Biglaw, Layoffs, Partner Issues, Partner Profits

Nationwide Layoff Watch: Partners in Peril

During the Great Recession, it felt like associates were being laid off in droves. In the past year or so, the big trend has been staff layoffs (often fueled by sending staff functions to an outside service provider).

Associates, staff — what about partners? Well, it seems that their time has come, at least according to some new surveys….

In truth, reductions to partner ranks are nothing new. Over the past few years, many firms have been quietly showing partners the door, or at least “de-equitizing” certain equity partners that they’re willing to keep at the firm, but not as equity partners.

Look for the trend to accelerate in 2013, according to the Wall Street Journal (sub. req.). As Tony Williams, a law firm consultant and former managing partner of Clifford Chance, told the Journal, “It’s become a more challenging environment. Firms are now much more clear in what they expect… and much less forgiving if people consistently fall short.”

In some cases, the partner cuts are significant — not just one or two underperformers, but dozens of partners. From the WSJ:

Take Waller Landsen [sic] Dortch & Davis LLP. When the recession caused business to sag, the Nashville, Tenn., firm overhauled its partnership structure. Managers recalibrated pay and assigned specific hour and revenue goals to partners at the 200-lawyer firm.

“Over that time we went from about 85 equity partners to about 55,” says Chairman John Tishler. “We had a lot of hard conversations, and so some people left us.”

Those who stayed, he said, “became much more engaged in developing new lines of business.”

That shouldn’t surprise. The threat of losing one’s job is a powerful incentive.

Of course, this is just anecdotal information. But surveys suggest that partner purging is taking place industry-wide:

About 15% of roughly 120 firms surveyed by Wells Fargo Private Bank’s Legal Specialty Group intend to cut partners in the first quarter, continuing a three-year trend.

And 55% of the 113 managing partners and firm chairmen who responded to an American Lawyer magazine poll said they planned to ask between one and five partners to leave in the coming year. Though that proportion was roughly steady with the previous year, 5% intended to cut between 11 and 20 partners this year, up from 1.2%.

Fretting about hours: it’s not just for associates any more. It appears that many partners are having trouble keeping themselves occupied:

[P]roductivity among the highest-paid tier of a firm’s lawyers remains stubbornly low, with some partners billing less than 1,300 hours a year, down about 30% from the prerecession industry benchmark of 1,900 hours.

“There are a few very major firms that are genuinely and consistently busy,” says law-firm consultant Paula Alvary. But many of the country’s 200 top-grossing firms have partners who remain comparatively idle, struggling to bill 1,700 hours a year, or even 1,500 hours, Ms. Alvary says.

When assessing the value of a partner, the partner’s book of business and client relationships tend to be much more important than the partner’s personal billable hours. If the partner brings in a giant matter that keeps a dozen associates and paralegals busy for months, the total billings of those associates and paralegals will far exceed the partner’s personal billings. But one would still expect that individual partner to be fairly busy herself; billing under 1,300 hours a year seems shockingly low.

In bygone days, the WSJ notes, “partnership was the law-firm industry’s equivalent of getting tenure, a reward for skilled and dedicated practice that conferred prestige and ensured a comfortable living.” Once you made partner, you generally stayed partner, until retirement. But that’s no longer the case. These days, tenured professors have far greater job security than law firm partners.

If you want to get paid, you’ve got to produce. Welcome to 2013, partners.

Partner Layoffs Haven’t Ended in BigLaw, Surveys Indicate [ABA Journal]
Law-Firm Partners Face Layoffs [Wall Street Journal (sub. req.)]

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