Latham, law firm layoffs, and the recovering economy Forum

[Anonymous User]

In a previous career, I worked for and with some of the world's most respected engineering companies, and layoffs during down times are the norm in that industry as well. I suspect that is the case in all industries. Executives at Fortune 500 companies don't think "I better not hire Latham to represent me because they just had layoffs." They care about the quality of legal representation and ability to handle complex matters. Because of this, I’m certain that Latham has not lost esteem in the eyes of their clients.

The only way the layoffs would hurt Latham is if law students and lateral attorneys refuse to work for them, and Latham’s talent pool starts to look like that of dla piper, Jones Day, or Greenberg Traurig. ITE, Latham is going to land solid students from goods schools. Once ITE turns around, it’s likely that no one will remember the bloodbath. If you want to punish Latham, make sure law boards have a continuous stream of fresh anti-Latham posts for the next decade.

Also, if a partner is unhappy with the amount of money the firm pays him, he can take his book of business and leave. Depending on the size of the book, that could be disastrous for a firm. I could definitely see a firm laying off associates to keep partner pay high, thereby preventing an exodus of rainmakers.

[09042014]

I dunno, they called back sub 3.0 NU students at every office last year. That screams TTT to me.

[seriouslyinformative]

If you want to punish Latham, make sure law boards have a continuous stream of fresh anti-Latham posts for the next decade.

An anti-Latham troll on TLS? There was one on another forum, but he was seemingly replaced by one who trolls for habeas petitions and Jos A Bank suits.

[09042014]

Jos A Bank threading is hilarious.

[seriouslyinformative]

Seriously, though: By most accounts, laying off associates is a short-sighted move. Now that things are booming for Latham, they sure do regret cutting as many as they did. If only they were patient and had waited the craziness out, right? Lot's of other firms made similarly short-sighted decisions. Even other firms made long-term decisions: They didn't lay off associates (or laid off just a few), and they weren't worried about the PPP hit causing partners to leave because the institutional identity of the firm kept partners there for reasons other than money. Davis Polk, S&C, Cleary, Debevoise, and Simpson come to mind for this.

[seriouslyinformative]

Jos A Bank threading is hilarious.

Jesus is aramaic for Jos A Bank.

[3ThrowAway99]

The reason the firms try their best to hide their layoffs is because of the reputation damage. It's a basic tenant of business

Hate to break it to you, son, but it's still a law firm's market and it will continue to be so for the foreseeable future. Because of that, I strongly doubt law firms like Latham have suffered a decrease in the quality of students they recruit, at least if the last two summer classes were any indication. Moreover, when the law students' market returns, they will all have forgotten. Just like the classes of 2009 and 2010 forgot about Latham's actions in the early 90s.

But again: A reputation damage from WHOSE perspective? Does Chambers and Partners evaluate firms based on how many they laid off? Legal500? No. The layoffs matter only to associates. The "reputation" associated with not having laid off people matters only to future associates. But I guarantee you that Latham is just as good at what they do now as when they laid off those associates.

I hope you're beginning to see the rift here (it's kind of obvious and I'm surprised you haven't gotten it so far): The interests of partners and the interests of associates differ significantly; what's good for the former isn't always what's good for the latter. Latham could have easily survived if they didn't lay off their associates; they'd just have taken a hit to their PPP. Because partners still wanted to take a lot of money home, they fired associates. That's just the way of life. How do other partners view the move? I'm sure they are all fine with it and thank god they weren't put in a similar position, because they'd have done just the same thing. If Wachtell's business dried up overnight like Latham's did, you're fooling yourself if you think the partners would think twice before firing associates left and right.

How do clients view Latham's layoffs? They probably don't care.

So really, to the people who do matter in the legal industry, partners and clients, Latham is A-OK.

Today's associates are the partners of tomorrow, so to imply or state that it doesn't matter if they get screwed and it won't affect the reputation of a firm doesn't seem accurate to me. Already I would say that Latham has gotten a negative reputation based on the way they laid people off (even if overall the firm is still looked at as being prestigious), and I doubt that the rep damage has been limited entirely to how associates or potential associates look at the firm.

[seriouslyinformative]

Today's associates are the partners of tomorrow, so to imply or state that it doesn't matter if they get screwed and it won't affect the reputation of a firm doesn't seem accurate to me.

This is arguable. How many of these associates have a legit shot at being partners at Latham tomorrow? Is it even a non-zero number? I ask this seriously because talent models at firms are changing rapidly (and again, they are short-sighted). Partner tracks are increasing to absurd lengths, and firms are electing fewer partners. Moreover, a lot of firms, including Latham, bring in many lateral partners. This only curbs the amount of partners the firms will make from within. At plenty of firms, associates are churned through while almost all new partners are lateraled into the firm.

Again, whether these are good things for the long-term is debatable. In my opinion, rigidity in the partnership ranks (rarely taking partners, almost always promoting from within) is one extreme, and looseness in the partnership ranks (i.e., Cadwalader) is another. A firm should look for a balance between the two. In the former situation, a significant partner departure can ruin the firm's prowess in a field, and it will take a long time to rebuild their strength in the field if they promote only from within. In the latter situation, money is the glue that holds the partnership together. Therefore, partners present a higher flight-risk in the event PPP drops or another firm with deeper pockets makes them an offer they can't refuse.

I doubt that the rep damage has been limited entirely to how associates or potential associates look at the firm.

Are you a client or a partner at a law firm? Do you know any and have you asked them for their thoughts on Latham's reputation? If the answer is "no" to both questions, how can you possibly have this opinion?

[Bronte]

Wasn't Shearman a V10 firm before it did massive layoffs circa 2000? Now where is it? Why the change?

Listen, son, layoffs have no effect on a firm's reputation.

[fatduck]

Wasn't Shearman a V10 firm before it did massive layoffs circa 2000? Now where is it? Why the change?

i read this as Shearson and got really confused

[seriouslyinformative]

Wasn't Shearman a V10 firm before it did massive layoffs circa 2000? Now where is it? Why the change?

Correlation, causation? I thought you were a smart guy. Apparently... not so? And I love how Bronte was so quick to jump on the fallacy bandwagon.

Shearman's decline was for many reasons that had nothing to do with the layoffs.

[Bronte]

Wasn't Shearman a V10 firm before it did massive layoffs circa 2000? Now where is it? Why the change?

Correlation, causation? I thought you were a smart guy. Apparently... not so? And I love how Bronte was so quick to jump on the fallacy bandwagon.

Shearman's decline was for many reasons that had nothing to do with the layoffs.

Have you considered maybe that their decline was a causal factor in the layoffs? And that people know that layoffs are associated with decline? And thus layoffs are a sign of decline? And thus layoffs send a negative signal to the market?

It's also a fallacy to believe that correlation is never probative of causation, especially when there's an obvious logical link. You should seriously consider the possibility that you're the stupid one.

[3ThrowAway99]

Are you a client or a partner at a law firm? Do you know any and have you asked them for their thoughts on Latham's reputation? If the answer is "no" to both questions, how can you possibly have this opinion?

Are you a partner or a client yourself? And do you really not work for Latham if so? Also, why is it necessary I be a partner or a client to form a general opinion related to the fact that the reputational damage of Latham may well not be hermetically sealed to the group that was apparently screwed by them?

But to the extent you're right that questionable business practices (such as saving partners' large salaries at the expense of associates careers) doesn't have any effect on the reputation among firm partners or clients of firms I think that points to part of the problem with the corporate machine as it currently exists and lack of corporate accountability.

[seriouslyinformative]

Yeah, of course correlation is indicative of causation. That was implied when I stated that Shearman's decline was due to other factors.

I admit that layoffs may be indicative of deeper problems, but with nearly every firm laying off associates that year, it's difficult to conclude that latham's layoffs indicated something problematic about that firm or just law firms in general.

What's this market you speak of? The partner market?? The market for clients? Please, save your freshman grasp of law and economics for the ladies.

[seriouslyinformative]

Are you a client or a partner at a law firm? Do you know any and have you asked them for their thoughts on Latham's reputation? If the answer is "no" to both questions, how can you possibly have this opinion?

Are you a partner or a client yourself? And do you really not work for Latham if so? Also, why is it necessary I be a partner or a client to form a general opinion related to the fact that the reputational damage of Latham may well not be hermetically sealed to the group that was apparently screwed by them?

But to the extent you're right that questionable business practices (such as saving partners' large salaries at the expense of associates careers) doesn't have any effect on the reputation among firm partners or clients of firms I think that points to part of the problem with the corporate machine as it currently exists and lack of corporate accountability.

Will respond more extensively when not on phone. Per chambers and legal500, latham doesn't seem to have suffered a rep hit. And no, I don't work at Latham, and I hope I never have to.

[Julio_El_Chavo]

I think Latham is a terrible place to be as an associate, but the notion that they aren't an elite law firm is just silly and overrates the importance of associates in biglaw. If the Latham layoffs and recent Vault rankings proved anything, it's that we're interchangeable cogs as far as big law firms are concerned. We don't matter.

This is true to SOME degree at every firm. But IMO, it varies significantly from firm to firm.

[Bronte]

Yeah, of course correlation is indicative of causation. That was implied when I stated that Shearman's decline was due to other factors.

I admit that layoffs may be indicative of deeper problems, but with nearly every firm laying off associates that year, it's difficult to conclude that latham's layoffs indicated something problematic about that firm or just law firms in general.

What's this market you speak of? The partner market?? The market for clients? Please, save your freshman grasp of law and economics for the ladies.

Yeah, it has a negative effect on the market for partners and associates, those who would have a vested interest in the financial health of the firm. And failing to attract the best talent can ultimately have an effect on the client base. I'm not saying layoffs are the death knell of a firm. I'm just saying they have, to some extent, a negative effect on the firm. You're correct, it is freshman economics.

[Renzo]

Yeah, of course correlation is indicative of causation. That was implied when I stated that Shearman's decline was due to other factors.

I admit that layoffs may be indicative of deeper problems, but with nearly every firm laying off associates that year, it's difficult to conclude that latham's layoffs indicated something problematic about that firm or just law firms in general.

What's this market you speak of? The partner market?? The market for clients? Please, save your freshman grasp of law and economics for the ladies.

Yeah, it has a negative effect on the market for partners and associates, those who would have a vested interest in the financial health of the firm. And failing to attract the best talent can ultimately have an effect on the client base. I'm not saying layoffs are the death knell of a firm. I'm just saying they have, to some extent, a negative effect on the firm. You're correct, it is freshman economics.

Uh, lets revisit freshman economics for a second.

Partners make money based on the net revenue a firm generates. Associates are an expense that directly comes out of that revenue. So by firing associates that aren't billing out more than they cost, a firm is putting money directly in the pocket of the partners. It attracts partners when firms layoff deadweight associates, because it means they will be getting richer. If you need proof, look no further than Cadwalader.

[Julio_El_Chavo]

Using seriouslyinformative's own logic:

1) any biglaw firm would lay off associates if it had a drop in business
2) Latham laid off associates
3) therefore it had a drop in business
4) other firms (GDC, Davis Polk, Simpson) did not have layoffs
5) therefore they did not have a drop in business
6) having a drop in business means your workflow is not stable
7) if your workflow is not stable, your firm is not stable
/8) Latham is not a stable firm

[Renzo]

Using seriouslyinformative's own logic:

1) any biglaw firm would lay off associates if it had a drop in business
2) Latham laid off associates
3) therefore it had a drop in business
4) other firms (GDC, Davis Polk, Simpson) did not have layoffs
5) therefore they did not have a drop in business
6) having a drop in business means your workflow is not stable
7) if your workflow is not stable, your firm is not stable
/8) Latham is was not a stable firm

Now I agree completely with this logic. One great way to stabilize a business is to downsize.

[Julio_El_Chavo]

Using seriouslyinformative's own logic:

1) any biglaw firm would lay off associates if it had a drop in business
2) Latham laid off associates
3) therefore it had a drop in business
4) other firms (GDC, Davis Polk, Simpson) did not have layoffs
5) therefore they did not have a drop in business
6) having a drop in business means your workflow is not stable
7) if your workflow is not stable, your firm is not stable
/8) Latham is was not a stable firm

Now I agree completely with this logic. One great way to stabilize a business is to downsize.

But it just goes to show that clients were choosing other law firms over Latham during the economic downturn.

[Renzo]

Using seriouslyinformative's own logic:

1) any biglaw firm would lay off associates if it had a drop in business
2) Latham laid off associates
3) therefore it had a drop in business
4) other firms (GDC, Davis Polk, Simpson) did not have layoffs
5) therefore they did not have a drop in business
6) having a drop in business means your workflow is not stable
7) if your workflow is not stable, your firm is not stable
/8) Latham is was not a stable firm

Now I agree completely with this logic. One great way to stabilize a business is to downsize.

But it just goes to show that clients were choosing other law firms over Latham during the economic downturn.

Not necessarily. I don't know where the layoffs were, but if they were in, say real estate finance, or securitization, then the work just disappeared. Not to another firm, just gone. There were zero (literally zero) CMBS transactions in 2009.

[Anonymous User]

But it just goes to show that clients were choosing other law firms over Latham during the economic downturn.

I'm the anon who started this thread. I don't want to weigh in too much, but my understanding is that this was less of a "choosing other firms" event and more extremely bad timing (and arguably business decision making) on Latham's part prior to the crash. They quickly built up a huge NYC office that, as I understand it, largely focused on securitization of the kind that dried up in the wake of the crash. I believe similar things occurred at many other firms that conducted large layoffs.

It wasn't a failure to compete for business, it was a failure of the business to which the firm catered.

I may be wrong about some of the details.

Edit: Renzo beat me to it.

[Bronte]

Uh, lets revisit freshman economics for a second.

Partners make money based on the net revenue a firm generates. Associates are an expense that directly comes out of that revenue. So by firing associates that aren't billing out more than they cost, a firm is putting money directly in the pocket of the partners. It attracts partners when firms layoff deadweight associates, because it means they will be getting richer. If you need proof, look no further than Cadwalader.

Lol, I'm done with this fight. Now it's a positive thing to layoff associates?

[Renzo]

Uh, lets revisit freshman economics for a second.

Partners make money based on the net revenue a firm generates. Associates are an expense that directly comes out of that revenue. So by firing associates that aren't billing out more than they cost, a firm is putting money directly in the pocket of the partners. It attracts partners when firms layoff deadweight associates, because it means they will be getting richer. If you need proof, look no further than Cadwalader.

Lol, I'm done with this fight. Now it's a positive thing to layoff associates?

For partners, yes. For associates, obviously not. For clients, who knows. Maybe there's some truth to the idea that Latham et al will have trouble recruiting; in which case it's bad for clients in the long run. But at the same time, clients hire lawyers, not firms. If their go-to partner fires his associates, he's still their go-to guy.