Allen & Overy, Layoffs, Salary Freeze

International Layoff / Salary Freeze Watch: Allen & Overy Hits Us With Their Best Shot(Layoffs hit almost 10 percent of lawyers and staff.)

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This morning Allen & Overy quit beating around the bush and sent a firm-wide email announcing that there’d be some changes around there — major changes. It was with a heavy heart that firm managing partner Wim Dejonghe and senior partner David Morley inflicted a world of pain on its personnel:

Since the beginning of December, the Board has been conducting a thorough review of our business in response to the unprecedented economic conditions in which we are now operating. The inescapable and reluctant conclusion of that review is that there is simply not enough work to keep all of our people busy, and we do not see that changing in the foreseeable future.

In the beginning, Allen & Overy said: let there be layoffs, half in London, the rest from the network:

• Partners – A global reduction in partner headcount of approximately 9% (47 partners) and around a further 7% (35 partners) subject to equity adjustments. Around half of those affected will be London partners. This process is at an advanced stage and will be completed by the end of this financial year on 30 April.

• Other fee earners – A proposed 9% reduction in numbers of other fee earners globally. Around half of these are proposed to be in London, where the redundancy programme we undertake is likely to result in approximately 100 other fee earners leaving the firm. This will be subject to local employment processes which will commence immediately.

• Support Staff – A proposed 9% reduction in support staff headcount. Again, around half of these people would be in London, where roughly 100 staff are likely to be affected. This will also be subject to local employment law and, where appropriate, consultations, which will commence as soon as possible.

And then the firm created a firmament in the salaries and billable hour rates:

• Pay – For 2009 pay will be frozen for all staff globally – fee earning and support staff alike, subject to local employment law, where applicable.

• Fee rates – Acknowledging the impact of the global financial crisis on the firm’s clients, our headline billing rates are to be frozen at 2008 levels until further notice.

A spinoff, the full email, and whether Deirdre Dare is causally related to this mess, after the jump.

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The firm is also spinning off its private client group:

• Demerger of Private Client practice group – As part of this strategic review, Allen & Overy’s private client practice is to demerge and become an independent firm, Maurice Turnor Gardner LLP, with effect from 1 May 2009. Maurice Turnor Gardner LLP and A&O will continue to work together where it is appropriate and in the interests of clients.

Phew. At least the spinoff preserves the jobs of those in the private client group, right? Wrong:

Staff in the Private Client group will be at risk of redundancy and will be consulted with accordingly.

Yet one cannot say that personnel at A&O weren’t warned of the coming Armageddon. After all, Deirdre Dare did say that they “picked a fight with the wrong girl.”

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Full email below:

From: Dejonghe, Wim:MGT (LN)

To: A&O_Global

Sent: Thu Feb 19

Subject: Important Announcement – Please Read

Announcement from David and Wim

Since the beginning of December, the Board has been conducting a thorough review of our business in response to the unprecedented economic conditions in which we are now operating. The inescapable and reluctant conclusion of that review is that there is simply not enough work to keep all of our people busy, and we do not see that changing in the foreseeable future.

As a result of that conclusion, and with regret, today we are announcing the following proposals:

· Partners – A global reduction in partner headcount of approximately 9% (47 partners) and around a further 7% (35 partners) subject to equity adjustments. Around half of those affected will be London partners. This process is at an advanced stage and will be completed by the end of this financial year on 30 April.

· Other fee earners – A proposed 9% reduction in numbers of other fee earners globally. Around half of these are proposed to be in London, where the redundancy programme we undertake is likely to result in approximately 100 other fee earners leaving the firm. This will be subject to local employment processes which will commence immediately.

· Support Staff – A proposed 9% reduction in support staff headcount. Again, around half of these people would be in London, where roughly 100 staff are likely to be affected. This will also be subject to local employment law and, where appropriate, consultations, which will commence as soon as possible.

· Trainees – Current trainees and those with future training contracts at the firm are not impacted by these proposed headcount reductions.

· Pay – For 2009 pay will be frozen for all staff globally – fee earning and support staff alike, subject to local employment law, where applicable.

· Fee rates – Acknowledging the impact of the global financial crisis on the firm’s clients, our headline billing rates are to be frozen at 2008 levels until further notice.

· Demerger of Private Client practice group – As part of this strategic review, Allen & Overy’s private client practice is to demerge and become an independent firm, Maurice Turnor Gardner LLP, with effect from 1 May 2009. Maurice Turnor Gardner LLP and A&O will continue to work together where it is appropriate and in the interests of clients. Staff in the Private Client group will be at risk of redundancy and will be consulted with accordingly.

We appreciate that these proposals will be troubling and unsettling for you. These are tough proposals because they affect our people. And as we have often said, our people are at the very heart of our business.

But our review of the firm and current markets clearly showed that we have no choice. We are in a severe, prolonged, global recession which isn’t going to get any better this year, and 2010 is also expected to be weak. We need to reduce the size of the firm to match demand for our services and ensure our future competitiveness.

We have taken the difficult decision to act now, from a position of relative financial strength, so that we can offer better terms than might otherwise be the case to our departing people. We have a well-earned reputation for being a firm which genuinely cares for its people, and we are not about to lose sight of that in these difficult times.

We believe that the economic environment poses a real threat to our business if we don’t act now. We have a better prospect of overcoming those threats if we accept their seriousness and make necessary adjustments now.

A&O is one of the most well-known and highly regarded law firms in the world. Our clients and people in the communities in which we operate look to us to provide the highest possible professional standards. We have a duty to protect that reputation with a sustainable and stable business that mirrors the economic conditions it operates in.

If we didn’t make these proposed changes now, our scenario planning suggests we would almost certainly need to in the near future. We could then find ourselves making hurried decisions from a weaker financial position. We cannot allow this to happen.

This is not a reaction to the recent, similar announcements by some of our competitors, which you may have seen in the press. Our proposals are the result of a long, comprehensive review of our business and our markets. The Board first started reviewing the firm’s position at the beginning of last December.

Since then, we have carried out a very detailed analysis of our current position, modelled a number of different scenarios and looked at the impact of different remedial measures.

We can assure you that we have looked and continue to look at cost savings, and other measures, that do not involve people losing their jobs and we have already started to implement these where we can and will continue to keep this under review. However, these alone do not adequately address the central issue of the over capacity we have in significant parts of the firm. Our aim is to minimise the numbers affected by the restructuring but equally, given the severity of the downturn, the need for restructuring cannot be ignored.

We are reasonably confident that these proposals will, based on our best assessment, be capable of seeing us through the worst of the downturn. Of course, we cannot predict exactly what course this economic downturn will take, so no-one could rule out the possibility of further proposals.

But we have taken great steps to avoid half measures at this stage to try to reduce the likelihood of any further, similar proposed action.

That’s why our proposed measures relate to the whole global firm, including partners, other fee earners and support staff. We must act decisively to get the business to the right size, with the right skills in the right places.

We promise to be as open and transparent with you as we can be throughout the whole process, and to keep you fully informed of events as they unfold.

Practice group and office heads, and support services directors, will be available for you to ask any initial questions.

We will also post information and updates, including frequently asked questions, in due course, broken down by position and country, on a special site on our intranet which is currently being built.

We wanted to explain to you the thinking behind these proposed changes on a more personal level, so we have also recorded a short webcast which you can watch by clicking on this link.

If you have any questions on any of these issues, please speak to your line manager or practice group head in the first instance. We recognise you will want to know the impact of these proposals on your personal position as quickly as possible. We intend to move as quickly as we can to provide certainty for every individual but we are limited by law in some countries, including the UK, as to what we can say and when we can say it.

Proposing redundancies / lay offs is always a very difficult thing to do, and it is not something that we take lightly. But having looked at all the options, we believe that the state of the global economy leaves us with no other choice.

The proposals we have announced today are about the long-term sustainability and competitiveness of our firm, our ability to continue to recruit and retain the best people and our capacity to offer the best service to our clients at competitive prices. We are confident that these measures, though difficult now, will put us on the right path for the future.

David and Wim

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