Rumors are swirling on the legal blog Above the Law about "stealth layoffs" at Dechert, with several posters to the site claiming associate layoffs ranging from 13 to 80 and even more across several months since March.
But the firm's chairman, Barton J. Winokur, has adamantly denied any layoffs took place and said the number of associates who have left the firm for any reason in the first nine months of the year was lower than in the same period in 2007.
A Dechert spokesperson told Above the Law that "performance reviews are taking place now, and some associates will be encouraged to move on."
The spokesperson said there haven't been any layoffs since March, and 20 structured finance attorneys were reassigned to other practices. The person also said business is down in some areas but strong in most practices, and associate head count is up in the United States.
"In my view, layoffs are when you decide to cut head count," Winokur said. "It's not when you decide to replace people with better people."
Winokur said the culture of the firm is to improve year over year and when people reach a point of seniority and still aren't getting better, the firm will sometimes tell them they don't have a future at Dechert.
Legal industry watchers in the Philadelphia area told The Legal Intelligencer they've heard rumors of layoffs at Dechert, but no one seemed to be sure of the number.
A person knowledgeable about the local market said he heard of the possibility of layoffs from former and current Dechert attorneys but said even they weren't sure of the number.
Winokur was adamant that there had been no layoffs since those in the finance and real estate practice announced earlier this year. He said there are a total of 68 U.S. associates who were at Dechert in January 2008 who were not there by the end of September. For that same time period in 2007, he said, 82 U.S. associates had moved on. He wouldn't specify whether those numbers were all associates who were asked to leave or if some left on their own accord.
Aside from the 68 associates who have left the firm between January and September, 101 were added to the U.S. offices in that time frame. Winokur compared that to the 96 who were added in 2007 when 82 left.
When looking at just the finance and real estate practice, he said 23 associates left the practice in the first nine months of 2007 and 24 left in that same time period this year. That includes, he said, the 13 layoffs announced in March.
Winokur said the firm came out earlier in the year and said it was cutting head count and hasn't done it since.
In March, the firm gave layoff notices to 13 associates in the finance and real estate practice, but later that day told the group that while they were laid off from that practice, they could take opportunities in other practices. Winokur said the group was told Dechert couldn't guarantee how long they would be reassigned to a different group. He said 12 of the 13 took the offer and a few left during the first month of the offer.
Ultimately, there were nine or 10 associates from the original 13 who were laid off at the end of three months once their assignment concluded, Winokur said.
The 20 associates mentioned by the spokesperson who were reassigned were separate from the original 13, Winokur said. Nine of those 20 were associates who were supposed to start in the finance and real estate practice, but they were split among other groups because that practice didn't need extra attorneys, he said. There were 17 associates in total who were supposed to start in the practice, so only eight actually did.
One of the comments on Above the Law's post questioned the "performance review" explanation for the layoffs, saying the firm's review period hasn't concluded yet.
Winokur said the formal review process, which is staggered over months to deal first with those associates who are having trouble, is set to conclude by the end of the year with partners and senior associates just now finishing filling out reviews. Associates were let go for performance issues earlier in the year, he said, because the firm isn't going to ignore problems until review time. Winokur said the number of associates who will have left the firm over performance issues is sure to rise -- once reviews are completed -- from the 68 who have already left.
Winokur said associates want more frequent reviews, and the firm has responded. While there is still only one formal review -- that will change to two next year -- Dechert offers more frequent, informal reviews throughout the year. He said associates had complained that reviews were given too late, around the time bonuses were given out at the end of the year.
"This is all such bull, if you don't mind my saying so," Winokur said of the layoff rumors.
He added later that this is a world in which the firm can't even know whether some of the posters to the blog are actually Dechert associates.
If the layoff rumors are true, another legal industry analyst said, he wouldn't be surprised given the firm's model and the economy.
Dechert made a decision years ago to focus on a few practice areas like high-end litigation, M&A and structured finance, that would allow it to bill at high rates and push profits per equity partner, he said, but the firm isn't as diversified as some other large firms. When times were good, that meant the firm was doing really well, he said.
"But when there's a downturn, you're going to get hurt more than the other firms that are more diversified," he said.
Winokur disputed the firm heavily favored many of the finance practices that have fallen off in this economy. He said 13 percent of the firm's revenue in 2007 was attributable to the structured finance, real estate finance and real estate practices combined. Those practices have taken a hit in 2008, with Winokur estimating they will make up about 7 percent of the firm's total revenue this year. He said that percentage drop off is not as much as those markets have fallen off in general.
When asked whether the firm's revenue would be taking a hit in 2008, Winokur said Dechert is up $14 million in revenue so far this year over last year without substantially increasing its head count. He attributed that mainly to luck, but did later add that the firm's money management practice is as busy as it has ever been. While revenue is up, Winokur said most firms would have trouble increasing profits in 2008.
One comment on the blog post claimed a small group was let go in June and another in August, followed by a much larger group of nearly 50 just a few weeks ago. That same comment claimed about 30 more layoffs were expected in January, mainly from the firm's bank financing and securitization group.
But a subsequent comment questioned the high estimates and claimed that perhaps those who were let go didn't want to believe it had to do with their performance and exaggerated the problem to make themselves look better.
"I would expect firms to be more stringent in their mid-year reviews given the slowdown in business, and those who might have just slipped by in a boom year are now getting cut, thus a larger number of firings around October," the poster wrote.
Robert Nourian of Philadelphia search firm Coleman Nourian said firms are much more open this time around than in the last economic downturn about saying they are laying off for economic reasons. He said that is commendable, although he admitted it would be difficult to say 25 attorneys were all let go for performance reasons.
Attorneys who aren't "shining" during good times tend to get carried through even if they aren't partner material, simply to bill the hours, Nourian said.
"But when there's overcapacity, firms are going to make harder decisions about who has the longer-term potential," he said.
Nourian said he is taking firms at their word these days that layoffs are performance-based because, in this market, if it's truly economic, firms seem to admit it.
The best way to handle layoffs, he said, is to keep it a well-guarded secret until the official announcement and be sure to include as many as the firm feels necessary to ensure it's a one-time deal. Then the firm can assure the remaining staff and attorneys that it feels strong moving forward and has done what was necessary to remain stable. If layoffs dribble out through rumors, people remain on edge, Nourian said.
He pointed to two emerging models that have developed out of the latest economic downturn. One, Nourian said, was the Cadwalader Wickersham & Taft model of "betting" on a practice area, riding the highs and suffering the lows. He said Cadwalader, which has seen significant attorney layoffs, has admitted it would probably do the same thing again. Other firms, he said, have been singing the praises of practice area diversification.
When asked whether Dechert would look to change its practices or has any regrets about the firm's focus, Winokur said there are always new opportunities and the firm should never be doing the same thing it was a few years ago.
"If you define yourself by what you did yesterday ... you probably aren't going to have a very long career," he said.
The firm is looking now at a lot of foreign investment in the United States, representing clients like Korea Development Bank and Singapore-based investment management company GIC. He said the firm wouldn't have been doing that work five years ago because those clients weren't interested in investing in the United States then.
Hank Grezlak contributed to this article.
