Layoff Predictions Forum

[2013]

If the economy does rebound, do we think that lateral hiring will be hot in Q4?

[JusticeSquee]

Fross Zelnick (IP boutique) also cut salaries:

https://abovethelaw.com/2020/04/another ... -downturn/

Arent Fox is also cutting salaries: https://abovethelaw.com/2020/04/lawyers ... 0-percent/

I think this short-term crisis is going to reveal some differences between firms that are ostensibly on the 190 scale. I can't imagine a firm like Cravath ever cutting salaries, even temporarily, but a lot of firms have very different economics than the V10 NY firms. In a way I think this makes sense--it seems strange for firms with $1.5m PPP paying the same as $5m PPP.

From an economic perspective, this was always a weird quirk about law firm pay.

From a law student perspective, this should make clear the distinction between the tier of firms that are actually financially stable from those that only pretend to be.

[Newbie2TLS]

What do people think of tech-based firms’ ability to weather the storm? It seems like those firms would have an easier time given their clients are more able to continue via work from home during these shutdowns. But that’s just me guessing. Who knows what’s happening.

[JusticeSquee]

What do people think of tech-based firms’ ability to weather the storm? It seems like those firms would have an easier time given their clients are more able to continue via work from home during these shutdowns. But that’s just me guessing. Who knows what’s happening.

lol what in the world is a “tech-based firm”

[nealric]

Fross Zelnick (IP boutique) also cut salaries:

https://abovethelaw.com/2020/04/another ... -downturn/

Arent Fox is also cutting salaries: https://abovethelaw.com/2020/04/lawyers ... 0-percent/

I think this short-term crisis is going to reveal some differences between firms that are ostensibly on the 190 scale. I can't imagine a firm like Cravath ever cutting salaries, even temporarily, but a lot of firms have very different economics than the V10 NY firms. In a way I think this makes sense--it seems strange for firms with $1.5m PPP paying the same as $5m PPP.

These differences were always there to those who were paying attention. At the v20 or so, the payscale is ironclad all the way to the 8th year associate level and beyond. If you make partner, you start making well above that fairly quickly. Then in the v20-50 range, the payscale may stay all the way to 8th year, but there are tougher criteria for bonuses, some firms will pay below market bonuses, and some associates don't get automatically bumped. New partners may not see a salary increase over their associate comp for some time. Then in the v50-100 range, you start seeing firms depart from the payscale after the 190 intro salary. There's a lot more compression, more blackbox/individualized comp (i.e. below market). Bonuses may be below market or awarded only to top performers.

Note I use vault as a lazy short hand. It's very imperfect for a lot of reasons, but it's an easy reference point people are familiar with. There are v50-100 firms that are pretty solidly market (or even above in some cases), and v20-50 firms that are below market (even first first years in some cities).

Note that associate pay and PPP is not necessarily an indicator of firm health. Firms like Dewy and Drier that collapsed in the wake of the 2008 recession paid solid market salaries for a time and had some good PPP numbers (in Drier's case, the books were totally cooked).

[nealric]

What do people think of tech-based firms’ ability to weather the storm? It seems like those firms would have an easier time given their clients are more able to continue via work from home during these shutdowns. But that’s just me guessing. Who knows what’s happening.

lol what in the world is a “tech-based firm”

Probably thinking of West-coast firms that mostly do tech stuff for a living. I'm thinking of firms like WSGR.

[Anonymous User]

'Strong, Big-Name Firms' Are Looking at Imminent Cuts to Partner Draws, Consultant Says

To deal with economic uncertainty, industry adviser Kent Zimmermann said Am Law 100 firms are seriously considering numerous meaningful cost-cutting options.

By Brenda Sapino Jeffreys | April 01, 2020 at 01:43 PM | The original version of this story was published on The American Lawyer

Cutting partner draws by as much as 50% in the near future is one option Am Law 100 firm leaders are considering to ensure the financial viability of their firms as the new coronavirus, and the stay-home orders intended to help slow its spread, continue to affect the economy.

Kent Zimmermann, a consultant at Zeughauser Group, said he spoke with the chairs of multiple Am Law 100 firms on Tuesday who said they are “close” to cutting partner draws within the next 30 days by as much as 50%, depending on their firm’s revenue forecast for the next few months. He said some firms are predicting a modest revenue decline over the next few months, while others are looking at a drop-off in the 50% range, he said.

“These are strong, name-brand firms,” he said.

Temporarily reducing the money going to equity partners is just one action law firm chairs and managing partners are considering right now while economic conditions are uncertain, Zimmermann said. Other options are deferring 2019 distributions that haven’t been paid yet; reducing lawyer and staff head count; instituting mandatory reduced workweeks paired with a proportional compensation decrease; mandatory or temporary leaves of absence; and delaying or shortening summer associate programs.

Zimmermann said something that doesn’t get a lot of attention during the good times is that the profit margins of Am Law 200 firms vary widely, from more than 50% among the most profitable firms down to 20% or less. “That causes a big difference in how much money you have to work with, or how much room you have to maneuver, when revenue may be down materially,” he said.

While a number of large and midsize firms have already made decisions to lay off employees, cut pay or reduce partner draws, Zimmermann said firms really don’t want to lead the industry in these unpopular actions for fear it’s a sign of weakness.

But firm leaders are eager to talk to others about options and what they all face in these uncertain times, he said, noting that 45 or 50 Am Law 100 chairs and managing partners participated in a virtual meeting on Friday organized by Zeughauser Group.

Discussions during that chat were off-the-record, Zimmermann said, but based on individual conversations he’s had with firm leaders, a lot of options are on the table.

Many firms are still collecting on pre-COVID-19 work, lawyers remain busy with work in progress, and some firms are “closing out March and like what they see,” he noted. But, Zimmermann said, “There is concern at many well-run firms that they shouldn’t get lulled into a false sense of security, because April, May, June may be worse.”

He said the timeline for action varies, and some firms are simply having more open discussions with employees about what may be in the works.

“Some firms have been extremely transparent in telling both the attorneys and the staff that the options are on the table,” he said, noting that those firms typically have a history of transparency. But other firms are wary of making statements to lawyers and employees before decisions are made because they want to keep their options open, he said.

The list of Am Law 200 firms whose cost-cutting actions have become public grew on Wednesday with Baker Donelson, which has cut partner draws and plans to temporarily reduce salaries and furlough some employees. Others taking action include Cadwalader Wickersham & Taft, Reed Smith, Womble Bond Dickinson, and Goldberg Segalla, and some midsize firms.

As for hiring in the near term, Zimmermann said firms are realizing it’s not “business as usual” but they face a decision in what to do about summer associate programs.

“The prevailing [question] is whether we delay the start of our summer program, or we just have a two-week boot camp at summer’s end … or we just cancel,” Zimmermann said.

Zimmermann said his advice to firms is to let associates know that even if the summer program is changed, they will still be hiring for the next fall. During the 2008-09 recession, some firms did not do that, and it may have affected their reputation at some law schools, he said.

[abcdoremi]

Fross Zelnick (IP boutique) also cut salaries:

https://abovethelaw.com/2020/04/another ... -downturn/

Arent Fox is also cutting salaries: https://abovethelaw.com/2020/04/lawyers ... 0-percent/

I think this short-term crisis is going to reveal some differences between firms that are ostensibly on the 190 scale. I can't imagine a firm like Cravath ever cutting salaries, even temporarily, but a lot of firms have very different economics than the V10 NY firms. In a way I think this makes sense--it seems strange for firms with $1.5m PPP paying the same as $5m PPP.

These differences were always there to those who were paying attention. At the v20 or so, the payscale is ironclad all the way to the 8th year associate level and beyond. If you make partner, you start making well above that fairly quickly. Then in the v20-50 range, the payscale may stay all the way to 8th year, but there are tougher criteria for bonuses, some firms will pay below market bonuses, and some associates don't get automatically bumped. New partners may not see a salary increase over their associate comp for some time. Then in the v50-100 range, you start seeing firms depart from the payscale after the 190 intro salary. There's a lot more compression, more blackbox/individualized comp (i.e. below market). Bonuses may be below market or awarded only to top performers.

Note I use vault as a lazy short hand. It's very imperfect for a lot of reasons, but it's an easy reference point people are familiar with. There are v50-100 firms that are pretty solidly market (or even above in some cases), and v20-50 firms that are below market (even first first years in some cities).

Note that associate pay and PPP is not necessarily an indicator of firm health. Firms like Dewy and Drier that collapsed in the wake of the 2008 recession paid solid market salaries for a time and had some good PPP numbers (in Drier's case, the books were totally cooked).

If not PPP, what do you think is the best way to assess a firm's health (assuming the books aren't cooked)? RPL? PPL? Leverage could go either way, since low leverage means less fat to trim and higher leverage means more firings but more of a chance of survival for the firm.

[VulcanVulcanVulcan]

'Strong, Big-Name Firms' Are Looking at Imminent Cuts to Partner Draws, Consultant Says

To deal with economic uncertainty, industry adviser Kent Zimmermann said Am Law 100 firms are seriously considering numerous meaningful cost-cutting options.

By Brenda Sapino Jeffreys | April 01, 2020 at 01:43 PM | The original version of this story was published on The American Lawyer

Cutting partner draws by as much as 50% in the near future is one option Am Law 100 firm leaders are considering to ensure the financial viability of their firms as the new coronavirus, and the stay-home orders intended to help slow its spread, continue to affect the economy.

Kent Zimmermann, a consultant at Zeughauser Group, said he spoke with the chairs of multiple Am Law 100 firms on Tuesday who said they are “close” to cutting partner draws within the next 30 days by as much as 50%, depending on their firm’s revenue forecast for the next few months. He said some firms are predicting a modest revenue decline over the next few months, while others are looking at a drop-off in the 50% range, he said.

“These are strong, name-brand firms,” he said.

Temporarily reducing the money going to equity partners is just one action law firm chairs and managing partners are considering right now while economic conditions are uncertain, Zimmermann said. Other options are deferring 2019 distributions that haven’t been paid yet; reducing lawyer and staff head count; instituting mandatory reduced workweeks paired with a proportional compensation decrease; mandatory or temporary leaves of absence; and delaying or shortening summer associate programs.

Zimmermann said something that doesn’t get a lot of attention during the good times is that the profit margins of Am Law 200 firms vary widely, from more than 50% among the most profitable firms down to 20% or less. “That causes a big difference in how much money you have to work with, or how much room you have to maneuver, when revenue may be down materially,” he said.

While a number of large and midsize firms have already made decisions to lay off employees, cut pay or reduce partner draws, Zimmermann said firms really don’t want to lead the industry in these unpopular actions for fear it’s a sign of weakness.

But firm leaders are eager to talk to others about options and what they all face in these uncertain times, he said, noting that 45 or 50 Am Law 100 chairs and managing partners participated in a virtual meeting on Friday organized by Zeughauser Group.

Discussions during that chat were off-the-record, Zimmermann said, but based on individual conversations he’s had with firm leaders, a lot of options are on the table.

Many firms are still collecting on pre-COVID-19 work, lawyers remain busy with work in progress, and some firms are “closing out March and like what they see,” he noted. But, Zimmermann said, “There is concern at many well-run firms that they shouldn’t get lulled into a false sense of security, because April, May, June may be worse.”

He said the timeline for action varies, and some firms are simply having more open discussions with employees about what may be in the works.

“Some firms have been extremely transparent in telling both the attorneys and the staff that the options are on the table,” he said, noting that those firms typically have a history of transparency. But other firms are wary of making statements to lawyers and employees before decisions are made because they want to keep their options open, he said.

The list of Am Law 200 firms whose cost-cutting actions have become public grew on Wednesday with Baker Donelson, which has cut partner draws and plans to temporarily reduce salaries and furlough some employees. Others taking action include Cadwalader Wickersham & Taft, Reed Smith, Womble Bond Dickinson, and Goldberg Segalla, and some midsize firms.

As for hiring in the near term, Zimmermann said firms are realizing it’s not “business as usual” but they face a decision in what to do about summer associate programs.

“The prevailing [question] is whether we delay the start of our summer program, or we just have a two-week boot camp at summer’s end … or we just cancel,” Zimmermann said.

Zimmermann said his advice to firms is to let associates know that even if the summer program is changed, they will still be hiring for the next fall. During the 2008-09 recession, some firms did not do that, and it may have affected their reputation at some law schools, he said.

How is 50 law firms talking about employee compensation not an antitrust violation?

[Anonymous User]

What class years are potential layoffs most likely to affect? I'm a 1st year associate. Would layoffs target the most junior associates, mid-levels, or senior associates the most?

[jarofsoup]

'Strong, Big-Name Firms' Are Looking at Imminent Cuts to Partner Draws, Consultant Says

To deal with economic uncertainty, industry adviser Kent Zimmermann said Am Law 100 firms are seriously considering numerous meaningful cost-cutting options.

By Brenda Sapino Jeffreys | April 01, 2020 at 01:43 PM | The original version of this story was published on The American Lawyer

Cutting partner draws by as much as 50% in the near future is one option Am Law 100 firm leaders are considering to ensure the financial viability of their firms as the new coronavirus, and the stay-home orders intended to help slow its spread, continue to affect the economy.

Kent Zimmermann, a consultant at Zeughauser Group, said he spoke with the chairs of multiple Am Law 100 firms on Tuesday who said they are “close” to cutting partner draws within the next 30 days by as much as 50%, depending on their firm’s revenue forecast for the next few months. He said some firms are predicting a modest revenue decline over the next few months, while others are looking at a drop-off in the 50% range, he said.

“These are strong, name-brand firms,” he said.

Temporarily reducing the money going to equity partners is just one action law firm chairs and managing partners are considering right now while economic conditions are uncertain, Zimmermann said. Other options are deferring 2019 distributions that haven’t been paid yet; reducing lawyer and staff head count; instituting mandatory reduced workweeks paired with a proportional compensation decrease; mandatory or temporary leaves of absence; and delaying or shortening summer associate programs.

Zimmermann said something that doesn’t get a lot of attention during the good times is that the profit margins of Am Law 200 firms vary widely, from more than 50% among the most profitable firms down to 20% or less. “That causes a big difference in how much money you have to work with, or how much room you have to maneuver, when revenue may be down materially,” he said.

While a number of large and midsize firms have already made decisions to lay off employees, cut pay or reduce partner draws, Zimmermann said firms really don’t want to lead the industry in these unpopular actions for fear it’s a sign of weakness.

But firm leaders are eager to talk to others about options and what they all face in these uncertain times, he said, noting that 45 or 50 Am Law 100 chairs and managing partners participated in a virtual meeting on Friday organized by Zeughauser Group.

Discussions during that chat were off-the-record, Zimmermann said, but based on individual conversations he’s had with firm leaders, a lot of options are on the table.

Many firms are still collecting on pre-COVID-19 work, lawyers remain busy with work in progress, and some firms are “closing out March and like what they see,” he noted. But, Zimmermann said, “There is concern at many well-run firms that they shouldn’t get lulled into a false sense of security, because April, May, June may be worse.”

He said the timeline for action varies, and some firms are simply having more open discussions with employees about what may be in the works.

“Some firms have been extremely transparent in telling both the attorneys and the staff that the options are on the table,” he said, noting that those firms typically have a history of transparency. But other firms are wary of making statements to lawyers and employees before decisions are made because they want to keep their options open, he said.

The list of Am Law 200 firms whose cost-cutting actions have become public grew on Wednesday with Baker Donelson, which has cut partner draws and plans to temporarily reduce salaries and furlough some employees. Others taking action include Cadwalader Wickersham & Taft, Reed Smith, Womble Bond Dickinson, and Goldberg Segalla, and some midsize firms.

As for hiring in the near term, Zimmermann said firms are realizing it’s not “business as usual” but they face a decision in what to do about summer associate programs.

“The prevailing [question] is whether we delay the start of our summer program, or we just have a two-week boot camp at summer’s end … or we just cancel,” Zimmermann said.

Zimmermann said his advice to firms is to let associates know that even if the summer program is changed, they will still be hiring for the next fall. During the 2008-09 recession, some firms did not do that, and it may have affected their reputation at some law schools, he said.

How is 50 law firms talking about employee compensation not an antitrust violation?

We aren’t consumers. Think that they are cutting your pay but still billing you out at the same rate...

[Anonymous User]

What class years are potential layoffs most likely to affect? I'm a 1st year associate. Would layoffs target the most junior associates, mid-levels, or senior associates the most?

probably us first years lol

mid levels seniors more expensive to replace I think

[trebekismyhero]

What class years are potential layoffs most likely to affect? I'm a 1st year associate. Would layoffs target the most junior associates, mid-levels, or senior associates the most?

probably us first years lol

mid levels seniors more expensive to replace I think

You would hope that firms would be more considerate of their associates' careers, but based on what happened in 2008-09, juniors are the most likely to be affected. Though senior associates that were not going to make partner will be shown the door a lot faster than they would have otherwise

[burritotaco]

What class years are potential layoffs most likely to affect? I'm a 1st year associate. Would layoffs target the most junior associates, mid-levels, or senior associates the most?

probably us first years lol

mid levels seniors more expensive to replace I think

You would hope that firms would be more considerate of their associates' careers, but based on what happened in 2008-09, juniors are the most likely to be affected. Though senior associates that were not going to make partner will be shown the door a lot faster than they would have otherwise

Sounds right to me. I remember a candid email from our office services saying in so many words, don't get your hopes up at OCI because firms are already getting rid of first years, so why would they hire you? I feel so badly for current law students because this seems so much worse and more widespread than the Great Recession.

[letsplayball]

Do you guys think that firms would first fire associates, or rescind offers to summers/incoming first years?

[ghostoftraynor]

There isn't much use in going down these rabbit holes other than increasing stress.

But, if you want to speculate, definitely first years. If we are still in bad shape come fall, some offers will likely be rescinded. But, rescinding an offer does nothing to help a firms cash flow now.

[letsplayball]

There isn't much use in going down these rabbit holes other than increasing stress.

But, if you want to speculate, definitely first years. If we are still in bad shape come fall, some offers will likely be rescinded. But, rescinding an offer does nothing to help a firms cash flow now.

But come fall, current first years will become second years, and last years crop of summers will be first years. Wouldn't rescinding offers from last year's summers/incoming first years and canceling the upcoming 2020 summer program help cash flow just as much as firing current associates?

[ghostoftraynor]

There isn't much use in going down these rabbit holes other than increasing stress.

But, if you want to speculate, definitely first years. If we are still in bad shape come fall, some offers will likely be rescinded. But, rescinding an offer does nothing to help a firms cash flow now.

But come fall, current first years will become second years, and last years crop of summers will be first years. Wouldn't rescinding offers from last year's summers/incoming first years and canceling the upcoming 2020 summer program help cash flow just as much as firing current associates?

If the new class is set to start September 1, a firm could wait until August 31 to rescind offers. Realistically, they'd probably give some lead time, but the point is there is zero point in making that move now. Current associates are on the chopping block now. By September, seriously hope we are largely out of this. If not, sure those people are at risk too.

Sorry accidental anon. GhostofTraynor.

[QContinuum]

If the new class is set to start September 1, a firm could wait until August 31 to rescind offers. Realistically, they'd probably give some lead time, but the point is there is zero point in making that move now. Current associates are on the chopping block now. By September, seriously hope we are largely out of this. If not, sure those people are at risk too.

Agree. The incoming first-year class is, comparatively speaking, least at risk. Firms will look first at delaying start dates before axing them. And delayed start dates/rescinded offers won't even be under consideration until July, maybe even August, at which point hopefully the lockdowns will have been long lifted.

In terms of highest risk - I'd say current associates, followed by upcoming summers. We've already seen moves on these fronts, with layoffs and paycuts for current associates at several firms, and Cooley almost halving the length of the summer program.

[bella26]

Why Would summer associates be at risk at most V100 firms? I get shortening the summer program, mainly due to the office likely being closed, not for financial reasons. But doesn’t no-offering summers only have downsides? It creates a bad reputation for the firm and the economy may be back to normal by fall 2021. Why not maintain a 100% offer rate and if things are still bad in fall 2021, defer or rescind offers at that point.

[nealric]

Why Would summer associates be at risk at most V100 firms? I get shortening the summer program, mainly due to the office likely being closed, not for financial reasons. But doesn’t no-offering summers only have downsides? It creates a bad reputation for the firm and the economy may be back to normal by fall 2021. Why not maintain a 100% offer rate and if things are still bad in fall 2021, defer or rescind offers at that point.

Whatever the rationale, there were a lot of no-offers from summer of '09 (first summer after the financial crisis). A lot of of it was because incoming classes were already deferred, so they didn't really have room for a double class start. The reputational damage wasn't much because a wide swath of firms did extensive no-offers.

[Anonymous User]

Procopio (San Diego based firm) has laid off attorneys and staff

[letsplayball]

This is a nightmare.

[Anonymous User]

Why Would summer associates be at risk at most V100 firms? I get shortening the summer program, mainly due to the office likely being closed, not for financial reasons. But doesn’t no-offering summers only have downsides? It creates a bad reputation for the firm and the economy may be back to normal by fall 2021. Why not maintain a 100% offer rate and if things are still bad in fall 2021, defer or rescind offers at that point.

Whatever the rationale, there were a lot of no-offers from summer of '09 (first summer after the financial crisis). A lot of of it was because incoming classes were already deferred, so they didn't really have room for a double class start. The reputational damage wasn't much because a wide swath of firms did extensive no-offers.

If that's the case, then wouldn't it be the 2021 summer class ('22 grads) put in a worse position and not 2020's? The 2019 summer class wasn't deferred and 2020's has already been hired in the SA program. Perhaps they'll defer some of the 2020 summer class to start in 2022 instead of 2021 when they're given offers and avoid having to no-offer people at all. Then they could drastically trim the 2021+ summer class sizes since they haven't interviewed them yet and maintain a good image while right-sizing.

This would also be consistent with that approach assuming higher-ranked firms start pulling their programs: https://www.law.com/americanlawyer/2020 ... r-program/

I didn't mean to anon on this.

[JusticeSquee]

Was anyone here around for the '08-'09 shit show? What did the layoffs look like?