Biglaw, Layoffs

Biglaw Firms Must Conduct More Layoffs, Before It's Too Late

Layoffs are a necessary part of the law firm life cycle. Don't tempt fate.

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pink slip LF layoffsFor years now, law firm leaders have not been laying off enough lawyers to protect their profitability. This is the startling conclusion that’s been drawn from a recent report released by Altman Weil, a law firm consultancy.

Altman Weil surveyed 356 law firms — including 49 percent of the largest 350 firms in the country, and 48 percent of the Am Law 200 — and according to the report, 59.5 percent of leaders from those large firms said overcapacity was hurting their bottom line. As the report notes, the larger the firm, the larger the problem, with 75.6 percent of leaders from law firms of 250 lawyers or more claiming that an overabundance of lawyers was diluting their profits. This information, coupled with the fact that 62 percent of law firm leaders said that demand for legal services has not yet rebounded from pre-recession levels, could be a recipe for disaster.

Biglaw firms haven’t been laying off attorneys en masse, like the Great Lathaming of 2009, but that doesn’t mean they’ve stopped stealthily conducting layoffs. As we know from our wealth of tipsters, some firms have been conducting stealth layoffs for years. About 96 percent of law firm leaders reported that their firms had employed under-performing lawyers, and approximately 73 percent said that the way they’ve been dealing with those chronic under-performers is by removing them from the firm.

Which lawyers have been (or should be) the primary targets of these cuts? It seems that Biglaw firms have a nonequity partner problem. Here’s more information from the Am Law Daily:

The overcapacity issue appears to be most acute among nonequity partners, the Atlman Weil report found. “Nonequity partners present the most obvious target for law firm rightsizing, as that class has been allowed to grow larger than current economics and likely future demand can justify,” the authors wrote.

Only 19.8 percent of survey respondents from large firms said that their nonequity partners were “sufficiently busy.” By comparison, 78.9 percent of large firm leaders surveyed said that their associates were sufficiently busy.

“The role and value of nonequity partners is in flux,” one anonymous firm leader said in the survey. “They fill needs now, but their value in the future is uncertain.”

In case you’re wondering whether you should be worried about your law firm’s stability and your continued employment, things haven’t gone sideways for Biglaw quite yet — after all, with 5.8 percent revenue growth, law firms just had their best quarter in the past eight years, the highest law firms have seen since before the 2008 recession. “The world is not falling apart,” said Eric Seeger, an Altman Weil principal and the author of the report. So go ahead, keep rallying for that first-year base salary increase to $190,000, but please keep in mind that with those compensation bumps may come the waves of layoffs needed to sustain your firm’s profitability.

Layoffs are a necessary part of the law firm life cycle. With too much disruption, the legal industry could be looking at an extinction-level event in years to come. Don’t tempt fate.

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Law Firms in Transition 2016: An Altman Weil Flash Survey [Altman Weil]
Too Many Lawyers? Report Faults Firms for Resisting Layoffs [Am Law Daily]

Staci Zaretsky is an editor at Above the Law. Feel free to email her with any tips, questions, or comments. Follow her on Twitter or connect with her on LinkedIn.

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