Perhaps this is old news to many of you, but I’ve been in a grading cocoon (just a few more left) for the past week or so. Well, I just learned that the subprime market turmoil is responsible for the layoffs of 35 lawyers at Cadwalader, Wickersham & Taft. Granted this is small potatoes compared to the impact on many of the big banks, but I think it’s interesting on a couple of fronts.
First, according to various reports, Cadwalader turned to giant public relations experts, Hill and Knowlton (where I worked as a summer intern 17 years ago, yikes!), to help the law firm handle the fallout. I don’t know why, but seeing the statement from a p.r. firm regarding a law firm layoff struck me as odd and made me wonder which constituents Cadwalader is most concerned about… Clients? Potential recruits? The firm’s current lawyers?
Clients: Surely, most of the firm’s clients have made similar decisions before. They would certainly understand the “market demands” to pursue reductions in force to stay fiscally competitive.
- Law Students: Do law students care that a firm has handed out a bevy of pink slips in prior years when selecting law firms? Do today’s students talk about which firms laid off associates in 2001 after the dot com bust? I’m guessing that many law students consult the profit per partner and revenue per lawyer rankings produced by the American Lawyer Magazine each year, and the ironic reality is that these layoffs will likely improve those figures.
- Current Lawyers: The cynic in me wants to ask whether the remaining lawyers are particularly interested in giving back any of their record-breaking bonuses to keep their fellow associates around. That said, without question, layoffs are difficult and emotional--not just for those being laid off but also for those who remain. Considering how poorly most firms generally handle communications, hiring some professional communications expertise is probably a sound investment for long-term employee morale.
Second, it seems to me that these types of layoffs are a real downside of two important trends in the legal profession: (1) the growing corporatization of professional service firms and (2) the push toward specialized practices. According to the WSJ Law blog, the credit markets are responsible for (smaller) layoffs at Clifford Chance, McKee Nelson, and Thacher Proffitt as well. Although unrelated to the subprime mess, evidently partners are not immune from law firm dismissals: as nearly 50 Mayer Brown partners learned in March 2007. (Of course for some handful of white-shoe firms the idea of layoffs, even in difficult economic times, will continue to be a subject that is anathema.) It occurs to me that business schools (at least MBA programs) discuss, teach, and prepare students for periods of time when they might find themselves unemployed (due to no fault of their own) and how you bounce back from career disappointments. As the world of legal practice evolves are law schools doing our students a disservice by not doing the same?
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1. Posted by blabla on January 16, 2008 @ 22:12 | Permalink
Yes, law students care about this big time. We all still remember that Sherman & Sterling laid off a bunch of associates during the last downturn. The reason we know this, actually, is that the Vault guide to firms discusses it a ton. Surely, future versions of the guide will include info on CWT.
At the same time, I'm not sure that these layoffs are a bad thing. The jettisoned lawyers were given generous severance packages and will probably all find employment elsewhere. The truth of the matter is that firms aren't that great at selecting associates in the first place, so if they aren't allowed to push people out after a few years (through soft pressure or actual layoffs) they won't function well economically.
You blame "the growing corporatization of law firms", but I'm not sure what the problem is here either. If anything, law firms need to become more like corporations. Management needs to become more professional. Controls need to be improved. Etc. Some may bemoan that law firms are turning a "profession" into a "business", but when was lawyering not a business?
2. Posted by k on January 16, 2008 @ 22:25 | Permalink
You raise some interesting points. First, I think at least part of the PR was meant for prospective associates and others in the legal services industry who tend to assume that layoffs of associates are generally performance related. I give kudos to Cadwalader for making it clear that the laid off attorneys were not poor performers but were, rather, the victims of an economic downturn.
And I think the fact that such PR was necessary underscores your point--the legal services industry really needs to "grow up," as it were. I've heard accountants and consultants say that, even at the top firms, fully half of any incoming associate class will be fired. If top law firms, though, started extending fewer offers to summer associates, or started firing the bottom-performing first-year associates, their reputations would plumment, at least among prospective hires. (Their clients, on the other hand, might think the firms finally got it right.) Though law students might be more concerned with Vault rankings, we are also very aware of what firms are known to not give all summers offers. I'm pretty sure we'd also hear all about which firms lay off junior associates for "performance reasons" (we certainly know which firms are more likely to make underperforming associates' lives hell [constructive firing?]).
So Cadwalader might be trying to set a new model for associate layoffs. As large law firms really start thinking of themselves as businesses, I think we may see more of this kind of action, even in more flush times.
3. Posted by Carolyn Elefant on January 17, 2008 @ 10:18 | Permalink
My new book, Solo by Choice: How to Be the Lawyer You Always Wanted to Be discusses how solo practice can help lawyers tossed off the partnership track or otherwise fired salvage their careers. Many times, a lawyer can start a practice and continue to offer the same expertise at lower rates and either ride out a recession (and return to a firm in better times) or else they will find so much success, they may decide to stay solo or small. I appreciate that you are focusing on the law firm end of things, but the fact is that associates and lawyers need to take charge of their careers from the outset so they have choices even in dark times.
4. Posted by Another Law Student on January 18, 2008 @ 1:22 | Permalink
Law Students are always focused on getting an offer after their summer position. If a firm no-offered other summers, laid off associates, or has any indications that they will do so in the near future, recruits run away. My own decision between two law firms was based on my perception that one firm often overhired. I went with the firm where my offer was practically guaranteed if I did decent work. I'm not too money driven (I came to law school for the money, but 160K is plenty for me), so profits per partner barely factored in. When I'm not so sure I'll make partner, I'm more concerned with what the firm offers right now. (And if I don't get a job offer at all, or get laid off, that is a bad situation to be in.) So I barely looked at profits/revenues at all. They only weighed in on whether the firm was in a good position to be hiring, not on my decision in choosing which firm I wanted.