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Fading Away

Am Law 200 firms have laid off almost 3,000 associates this year. Who did it well--and who didn't?

The American Lawyer

By Ross Todd

August 01, 2009

On a Monday morning in early March, two associates sat in an East Coast office of Morgan, Lewis & Bockius discussing a firmwide e-mail from chairman Francis Milone. It warned that because of the recession, 55 lawyers and 161 staff members would be told that day that "their employment will end." These two associates felt relatively confident that their jobs were safe. But as they chatted, the phone rang, and the number of the partner both of them worked for popped up in the caller ID box of one asso­ciate's phone. They panicked.

As one associate looked on, the other answered what turned out to be a routine work-related call. After a collective sigh, the associates discouraged the partner from calling anyone else until later that day, after a meeting that had been scheduled to discuss the layoffs--the unofficial all-clear for associates unaffected by the cuts. (These associates, like all quoted in this story, spoke on the condition of confidentiality.)

Since January 2008, Am Law 200 firms have laid off more than 2,900 lawyers. No matter how much care firms put into layoffs, moments like this one--when the world seemed to skip a beat--inevitably occurred for associates who kept their jobs. (That's not to mention those who did not.) This year, as part of our annual midlevel survey, we asked 6,101 third-, fourth-, and fifth-year associates between late March and mid-May to assess how their firms handled layoffs and how the news was communicated to them, and combined those scores into a single "layoff composite" [See Cuts--Cruel and Kind, below]. In a year filled with disappointment, how the bad news was delivered and how departures were characterized mattered.

Morgan, Lewis's layoff composite score placed it among the top third of the 92 firms that received a layoff composite ranking. Morgan, Lewis associates contacted for this story appreciated that the firm clearly stated in March that their colleagues were being let go because of the economy, not their individual performance. Although some questioned Milone's decision to break the news via an e-mail blast instead of waiting for each affected employee to be notified, they conceded that there's no perfect way to deliver bad news. Milone says he worked closely with staff "so that we had as little uncertainty for the shortest amount of time possible" and that the people affected were told within a few hours of the announcement. "There's no tougher task than making decisions about the employment status of people," Milone says. Notes one West Coast Morgan, Lewis associate who survived the cuts: "A little bit of anxiety for an hour or two is not so bad, in the whole scheme of things."

So what did associates perceive as bad firm conduct? Most were skeptical--hostile, even--about cuts that firms labeled as purely performance-related. The downturn left most firms with less work and lower-than-normal attrition. So to most associates, layoffs were understandable. But sending exiting colleagues into a terrible economy while tarnished with poor performance reviews drew associates' ire. While it's true that poor performers were targeted, explains an asso­ciate at Dewey & LeBoeuf, the firm wouldn't have let so many people go in good times. "It's both economic and performance-based, and I wish they would just say that," this associate says. Dewey's layoff composite score placed it among the bottom ten firms. "When we've done layoffs, we've tried to be as transparent as possible," says Dewey spokesman Angelo Kakolyris. "We really do our best to let people know how the process works." Kakolyris says the score doesn't take into account the firm's DL Pursuits program, launched in May, which allows associates and counsel to take up to 18 months off from the firm at one-third of their pay while retaining their health benefits.

By contrast, firms that scored the best, such as McKee Nelson, made it clear both inside and outside the firm that the cutbacks were caused by the economy. When news of firm layoffs broke, McKee Nelson cofounder William Nelson told The Wall Street Journal's law blog, "This is market-driven, not the fault of these kids." (In July, McKee announced it would merge into Bingham McCutchen.)

Associates contacted for this story were largely unaware of what sorts of severance payments, benefits, and outplacement assistance their exiting colleagues were offered--understandably so, since those packages were often confidential. What associates were aware of is how moves were characterized to their exiting colleagues.

Take the case of Fried, Frank, Harris, Shriver & Jacobson. The firm let individual attorneys know they should start looking for new jobs during performance reviews staggered throughout November. "Everyone had a nervous twitch for three days," says one associate who is still with the firm. Besides setting associates' nerves on edge, the use of the performance reviews angered associates, who said it appeared to make performance, rather than the economy, as the reason for the cuts. "In [firm leaders'] minds, it wasn't layoffs. It was just a regular process. They didn't 'do layoffs,' " says one associate. Says another: "Ninety percent of our profession is guarding secrets for people. When you try to translate that into management, it doesn't quite work out."

Fried, Frank's layoff composite score placed it at number 82 among 92 firms. But associates said the firm did a better job with layoffs that were announced in late March, after some respondents had already filled out our associate survey. In that cutback, the firm laid off 41 associates, in a single move characterized in a firmwide memo as an attempt to "respond responsibly to the current environment." Associates said they appreciated that the move was handled more transparently by management and that their colleagues weren't tarred as poor performers. It was, said one Fried, Frank midlevel, a "marked improvement."

At some firms, associates had little expectation that the firm would communicate clearly about its decisions. "We don't have an open disclosure policy," says one associate at Snell & Wilmer, a firm where 21 associates responded that the firm conducted layoffs and 29 said the firm did not. "Even equity partners are [only] given information on a need-to-know basis." Although some junior associates quietly left the firm, Snell associates contacted for this story disagreed about whether the departures were for economic or performance reasons. It's a guessing game, they say, because partners maintain that personnel matters are private, even when asked directly. "I guess obfuscation is better than flat-out lying," says one associate.

Snell chairman John Bouma says that associate attrition this year matches that of prior years. "We haven't had layoffs among the asso­ciates, and we don't anticipate layoffs among the associates," Bouma says. He attributes associates' differing opinions on whether the firm has had layoffs to "the old business about the glass either being half-full or half-empty," adding that "some people are cynics."

Even the cynics among Snell associates say that the firm has been more transparent than usual in the past six months. Firm management has gone so far as to set up an anonymous online system for asso­ciates to ask questions of firm leaders—though some associates hold the claims to anonymity to be dubious. ("I guess paranoia reigns [at] some places," Bouma responds to those doubts.) Leaders also have been holding more frequent associate roundtables to explain the firm's approach to the economy, including an open round of staff layoffs.

Despite the complaints, this generation of midlevels knows that it has benefited from the boom and bust of big-firm economics. They lived it up during the bubble years, and now they're seeing the downside. One Fried, Frank associate recalled receiving two notices of raises during the industrywide salary bumps in the summer of 2006—all before billing "a second" of time for the firm. Says this associate: "I would just like to see the firm leadership be more transparent about thinking through things, because it's comforting to people, and that's what you should do when you are responsible for people's lives." Besides, the associate says, "it doesn't cost anything."

Several associates compared their industry's economic cycle to that of the real estate sector. Just as real estate was overvalued, they say, many firms paid inflated prices for talent, resulting in the wave of salary freezes and layoffs sweeping the country. One Shearman & Sterling associate remembers the firm raising bonuses to meet market rates a couple of years ago. "I remember thinking at the time, 'I'm not going to see a labor market like this in my profession again,' " this associate says.

The shift is having some unintended consequences. As some midlevels start to think strategically about their own practices, they're doing so with a sense of independence that might unnerve some partners. "I'm much more focused on ensuring that I build my personal brand with clients," says one Cooley Godward Kronish associate. As partners look out for their economic interests, can associates be blamed for doing the same?

CUTS--CRUEL AND KIND

As a part of our annual midlevel survey, we asked associates whether their firms had conducted layoffs. We also asked them to assess--on a 1-to-5 scale, with 5 being the highest possible grade--how their firms handled the layoffs and how they communicated the news. To be evaluated for these tables, a firm needed to meet two conditions: More than half of its respondents had to answer that there had been layoffs at the firm, and more than five midlevels had to respond to the layoff-related questions. Ninety-two firms met those criteria. To create our "layoff composite score" for those firms, we averaged scores for the question about the handling of layoffs and the question about communication about layoffs. Here are the firms with the top ten and bottom ten composite scores.

High Scorers

Low Scorers

Click here to access the full report, including the national, city-by-city, and A to Z charts and all related feature stories.

Illustration: iStockphoto.com / Jason R. Murray