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Though more subtle than mass layoffs in the financial and manufacturing industries, the layoff ax hit some attorneys this year at law firms in South Florida as members of support staffs such as paralegals and legal assistants lost their jobs in greater numbers. The cutbacks, analysts warn, are not likely to abate in the new year.
Anyone who thinks law firm layoffs are over should think again, said Bill Brennan, a principal with legal consulting firm Altman Weil. Some law firms have only delayed the inevitable by holding off cuts until the new year. It may seem more charitable, but it ultimately doesn’t help the people on their way out, he said.
“There actually may be a negative impact on the job-seekers who will lose their positions in the first quarter of 2009 because any jobs that may have been available at the end of 2008 will have been taken,” he said. “The unfortunate few lawyers who may get pink slips in the first quarter of 2009 will probably find it very difficult to find new employment. It’s a pretty sad situation.”
The National Law Journal's 31st annual survey of the nation's largest law firms found that hiring slowed significantly in 2008.
"At this time last year, we reported that overall growth had picked up to levels not seen since 2001. These days, of course, are a different story. The current economic crisis is hitting law firms hard — seven large law firms announced layoffs this year, and the demise of two major firms on the list, Heller Ehrman and Thelen, will affect approximately 1,200 attorneys. It's not all bad news, at least for some law firms: DLA Piper maintained its spot at the top of the chart and K&L Gates, through a series of successful mergers and lateral hires, has climbed into the top 10 firms."
Image via WikipediaA recently released report by Paris-based Euler Hermes, the world's largest credit insurer, concludes that Europe and the U.S. will experience a significant increase in business failures in 2009.
Image via WikipediaLarry Bodine Law Marketing Blog: "Failed law firms, like Thelen and Heller Erhman, have three things in common: * Below average financial performance – often including excessive financial leverage, significant deferred obligations, low productivity, and poor realization; * Internal dynamics – primarily involving leadership issues, partners with incompatible goals, differences over compensation philosophy, and lack of succession planning; and * External dynamics – primarily involving competitive pressures related to the firm’s historical client base, access to new clients and desirable work, and inability to recruit key talent.
NYTimes.com: "Federal authorities have been tracking what they describe as a brazen swindle of some of New York’s savviest investors by one of New York’s more accomplished lawyers. Mr. Dreier has been charged with multiple frauds in the United States and a related crime in Canada, and is being held without bail in Manhattan.
In court last week, prosecutors said their count so far put the money missing at $380 million, most of it lost by hedge funds and other investors who had bought promissory notes that were flat-out fictions.
In recent days, Dreier L.L.P., the Park Avenue law firm that Mr. Dreier founded, has been plunged into chaos. At least $35 million in escrow that was to have been held by the firm seems to be missing, the authorities say, and nearly all of its 250 lawyers are now looking for work."
Image via WikipediaHildebrandt International : In 2004, Hildebrandt conducted a study of 80 US law firm failures that occurred between 1998 to 2004.
"Looking back on that study – and extending it forward to the firms that have dissolved since 2004 – we believe that the conclusions we reached in our earlier study remain valid and offer helpful guidance for today’s law firm leaders.
In our experience, failed firms typically exhibit one or more major fundamental flaws, and the flaws usually fall into three primary categories:
* Below average financial performance – often including excessive financial leverage, significant deferred obligations, low productivity, and poor realization; * Internal dynamics – primarily involving leadership issues, partners with incompatible goals, differences over compensation philosophy, and lack of succession planning; and * External dynamics – primarily involving competitive pressures related to the firm’s historical client base, access to new clients and desirable work, and inability to recruit key talent."
Image via WikipediaNews Detail: "In a recent White Paper titled, “Are the Myths of Space Utilization Costing You More Than You Know,” Jones Lang LaSalle, the leading integrated financial and professional services firm specializing in real estate, reveals that there is oftentimes a significant difference between how much vacancy corporate real estate executives think they have within their portfolios and the actual amount, and how this disparity is costing companies millions.
For its occupancy study, Jones Lang LaSalle examined the portfolios of eight major companies representing a cross-section of industries – technology, consumer products, professional services and financial – as well as its own real estate portfolio. The combined measurement was nearly 42 million gross square feet of corporate office space across the globe in 583 buildings.
Jones Lang LaSalle found that by dividing vacant seats by the total number of seats yielded one of the most significant findings: a 26 percent average actual vacancy rate – 13 percent in reported vacancies and another 13 percent in shadow vacancy (office areas reserved for reasons including new hires). This is in marked contrast to the typical estimations of all vacancy at seven to 10 percent."
Image via WikipediaThe West Peer Monitor Index, a measure of legal market conditions, found large law firms had the lowest productivity in the third quarter.
Overall, law firm productivity was down by 4.5 percent overall and 6.5 percent at the 100 largest firms. The report attributes the low productivity level to large firms having too many associates with too little to do.
“In spite of the various reports of layoffs and firm contractions, the factor that looms largest is the swelling of unproductive associates in firms,” the report reads. “This is especially true with the large firm segment, which is experiencing the lowest productivity in the industry.”
Layoffs have become increasingly common at major firms, but staff reductions have lagged behind the falloff in demand for legal services, further pushing down productivity. Still, the legal industry is definitely in downsizing mode.
Associate hiring declined by 6 percent from a year before, and law firms are offering equity partnerships to half as many attorneys as they did the previous year, according to the index. Lateral growth was about the same as in 2007.
On demand for services, billable hours dropped 2.5 percent in the third quarter following a 2 percent decline in the second quarter, according to the index. The drop in billable hours during the third quarter was especially steep in July and August at 5 percent, but demand rebounded in September to bring up the quarterly average.
About 75 percent of corporate general counsel nationwide indicated that their law departments are facing budget cuts next year, according to a survey by legal industry consultant Altman Weil.
Most of the cuts will be targeted at outside law firms, Newtown Square, Pa.-based Altman Weil said. The average cut will be 11.5 percent.
The survey said 15.6 percent reported that budgets would increase by a smaller percentage in 2009 than in prior years.
Altman Weil conducted the survey of the top lawyers at companies in November and it included responses from 115 attorneys working as general counsel for their firms.
Survey participants said outside counsel costs and the unpredictable nature of legal spending were the top two concerns about 2009.
See article at: http://www.bizjournals.com/sacramento/stories/2008/12/08/daily24.html
Image via WikipediaAccording to a Government Accountability Office report released on Tuesday, the two law firms have pulled in about $2.8 million combined in fees from work done on the federal government's $700 billion economic rescue plan.
Image via WikipediaThe merger, to be completed in early 2009, would create a 2,000-lawyer firm. In an interview, K&L Gates Chairman Peter J. Kalis said Bell Boyd was an especially attractive partner because of its well-known investment management and intellectual property practices.
Image by miss_blackbutterfly via FlickrUnder a new structure put in place this week, power will shift from 35 individual offices to 14 regional groups, with a renewed focus on 16 different global practices. The moves come in the wake of a four-month review by McKinsey.
Citing a "continuing slowdown in the economy," the firm announced on Wednesday the termination of 115 support personnel in its U.S. offices and the elimination of up to seven support staff and 11 associate positions in its London office.
Image by Getty ImagesFormer White & Case partner Raymond Sullivan Jr. has joined the Washington office of Baker Donelson to lead a global customs practice. Why the move? "The reason was really to move my practice, in these tougher economic times, to a firm that has a friendlier rate structure for my clients," Sullivan says. See full article on AmLaw at: From Legal Times: Baker Donelson's Lower Rates Attract White & Case Partner
Thanks to Patrick Lamb and his site In Search of Perfect Client Service for pointing this one out. Paul Lippe at Legal On Ramp (legal social networking platform) is opening up the site to assist attorneys who have become the victims of the economic downturn:
At Legal OnRamp, we're concerned about the recent layoffs of associates in large firms, but also optimistic that this will give those lawyers an opportunity to adapt to the world that's emerging. As such, even though Legal OnRamp is primarily for inhouse lawyers, we are inviting associates who are being laid off to join. We are putting together a career center with a variety of resources, we have a number of job listings, and will support various networking and skills development activities. We have extended that offer directly to the firms and welcome individuals to contact us as well. Just indicate which firm you are being laid off from when you request an invitation at www.legalonramp.com.
Nate Raymond, The American Lawyer, November 25, 2008
Simpson Thacher & Bartlett announced smaller year-end associate bonuses Monday, continuing the slashing seen at other elite law firms.
The bonuses, which range from a pro-rated $17,500 for first-year associates to $32,500 for eighth- and ninth-years, matched the reduced rates announced Thursday by Cravath, Swaine & Moore.
'The numbers were essentially half of last year's,' says Philip Ruegger III, Simpson Thacher's chairman. He confirmed the contents of a memorandum that outlined the lower bonuses and first appeared on the blog Above the Law. The memo cited 'the current challenging business environment' as the reason for cutting the bonuses.
Special bonuses -- which last year ranged from $10,000 for second-years to $50,000 for seventh- to ninth-years -- went unmentioned in the memo. Their disappearance followed a trend established in earlier memos from Skadden, Arps, Slate, Meagher & Flom and Cravath."
That prediction comes from the latest report issued by Hildebrandt International, which examines the reasons that law firms fail. 'Recognizing that the legal market is continuing to segment, we expect that we will continue to see a steady number of both mergers and dissolutions, even after the recovery from the current economic downturn,' the report reads.
The report isn't all doom and gloom, though. It concludes that firms tend to fail for several specific reasons, and dissolution can be avoided if leaders are able to recognize those problems early on.
'The seeds of most law firm failures are sown long before the actual dissolutions,' the report reads. 'In our experience, early diagnosis and action can usually prevent the fundamental flaws . . . from deteriorating into full-blown law firm failures.'"
NEW YORK — The latest bailout of Citigroup (C) helped soothe financial markets Monday and could serve as a model for other U.S. banks looking for help with their large portfolios of toxic assets.
The U.S. government late Sunday offered $20 billion for Citi preferred stock, on top of the $25 billion it has already given the bank. But this time, the government also said it will assume 90% of losses from Citi's $306 billion portfolio of loans related to bad mortgages if the losses exceed $29 billion, in return for another $7 billion in Citi preferred stock.
The news boosted Citi shares 58% to $5.95, helped lift other battered financial stocks and triggered a broad market rally Monday in which the Dow Jones industrials surged 397 points to 8443.
NEW YORK — The latest bailout of Citigroup (C) helped soothe financial markets Monday and could serve as a model for other U.S. banks looking for help with their large portfolios of toxic assets.
The U.S. government late Sunday offered $20 billion for Citi preferred stock, on top of the $25 billion it has already given the bank. But this time, the government also said it will assume 90% of losses from Citi's $306 billion portfolio of loans related to bad mortgages if the losses exceed $29 billion, in return for another $7 billion in Citi preferred stock.
The news boosted Citi shares 58% to $5.95, helped lift other battered financial stocks and triggered a broad market rally Monday in which the Dow Jones industrials surged 397 points to 8443.
Analysts say the backstop was essential to calm investors worried that the values of U.S. bank portfolios have been getting worse each passing month. "Persistent downward pressure on valuations of residential mortgage assets are being compounded by falling valuations of commercial real estate and other assets," says Brian Bethune at IHS Global Insight.
Any bank with similar toxic assets in their portfolio now has a chance to ask the government for similar cover. "Bank of America (BAC) can use this template to reduce the risk on Merrill's (MER) portfolio before they close the deal," says Cassandra Toroian, chief investment officer at Bell Rock Capital. BofA declined comment.
For the government, this is a way to stretch the fast-dwindling cash available from the $700 billion bailout fund. "It enables the government to leverage taxpayers' money better," says Keith Davis, financial analyst at Farr Miller & Washington. "This way, you can avoid buying up bad assets, and hopefully not have to bear losses unless the situation worsens."
For the banks, analysts say, this could calm investors by putting a floor on losses from the bad assets. Also, it's like an insurance policy, which the banks might never need to access, Bethune says.
This marked another reversal for the government, which two weeks ago said it would not take any action related to toxic assets, as it had planned, and instead would invest directly in the banks. That news sent financial stocks tumbling. Citi was especially hard hit, falling 60% to $3.77 last week, prompting the bank to ask for more federal help. Now, "If the investors start to go after Goldman (Sachs) (GS) or Morgan Stanley, (MS) you can see them, too, ask for similar government guarantees," Davis says. Goldman and Morgan declined comment.
Image via WikipediaThis economist article refers to firms in the broad buiness sense, but its recomendations and lessons can also be applied to firms in the more targeted, business of law sense:
"Firms that remain standing through a brutal recession will be those that have taken the phrase “cash is king” to heart. Yet there is a risk that in a rush to build up their cash mountains, cuts could be made too fast and too deep when a more targeted approach to surgery is needed. For instance, a recent article in the McKinsey Quarterly points out that technology budgets are a favourite place to make cuts, but indiscriminate chopping will be more damaging than ever before because IT systems are now so tightly interwoven with everything from supply chain management to the determination of pricing strategies.
Another reason for caution is that firms on a cash crusade can all too easily choke off investment in promising new products. That would be a huge mistake because, paradoxically, a recession can be a fantastic time to launch innovations. For one thing, tougher times can make consumers reconsider many of their purchasing decisions, leaving them open to trying something new. For another, a less crowded marketplace makes it easier—and cheaper—to create awareness of a new offering.
Scott Anthony of Innosight, a consulting firm, points out that during the dotcom bust Apple launched its first version of the iPod music player and that in America alone more than ten other “disruptive” innovations started during the same period. Experienced senior executives are convinced that this downturn will produce a new crop of world-beating businesses. In a recent speech to the Council on Foreign Relations, a think-tank, Sam Palmisano, the boss of IBM, said he was certain that he would see new leaders emerging who would “win not by surviving the storm, but by changing the game”.
Firms who want to be winners coming out of the downturn will also need the financial resources to seize any opportunities that arise during it. Interviewed in the Harvard Business Review, John Chambers, the boss of Cisco Systems, a network equipment-maker, said the firm tended to make more aggressive investments during bad times than good ones. When its rivals pulled back from Asia during the region’s financial crisis in 1997, Cisco deliberately increased its presence there, gaining a leading position it has never relinquished. Cisco’s experience is a timely reminder that while having plenty of cash is a powerful remedy in surviving a recession, if it is also deployed wisely it can produce a champion when the downturn ends.
Image via Wikipedia"'If you don't understand the value of cash right now, your clients do. You have to assume it will take longer to collect, so you have to be more rigorous in your collections. You have to make sure you've got cash coming in,'
Image via Wikipedia"There are some firms that would be better credit risks than others," Henderson said. "The thing that makes law firms different from a company that makes products is their ability to offer security for a loan. About all a firm has to offer is their accounts receivable, and a lending institution, particularly in today's market, is going to take a hard look at that."
The legal services sector shed 1,100 jobs in October as contraction in the general economy continued to hit law firm employment, according to figures released Friday by the U.S. Bureau of Labor Statistics (BLS).
Overall, jobs in the legal industry have shrunk 1.1 percent since October 2007, the report says, to 1.16 million employees. Those include not just lawyers but anyone on payroll, including paralegals, public relations specialists, secretaries, and many others. The last time so few people were employed in legal services was in December 2005, according to bureau figures.
"The Western financial system, as we know it, is dead. Not tarnished or cracked. Dead. With its demise go the Anglo laissez-faire financial mechanisms of the Reagan-Thatcher-Kohl era that have held sway for nearly three decades. The American subset, affectionately referred to as “the cowboy experiment,” run by self-centered eccentrics, is at the root of this collapse. After all, New York, not London, had been the creator of new financial products, strategies and entities. We were the innovators. Leverage was the tool. And greed was the measure of success."
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