Last month, we asked you if it was better to be laid off before the holidays, so you could adjust your holiday spending accordingly, or after the holidays, so you could bank the extra paychecks. Above the Law readers were pretty evenly split on the question: 50.8% would rather be laid off before, 49.2% wanted to hang onto their jobs through the holiday season.
Based on that poll, we can expect half of the people Sonnenschein laid off on Friday to be relatively happy with the news. The other half writes emails to Above the Law. Like this person:
Sonnenschein Nath Rosenthal laid off staff on Friday (14 days before Christmas)!
Sonnenschein confirmed the staff layoffs in a statement to Above the Law:
After an extensive and careful review of operations and staffing across the firm, we have decided to undertake a selective reduction in non-legal personnel. We have done everything possible to minimize the dislocation such a transition will make – not only on those leaving the firm, but for all our remaining employees. That includes consideration of tenure of service and other factors in determining severance and compensation continuation for those departing.
This reduction furthers our ongoing effort to right-size our workforce to best meet client needs and to achieve an appropriate attorney-staff balance.
Our restaffing will not in any way diminish our work product, business operations or our ability to deliver the highest quality service to our clients. Indeed, the firm will continue to make strategic investments in talent and professional resources. We have implemented these changes mindful that many of our clients have had to make similar adjustments in their workforce over the past 18 months.
We have great respect for all of those staff who will be moving on and are grateful for their service to Sonnenschein.
Elliott Portnoy, Chairman
David Schadler, Chief Operating Officer
No associates were affected by the staff cuts at Sonnenschein on Friday.
We can’t say the same for the next bit of news. Completely unrelated to the staff cuts, the firm has unveiled its new, non-lockstep compensation model. Let’s check it out after the jump.
Back in May, we reported that Sonnenschein intended to ditch lockstep compensation for a merit- based model. At the time, Sonnenschein managing partner Elliott Portnoy laid out his grand vision:
Long before the current economic upheaval that has gripped our clients and profession, survey after survey consistently confirmed a common theme: law firm associates have become increasingly unhappy in their work. Indeed, an entire industry has arisen in the blogosphere, where websites detail — often hour by hour — concerns from associate lawyers around the country and in firms of all sizes and stripes.
And yet, despite these warnings, the fundamentals of how most law firms recruit, develop, and compensate their associate lawyers have remained largely unchanged for too long — to the detriment of the current structure’s sustainability and, more importantly, to the professional reward and promise of our Associates.
Today is the roll-out of Portnoy’s and Sonnenschein’s new approach to associate compensation. Am Law Daily reports:
Like Orrick, Herrington & Sutcliffe, Sonnenschein’s plan, which the firm is announcing today and will roll out in early 2010, will involve a three-tier system in which associates will advance once they meet various merit-based criteria. The firm did not immediately release base salary figures for associates in each tier. Bonuses for individual associates will be tied to the same criteria instead of being linked “almost exclusively to billable hours,” as under the old system, the firm said. The system is designed so that “high-performing associates will be able to earn above-market compensation faster than they would have under the old model,” the firm said.
Numbers or it didn’t happen!
Seriously, it’s a little weak to roll out a new compensation plan without telling people how much they will be compensated. Will the firm follow Orrick’s structure, or the less lucrative DLA Piper plan?
Despite not revealing the actual numbers, Sonnenschein still contends that this will be great for associates. From the firm’s press release:
The three-tiered associate scale also favors a more meritorious bonus system. Compared to the old scheme, in which bonuses were tied almost exclusively to billable hours, associates will be able to earn bonuses based on how well they exceed the parameters assigned to their particular level, which will be reviewed closely by a mix of supervising partners, counsel and other senior associates.
Importantly, associates who have their eye on partner will no longer be bound by a strict timetable for eligibility. Rather than having to advance in lockstep with an entire class of peers, associates will be able to move through the levels according to their own individual paces. To elevate from associate to managing associate and then again to senior managing associate, an attorney will exhibit consistent command of the skills that define a particular level, while demonstrating traits that comprise the next level up the ladder.
Possibly making partner early? That’s interesting. Yesterday, we published a series of internal documents suggesting that Simpson Thacher & Bartlett was proactively trying to avoid making new partners. Remember, we just learned what partners are thinking at STB:
We are going to need to continue to be extremely circumspect in making new partners, and we need to continue to have partners take advantage of our very attractive retirement benefits that commence at age 55. In an environment in which net income is falling and the point is falling, point dilution compounds the negative impact.
In light of that, are we really supposed to believe that one of the “benefits” of this system will be that Sonnenschein can turn associates into partners more quickly? Really? Is Sonnenschein immune from “point dilution” in a way that STB is not?
Now that more than a couple of firms are “officially” scrapping lockstep for 2010, it’s time for another reader poll. Back in October, we asked if you would rather have lockstep or a merit-lockstep hybrid that Bingham McCutchen will be going with. Only 25% of you voted for traditional lockstep.
But what about lockstep versus these three-tier merit approaches? Which one do you prefer?
It’s not an idle question. The legal economy is slowly starting to rebound. You might have the choice to leave one of these merit-based firms, or lateral to one these firms, sooner than you think.
Sonnenschein Latest to Ditch Lockstep [Am Law Daily]
Earlier: Nationwide Layoff Watch: Faegre & Benson Gobbled Up Some Associates for Thanksgiving
Nationwide Salary Cut Watch: Sonnenschein Has Had Enough of Lockstep
Bingham McCutchen’s New ‘Merit-Lockstep’ Hybrid
Commissar Obama has just won over 14 new supporters who will bolster his re-election campaign in 2012.
toilet firm. 1st.
first
Not all bad news is indicative of a firm on the brink of collapse. Sonnenschein does not yet qualify for the following list:
Dissolution Watch Updated List
1) Nixon Peabody
2) Winston Strawn
3) Arent Fox
4) McDermott, Will & Emery
5) Seyfarth Shaw
6) Alston Bird
7) Reed Smith
8) Pepper Hamilton
9) Troutman Sanders
10) Darby & Darby
“We have great respect for all of those staff who will be moving on and are grateful for their service to Sonnenschein.” In other words: “Goodbye, Good Luck, Piss Off!”
4 – Add “11) Pillsbury”
4, Why is everyone saying that about Winston? Please provide some details.
6, Again with Pillsbury?
Unless you can provide some information, please stop with this dissolution nonsense.
That poll sort of fails.
If firms were *actually* capable of creating a “merit-based” compensation system I doubt anyone would resist.
The “problem” is that when it comes time to measure “merit,” everyone here knows the largest criterion will be hours spent billing and hours spent schmoozing with the most powerful department heads. Perhaps these are proxies for “merit” in a large firm — but the fact remains that I don’t trust any large firm to accurately reflect the quality of my work in my salary.
It’s just easier to stay lockstep and gradually “excuse” associates who do not meet expectations.
4,
I asked this in another post but maybe here I’ll get a response… why include Darby because a partner left 2 months ago (which happens all the time in biglaw), but omit firms like DLA that unilaterally cut salaries across the board?
You need more actual reasoning to back up each entry on your “list.”
I’m sure that Mr. Portnoy will not have any complaints if I humbly offer him my services in his efforts at reducing headcount.
Most of the top firms are saving their layoffs for next week.
Skadden Chicago
I don’t know about all of you, but “I’m superstar.”
7,
Winston slashed about 20% of its associate headcount over the past year and has even forced out many income and EQUITY partners. It’s not a good sign when a firm is kicking equity partners to the curb. They re-deferred all associates, 2/3 of whom won’t start till the summer of 2010 or Oct. 2010. Their corporate and real estate departments are dead. Litigation is slowing down after a few big settlements. Dissolution might be too strong a word right now, but they are at the very least undergoing a major “restructuring.”
7/9 – Bliglaw Troll
Mission Accomplished!
jeez…at least wait until Christmas Eve to lay people off. that’s how REAL bastards would do it.
As a Mormon, I wish all of these laid-off associates a Merry Christmas. May their hearts be filled with Our Lord Jesus Christ. I hope these associates have many Blessings throughout 2010 and I will pray for them and do my work for their families at the Temple.
I will say it again: we are where we are. There is no other way to put it. We are where we are. Get it through your thick skulls people. We are where we are.
– Associate Emeritus
4 — Please add Proskauer to the list.
First! to say PE is an ignorant troll. Good luck with that Cheney-Palin ticket in 2012, douche.
Retired partner here: I always was a strong supporter of the staff. Without a good staff, it’s hard to practice law effectively. On the other hand, there comes a time when you have to reduce the numbers. When you don’t absolutely need folks in certain position, but have folks in those positions, you need to make the hard calls and let them go. For decades, law firms have had way too many secretaries and support people. In hard economic times, you can’t afford the luxury of having too many people doing too little useful work. It’s not nice, but there you have it. By the way, when a firm lays off staff, you can bet your bippy that more associates are going to get the ax.
agree wtih 20 No dissolution list would be complete without Proskauer
Is it safe to assume that Sonnenschein will also “right-size” partner compensation? Didn’t think so.
Agree with your point, 22. However, I don’t believe overstaffing has been a problem for decades — more like for the last 5 years or so.
The ship be sinking…
I agree with 22 thats the reality; but these decisions (firing staff) are usually on recommendation of the office manager or paralegal coordinator, who always have some axe to grind. As a result, often the real loosers are not the ones who get fired. Partners rarely understand what is really going on with staff (its not their job, they have better things do to with their time), and so don’t have the first hand knowlege of what is going on in the bowels of the building. Its not the reality of having to cut staff in an economic downturn that I object to, its the favoritism that creaps into the decisions, and that turns everybody into nervous wrecks and makes it more difficult than ever for people to get their work done. And at a certain point work just grinds to a halt as more and more people freak out–there is a point at which this becomes counterproductive. Saving the 70k from firing a paralegal doesn’t make you money when everybody else in the vicinity has a nervous breakdown and can’t concentrate for a month. And you are paying for the whole floor anyway, its not like you save money on rent.
x-biglaw paralegal
“how tall are you paralegal?”
Isnt Sonnennschein based in Illinois? Maybe the folks who are out of work can get jobs at that new prison for the Guantanamo detainees. They can be part of the great Obama’s brilliant solution to the horrible Constitutional crisis caused by holding enemy combatants in Guantanamo. Holding them in Guantanamo was a egregious transgression against the Constitution, and moving them to Illinois makes it all better….all better….
The Emperor is beyond naked.
“How tall are you paralegal?” What the hell does that mean, 27?
I must respectfully disagree about Winston. I am there, and like anyone who went to the last town hall, I can confirm that (a) the firm has no long-term debt, (b) has used this opportunity to poach top talent laterals and (c) has a widening international client base.
30 – Are you in the “bowels of the building” (27) or closer to the anus?
30,
In February 2008, at a Heller Ehrman policy committee meeting, San Diego partner Alan Blankenheimer stated that the firm had “no long term debt.”
It’s really a meaningless distinction.
29–Full Metal Jacket–How tall are you paralegal? Five foot nine sir! (see Youtube for further information)
30–After wending my way through the bowels of biglaw I have been shat out through the anus, and now am down the toilet, and it don’t smell too good in here.
14, If your only proof of imminent dissolution is laid off and deferred associates, forcing out of partners, and dwindling work load, well heck, every big law firm is about to dissolve.
32, Winston is going to be around for a long, long time to come. They’re nowhere near dissolution.
29 – You are trolling, yes? Please tell me you’re trolling?
“How tall are you, Private Pyle?” ring any bells?
34 – If Silas H. Strawn knew what was going on right now at his firm, he’d be spinning in his grave
Usually when layoffs occur this late in the year it suggests poor operational management. Either it just dawned on Sonnenschein that the firm is going to miss its PPP target by a wide margin or firm management just gave the partners a preview of where the PPP likely would fall — and partners were not thrilled.
In either scenario, heads roll and layoffs are Management Tactics 101 for most law firm COOs. Nonetheless, to have layoffs this late in the year — assuming Sonnenschein has a calendar year fiscal year — suggests that someone’s crystal ball was less than clear. That somone is the COO. Too bad it looks like he survived.
If given the choice, where would you rather work: Sonnenschein, McDermott, or hell?
No, not trolling, 35. I guess Full Metal Jacket didn’t have as profound an impact on my life as it did yours. Sorry.
34,
The severity of the layoffs, including the removal of a bunch of equity partners, seems like a move borne out of desperation. It’s probably unfair to say that Winston will dissolve, but I don’t think they are in good shape either. It’s just as foolish to say that Winston will be around for a long time. No one thought Heller, Thelen, or Thacher were dissolving 1-2 years before they actually did.
How many were laid off? What offices were hit? Was it across all departments, or just nonlegal staff (i.e., paralegals and secretaries). I feel bad for everyone who was affected.
Can you say DLA Pooper?
42 – yes, “DLA Pooper.”
I guess it’s not all sonnenschein and lollipops over there…
“we have decided to undertake a selective reduction in non-legal personnel. We have done everything possible to minimize the dislocation such a transition will make”
Is this the English language? Since when is “right-size” a verb?
Answering some questions:
1) Prominent partners leaving a mid-sized firm indicates instability. However, though the list is not ordinal, I consider Darby to be less likely of dissolution than the others. There are no other serious indicators of financial problems.
2) DLA Piper and Pillsbury are not on this list because layoffs do not indicate serious problems, nor do salary freezes. I’ve considered Pillsbury, but I feel it has, at worst, the same chances of dissolution as the most stable of the firms on this list. If someone provides a reason why either firm deserves, for example, Darby’s spot, I’ll consider revising the list.
In addition, few would argue that more than 10 prominent firms will dissolve. Frankly, I feel that fewer than 10 firms will dissolve . . . hopefully we won’t have any further firm dissolution. I would like to keep this list to the ten least stable firms.
Input and tips in the comments on this site are appreciated and will be incorporated into the makeup of the list.
what about reed smith and troutman sanders?
No info here as to how many staffers were laid off. How many?
Why lay off staff? It saves you no money compared to the cost of having a bunch of attorneys getting paid full-time pay for half-time billables.
I bet Phillip himself would prefer you service him in the ass, poster #10.
47 -
Reed Smith just promoted 18 to partner, and their salary adjustment is an attempt to position themselves in a different market for labor. I haven’t seen any overt signs of failure.
Troutman Sanders had a pay cut. Whereas this distinguishes them from other firms, it does not put them in a “flailing” category.
Breaking it down here -
Signs of distress (things you wouldn’t see absent a serious problem with the firm):
1) Re-deferring associates within 45 days of their start date;
2) Loss of many partners or a few significant partners;
3) Reports of incredibly slow associates across practice groups and offices after August 2009;
4) Significant clients disappearing, bankrupting, or being acquired by a non-client.
Signs of market repositioning (the higher the caliber of the firm, the fewer of these you will have seen):
1) Modest layoffs;
2) Layoffs of first year associates;
3) Re-deferrals with 60 or more days notice prior to start dates;
4) Moving away from lockstep compensation in a non-transparent way (i.e. a way that seems to reduce total associate compensation);
5) Outright paycuts.
Indifferent indicators (they don’t really matter to “investors”):
1) Staff Layoffs;
2) Reducing attorney recruitment;
3) Paying reduced bonuses as compared to last year.
Positive indicators:
1) Deal/case presence – the number and complexity of M&A and PE deals or big cases on which a firm has worked;
2) Maintaining start dates for incoming associates;
3) No attorney layoffs;
4) No salary decreases or freezes;
5) Moving away from lockstep compensation; transparently and while maintaining or increasing total attorney compensation (this has yet to happen, but is possible).
There are others in each category, but you should get the idea. This list is (at least somewhat) thought through.
i didn’t read the post, but i really like this firm’s logo!
4 – You left off Paul HasTTTings. That piece of shit is now tottering.
Can someone describe how partners are paid at the top firms? How similar are the partnership agreements for the top 50 or so firms? Someone here must understand this.
42 people laid off across several offices, most departments included, no paralegals or secretaries
41 – not sure how it works at your firm, but at most I’ve worked at paralegals are legal staff. So layoffs of “nonlegal staff” would be secretaries, mail people, operations people, IT staff, etc.
Its was 48 staff. THey say they evaulate people, but they don’t evaluate. Its all random and its the big wigs in chicago who make ALL decisions. People with perfect reviews and no complaints are getting let go. While people who are nut cases or ass kissers remain. Morale is extrmemly low and employess just think Sonnenschein is a joke.
w&c tokyo just gave their associates a new years shunt, no bonus and salary freeze
w&c tokyo just gave their associates a new years shunt, no bonus and salary freeze
w&c tokyo just gave their associates a new years shunt, no bonus and salary freeze
57–My point exactly–when you lay staff off its never really on merit, because the partners can’t effectively evaluate the competence of people they don’t work with directly.
56–In my experience paralegal scum are NON-legal staff, and fall under the all-powerful dictatorship of the (non-lawyer) administrator/office manager .
55–I don’t see how its possible to fire 48 staff without touching secretaries or paralegals. You would have to eliminate copy room staff (many of which nowadays are outsourced to IKON or other firms), center word processors (day and night shift), proofreaders, floating secretaries, messengers, receptionists, file clerks–whats left? Even if they did fire all of the above, they would have to contract with an outside firm to provide the services anyway. This gains some flexability, but doesn’t really save you that much money unless you are really dead and have no work at all. Credit Suisse fires paralegals and secretaries (& other non-professionals) and then has an outsourcing contract with a temp employment service to provide people who work for up to a year–no more (any more than a year and they would have to pay benefits, ala Microsoft independent contractors). You could theoretically replace all non-lawyers with temps and save some money but wow, thats pretty desparate.
–Joker (paralegal scum 27)
61- You are on the money. I worked as a office administrator and when they laid off, it was individuals with good records, including excellent evals. The nuts and insane were left because they could be “controlled”.
61- You are on the money. I worked as a office administrator and when they laid off, it was individuals with good records, including excellent evals. The nuts and insane were left because they could be “controlled”.
61 – Excellent post re support staff work at law firms. I too am a former law firm staffer. Ironically, law firms are now starting to treat Associates like support staff. They’re not hiring, limiting their pay, lowering bonuses, and firing willy-nilly.
sonnenschein is a f-in joke.
57 – you don’t know what you’re talking about. These decisions were driven 700 mi. east of Chicago.
the layoffs were firm wide not just NY — the majority at the home office. 2 secretaries were laid off on the west coast. and one fairly high up manager/director in nyc., trainers and one asst librarian?
Kirkland is the best firm I’ve ever worked at. They make plenty of money and are not going anywhere. I don’t know where that crazy rumor came from. Sure, they run the place like a military school, but they are fair and just.
Kirkland is the best firm I’ve ever worked at. They make plenty of money and are not going anywhere. I don’t know where that crazy rumor came from. Sure, they run the place like a military school, but they are fair and just.
Kirkland is the best firm I’ve ever worked at. They make plenty of money and are not going anywhere. I don’t know where that crazy rumor came from. Sure, they run the place like a military school, but they are fair and just.
Sonnenschein is a dead firm walking. Let’s see if they last the year.