Alas, the nickname is less funny in the wake of yesterday’s big layoff news. The firm announced it will be cutting 60 associates and 110 staffers from the payroll. Despite the generous six-month severance for associates, some probably feel like their legal careers have been mangled. The firm also plans to reduce the compensation of about 10 percent of its partners (roughly 30 out of 300, some income and some equity partners).
Let’s take a closer look at the layoffs and try to make sense of them….
To get a sense of why the layoffs were so shocking — some readers said we should have broken out the Drudge siren for the news — here are some facts and figures about Weil Gotshal:
- #6 in prestige, according to the latest Vault rankings.
- #13 in gross revenue, with more than $1.2 billion in total revenue, according to the latest Am Law 100 rankings.
- #17 in profits per partner, with more than $2.2 million in PPP, according to the latest Am Law 100 rankings.
- #9 on the American Lawyer’s A-List, which measures firms on a number of metrics, including financial performance, pro bono work, associate satisfaction, and diversity.
And yet a firm this strong decided to conduct major layoffs. What prompted this dramatic move?
Despite the firm’s overall strength, things could be better. As noted by Am Law Daily:
The cutbacks come on the heels of a year that, according to the most recent Am Law 100 data, saw Weil’s gross revenue remain essentially flat compared to 2011, at $1.23 billion. The firm’s profits partners per profit, meanwhile, fell 8.6 percent, to $2.23 million….
[Executive partner Barry Wolf] said this year’s results to date have been disappointing: Demand fell in the first quarter of 2013 and failed to recover in the second quarter, despite the firm’s work on a string of recent major M&A deals.
But there’s no denying the considerable toll that layoffs can take on an institution and on morale. As noted in the firm-wide memo of executive partner Barry Wolf, bankruptcy and litigation were particularly hard hit. As one Weil lawyer told ATL, “About 20% of the bankruptcy associates in the U.S. were let go at Weil — 13 total…. A terrible, terrible day. And I feel worse for staff. Good people are gone.”
At the same time, Weil management has its defenders. As one Weil alum said to us:
I was at Weil [for several years] and for what it is worth, having been at [two other Biglaw firms as well], Weil was fairly transparent in the way it treated its associates. Also, as you already know, law firms are not the greatest-run businesses, but having seen firsthand the leaders who are steering the ship at Weil (and knowing some of them through outside interests), I actually am fairly confident that this decision was made with actual thinking involved and not just some overcorrection that law firms seem to enjoy doing. The people I spoke with at Weil have said that these cuts have not been indiscriminate — seems like some of the laid-off people would have been asked to go at some point anyways. Good to see that my old firm is making business decisions and explaining why they are making them.
The decision to conduct layoffs might be the right one, and it was handled with commendable candor by Weil. But there’s no denying that the news is deeply unsettling. In a New York Times op-ed, former Kirkland & Ellis partner Steven Harper, author of The Lawyer Bubble (affiliate link), writes that Weil interrupted the cheery mood of Biglaw summer associate programs by “dropp[ing] a sobering bomb that sends this message: You may be an associate here today; tomorrow you could be gone.”
Even partners at other firms are spooked. Here are some thoughts from Anonymous Partner:
This Weil news is unexpected and scary. I am not shocked at layoff news in the current demand environment, even news of large-scale layoffs hitting partners as well, but I thought we would hear that kind of news first from a lower-tier place. The big problem for the rest of the Am Law 100 (especially for those lawyers stuck in firms or groups that are struggling) when an elite firm does this is that it gives cover to lesser firms to launch their own layoff programs, with the excuse that the big boys are also hurting.
If you haven’t done so already, take our reader survey and make your own prediction about whether other firms will follow Weil’s layoff lead. I’d say the smart money is on yes, at least based on leading law firm consultants. As Bruce MacEwen told Am Law Daily, “This will not be the last…. [Weil's move] may give symbolic permission to other firms to do similar things.” See also Ed Reeser: “Now that Weil has done it, we can expect as we have experienced in prior years for a number of firms to step up and make similar moves.”
Back to Anonymous Partner:
Another thing that caught my eye is what I thought the money quote in the Weil memo was: “these actions are essential now to enable our Firm to continue to excel and retain its historic profitability in the new normal.”
First off, this is a big win for the new normal advocates in terms of validation of their arguments. To have their terminology adopted by an elite NYC-firm reporting profits per partner of over $2 million sends a strong message to the industry. Whoever was on the fence about whether this “new normal” business was for real should be looking for a ladder.
Second, it is indicative of the partner profit obsession in Biglaw these days that a valid argument for layoffs is that the firm needs to “retain its historic profitability.” I am not sure who the audience is for that comment, or how Weil’s ability to “excel” for its clients would be affected if “historic profitability” was no longer possible. This is not a struggling business we are talking about here — just one that feels the need to pay its performing partners at historically high and continuously rising levels.
If the audience for this comment is potential laterals and current Weil partners who might be tempted to leave, I believe any supposed danger to the firm’s continued success from its pre-layoff expense load is overblown. I would gladly work for much less than a current Weil partner for the opportunity to show that I could cut it at their job. There is no lack of potential lateral talent that Weil could draw on that would do the same. And the universe of firms who could poach Weil partners in the current environment is small.
I understand there are other dynamics at work, as these kinds of moves are not made in a vacuum, and often are less about the actual money saved than meets the eye. Ultimately this is major and unfortunate news, and all I can do is wish those lawyers affected the best of luck landing on their feet.
Good luck indeed. If you’ve been affected by the Weil Gotshal cuts, you should act fast. As legal recruiter Angela Kopolovich writes, “[i]f you’ve been laid off, or feel like you’re about to be laid off, you have a very short and narrow window of opportunity to find another job.”
We will continue to monitor the situation at Weil. If you have inside information to share about what it feels like at WGM right now, please email us or text us (646-820-8477). Thanks.
Big Law’s Troubling Trajectory [New York Times]
Weil Gotshal, Patton Boggs, and some unanswered questions… [It's All About Who You Know]
Mass Layoffs at a Top-Flight Law Firm [DealBook / New York Times]
Weil Slashes 60 Associates, 110 Staffers [Am Law Daily]