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The associate layoff memo has developed certain conventions. First, there's the blanket assurance that the firm is fundamentally healthy. Then comes the announcement itself, regretfully noting the need to "realign capacity." Finally, most firms emphasize that the departures were not performance-based; in fact, the lawyers that just got canned were "valued colleagues."
But associates rarely forget that they are merely cogs in a larger profit machine, or that the product of their daily grind is continually reviewed--both for quantity and quality--by the owners of the machine. More than 3,000 lawyers have been laid off from large firms so far in 2009, according to legal blogs tracking the carnage, and even the greenest greenhorn knows that someone in HR isn't pulling names randomly out of a hat.
So how are associates marked for extinction? Who lives, who dies, and why?
It's not simply a matter of hours. There is a calculus involved. Some firms really are "realigning," or making up for lack of traditional associate attrition. Others are tossing deadweight as fast as possible from a sinking ship. But even though a number of agendas are at work, firms usually start at the same place: billables.
"The best people are always going to stay the busiest," says the chairman of a large firm in the Northeast. "If you have people with really low hours, it generally means they're not as good as their peers, or they don't want to work as hard."
When average hours slipped too low in a particular department over the winter, that chairman says his firm determined how many lawyers it would need to cut to push productivity (and hence profits) back up to acceptable levels. Similarly, another Am Law 100 firm looked at mean associate hours in a troubled department over nine months and then chose a number below that mean--in this case, roughly 140 hours per month, close to 1,700 annually, according to the managing partner. Anyone below that line found themselves on the chopping block. In the end, more than 30 associates were laid off.
Still, firm leaders say it's rare to simply draw a line and fire every single associate who falls below it. "It's not a purely hours-based decision by any means," says Reed Auerbach, co-CEO of McKee Nelson. Firms assess their leverage model, try to balance layoffs across associate classes, and ask partners for feedback about particular associates' skills and flexibility. If they can move associates to busier departments, they will. "There is a huge amount of thought that goes into this," says Bingham McCutchen chairman Jay Zimmerman.
Then there's the reality that, as the chairman of one firm puts it, "every hour is not equal." He explains: "Some people take 100 hours to do a job that someone else can do in 50, and the 50-hour guy may do a better job." Those details are tough to capture in a statistic.
In fact, pure billable hours may have been a more important measure of value before the recession, when firms could barely handle all the business coming their way. "If everyone is working their tail off, but there is one kid with 1,500 billable hours, that sticks out a little differently," says Auerbach.
In the end, "firms are primarily focused on productivity," says Hildebrandt International law firm consultant Lisa Smith. In addition to hours, firms look at realization rates, write-downs, write-offs, and any other measure they can. And despite the assurances of regret, many firms are only too pleased to be playing the role that was once played by attrition. "In the old days they didn't get to pick and choose, but now they are holding on to the strongest performers," says Smith.
One firm chairman notes that the relatively easy profits of the last few years made it possible for firms to ignore the reality that some lawyers were working much harder than others. "We all got sloppy," he says. A counterpart at another firm puts it more bluntly. "The fact is, the qualitative gene pool improves in the process of doing these layoffs," he admits. "Valued colleagues" indeed.
