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Heller Says Slowdown Not Behind Layoffs
Profits this year are less than projected, but Heller leaders say the recent cut of 65 staffers is just an efficiency move
The Recorder
October 05, 2007
The chopping block at Heller Ehrman is getting a lot of use. Last week, the firm axed 65 administrative staff throughout its U.S. offices to eliminate overlapping positions and costs.
The layoffs come as Heller management continues to warn partners that profits may be less than what the firm projected at the beginning of the year. And though leaders say the plan to get rid of some back-office positions has long been in the works, at least one Heller lawyer, who did not want to be identified, said that a lull this year "made it easier" for the firm to make the decision.
Robert Hubbell, firmwide managing partner, acknowledged that "in some places for some part of the year there have been some modest reductions in work level due to the natural life cycles of cases that come to an end" -- but he emphasized that the staff cuts had nothing to do with those slowdowns.
"Having been someone who's been involved, it takes a long time of careful thinking to try to meet your business objectives -- it's not a short-term, reactive thing," he said.
The 700-lawyer firm with San Francisco roots has expanded across the globe in recent years, and Hubbell said some operational services that were initially staffed at each office can now be shared. The layoffs run from legal secretaries to IT staff. No attorneys were let go, Hubbell said.
"It really relates to completing the realignment and build-out of our national staff and structure platform," he said. "Once you have the platform in place, you're able to organize things by function or practice."
Hubbell said the cuts were also aimed at bringing costs down given the "competitive conditions" that law firms are facing.
Bradford Hildebrandt, a consultant with Hildebrandt International, said a lot of firms are looking to cut costs. Hildebrandt's cost reduction unit is the fastest-growing in the legal consultancy, he noted.
"We are in an environment today where not all firms are performing at the same level and costs are going up," Hildebrandt said. "And law firms are going to have to adjust."
With Heller's reputation as a friendly place to work, employees were hit hard when they heard the layoffs announced last Thursday in a phone message from Heller Chairman Matthew Larrabee. "It's sad because this is a very collegial place," said a Heller lawyer who did not want to be identified.
Yet the same lawyer acknowledged that Heller may have been a little overstaffed. "I don't think there's anybody who [thought] it wasn't necessary," the lawyer said.
Hubbell said it was difficult to see people go, adding that staffers were given severance packages, but he declined to provide details.
FINANCIAL UPS AND DOWNS
Heller's financial picture has been mixed in recent years -- this year may continue that trend.
Heller partners report that the firm has warned them that the value of their points -- upon which their compensation is based -- may not be as high as budgeted at the beginning of the year. Hubbell would neither confirm nor deny those reports.
Last year, Heller raised profits per partner by 17 percent to $1.035 million, though in 2005, PPP grew just 4 percent.
And over the past two years, the firm's revenue growth has lagged behind some other big San Francisco Bay Area firms.
In an interview earlier this year, firm Chairman Larrabee said the slow growth in 2005 was in part attributable to some big cases settling. Well-known for its litigators, Heller Ehrman is a go-to firm in bet-the-company litigation. But that also means that when cases finish up, some lawyers can be left without much to do.
In February, for instance, one of the few remaining antitrust cases against Heller client Microsoft Corp. was settled. A small army of Heller and Sullivan & Cromwell lawyers and staff had reportedly been camped out in Iowa when a settlement was suddenly reached.
The firm also recently lost its spot on a big Qualcomm Inc. case this summer after the judge in the case accused the company and its trial counsel of committing "gross litigation misconduct" for a massive discovery breach in Qualcomm's patent infringement case against Broadcom Corp.
"We have enjoyed a long and successful relationship with Qualcomm," firm spokesman Patrick Bustamante said on Thursday. "We continue to handle various matters for the company, and hope to continue doing so in the future."
Hubbell declined to comment on particular cases, but said that many practices across the firm are very busy now.
Heller is a firm that has traditionally inspired a lot of loyalty in its lawyers, and lawyers on the inside say that sentiment will prevail whether profits are up or down.
"People really like the institution," said a Heller lawyer. "There are years when you beat the budget and years that you don't."
But as the old saying goes, partners vote with their feet. And recruiters and some firms' local office managing partners note that they are seeing more resumes from Heller lawyers these days.
