Intense speculation follows the industry’s individual layoffs, looking for an emergent trend. However, according to AM Law Daily, leaders of several large law firms indicated that the ‘general trend’ of layoffs was coincidental and firm specific movement, rather than industry wide job shed.
“We are not planning any layoffs,” says the managing partner of one top New York firm. “We don’t have excess capacity. But that said, it’s a very fragile environment.” Americanlawyer.com reports that the leaders of six Weil peer firms who agreed to confidentially comment said that they are not considering lawyer layoffs. 5 out of 6 are also not looking to cut staff. Other firms didn’t respond to calls or had no comment. Many firm leaders did not want their names printed, as layoffs receive negative attention from the press.
Layoffs can indicate that the firm just isn’t cutting it. It can show lack of strategy or a poor response to a bearish environment. Finally, investors are very sensitive to this kind of information, especially when a firm has a great reputation that can get tarnished, or when the investor seeks a safe haven in a deflationary type of environment with extremely low and sometimes negative bond yields.
AM Law Daily reported that Weil managing partner Barry Wolf calls the firm’s downsizing a decision to respond to broader trends, such as the “new normal.” He cited a Citi Private Bank law firm survey that found that the 15 most profitable law firms have excess lawyer capacity of 8-8.5 % above 2007. Wolf’s peers do not agree. The six managing partners confidentially interviewed comment that demand will come back slowly, and that the swings are all a part of the economic cycle. As usual there are always a few contrarians in the mix. Another managing partner at a top 25 firm thinks Weil’s cuts are shortsighted. “Given this reality if you don’t have the bodies when things do get busy you miss opportunities. You have to take a long-term view.”
David Brill executive vice president and general counsel of American Stock Transfer & Trust Co and the president of the Association of Corporate Counsel’s Greater New York chapter feels that clients won’t view the layoffs negatively. Firms are sensitive to negative responses to their released data as it can show potential weakness. That is why Brill’s contrary viewpoint is surprising. “I think clients have undergone this at their own companies at different points. Law firms are not immune to the same business dynamics as their clients. For non-critical matters, there is a competition among regional and national law firms,” he reported to AM Law Daily. This kind of viewpoint takes the fear out of the current and future economic situation as it balances anticipation with expectation. It hopes that transparency won’t cause mass hysteria. That kind of trust is essential for a balanced understanding of the macro environment. Taking the long view has that benefit.