployment hit a 25-year high, reaching levels not seen since September 1983. Fewer people were laid off in April than in any month since October, which somewhat tracks the trend we’ve seen in law firm layoffs. April was the slowest month this year for our little corner of the market (things didn’t really pick up at firms until January, which trailed the broader economy). Still, while layoffs are slowing, the unemployment level continues to set new records due to the lack of hiring.
Data and analysis begin after the jump.

The Market

If you’re going to read one article that’s not on ATL or Law Shucks this week, you’ll probably want to read American Lawyer’s “Calculus of the Damned: How Are Associates Marked for Extinction?” David Bario and Drew Combs comment on the process, starting at the beginning:

It’s not simply a matter of hours. There is a calculus involved. Some firms really are “realigning,” or making up for lack of traditional associate attrition. Others are tossing dead weight as fast as possible from a sinking ship. But even though a number of agendas are at work, firms usually start at the same place: billables.

That’s certainly a reasonable first place to look, as a corollary to the notion that the best lawyers are the most sought out and, therefore, the busiest.

Still, firm leaders say it’s rare to simply draw a line and fire every single associate who falls below it. “It’s not a purely hours-based decision by any means,” says Reed Auerbach, co-CEO of McKee Nelson. Firms assess their leverage model, try to balance layoffs across associate classes, and ask partners for feedback about particular associates’ skills and flexibility. If they can move associates to busier departments, they will. “There is a huge amount of thought that goes into this,” says Bingham McCutchen chairman Jay Zimmerman.

Then there’s the reality that, as the chairman of one firm puts it, “every hour is not equal.” He explains: “Some people take 100 hours to do a job that someone else can do in 50, and the 50-hour guy may do a better job.” Those details are tough to capture in a statistic.

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From there, firms look at other factors like realization rates, but at the end of the day, one consultant (Lisa Smith of Hildebrandt) thinks firms are secretly happy for the opportunity. In the prevailing mindset that layoffs are a substitute for the voluntary attrition that is a pillar of the BigLaw model, firms are pleased with the new-found opportunity to select and retain the strongest performers. One unidentified firm chairman puts it bluntly: “The fact is, the qualitative gene pool improves in the process of doing these layoffs.”
Are things turning around for firms? National Law Journal reports “Study Projects Growth in Corporate Legal Spending,” but we’re not buying it. Among other things, the study ignores its own finding that seven of the 11 practice areas it measured were in decline, and law departments’ budgets were set long ago and the purses don’t re-open just because things are looking up (which they aren’t).
Actually, read two other articles this week. Check out Bill Henderson’s thoughtsand Jeff Liptak’s comments on the Legal Profession Blog. They’re also pessimistic about BigLaw, expecting further deferrals and pay cuts, but think there’s likely to be at least one segment of the market that will benefit:

Other conversations I have had recently suggest that regional firms are going to be the real winners. They are responsive and cost-effective, and GCs have zero ability to go over budget in the current environment. There is a general perception among many that national law school credentials are not required for motivated, high quality, cost-effective legal talent. At a minimum, regional firms are going to get the opportunity to do work that formerly went to DC, Chicago, NY, or West Coast powerhouses.

Activists continue to try to present the downturn as an opportunity. First, we heard that firms should embrace the opportunity to make firms more hospitable for women, leading to a kinder, gentler BigLaw. This week, it’s being presented as an opportunity to focus on retention of diverse attorneys as a competitive advantage. Unfortunately, that message is likely going to get lost in the broader effort to retain as many attorneys of every stripe as possible. Continuing on the protected-class front, older attorneys are supposedly more at risk.
One segment where we do believe the pundits who say it might actually benefit (at least temporarily) from the downturn is contract attorneys, as “law firms re-imagin[e] how to use lawyer talent.”

Layoffs

We’re definitely in a state of flux right now. Layoffs slowed significantly in April compared to the bloodbath in March, but this week saw a significant rise compared to last week, with more than three times as many people laid off. In fact, this was the worst week since the week ending April 3.
This article continues on Law Shucks with the numbers for the week and additional commentary on other cost-cutting measures.

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