Reed Smith has laid off 45 lawyers across its offices in the United States, Europe and the Middle East, along with an unidentified number of staff.
The news was first reported on legal website Above the Law and was confirmed by Reed Smith in a statement from global managing partner Sandy Thomas. Thomas told The Legal on Thursday that the moves were done to improve efficiency in the delivery of legal services and better meet client expectations for how matters should be staffed. He said the firm would continue to hire lawyers.
“The legal industry has experienced a fundamental shift in the nature of the demand for, and the delivery of, legal services in recent years,” Thomas said in the statement. “Like all profitable businesses, Reed Smith must be attentive to market demand and industry changes and make necessary adjustments to remain competitive.
“For those reasons, the firm recently undertook a review of its staffing model to ensure the firm is sized and structured to provide clients with the highest quality legal services in the most efficient manner. One step we have taken today is to restructure our legal and nonlegal staff.”
Thomas said the layoffs affected 45 lawyers, or 2.5 percent of the firm’s attorney head count, and a “related number of staff.” The firm has more than 1,750 lawyers across 27 offices.
Thomas said the firm was providing those affected with severance pay and advisory support for job placement.
According to the statement, Reed Smith experienced a fourth-straight year of more than $1 billion in revenue in 2015. The firm hired more than 40 lateral partners in 2015 as well.
“Reed Smith has a clear strategy to provide the highest quality legal services in our key industries—financial services, life sciences and health, energy and natural resources, shipping, and entertainment and media—and the practices that support them. These changes will help us deliver on that promise,” Thomas said.
In an interview Thursday, Thomas described the layoffs as a restructuring more than a reduction in workforce. He said the firm has and would continue to hire new attorneys.
“Since I’ve been in this role, I have been trying to look really carefully at the demand dynamics and business,” Thomas said. “As I’ve been studying that and listening to general counsel and our clients, I’ve seen a couple of trends out there that I thought were important and we needed to address.”
The point isn’t just that there is a decline in demand generally in the industry, Thomas said, but that clients are increasingly focused on the efficiency of the legal services that they are getting.
“That is really a big motivator for us, not just with this step but in being the best firm we can be,” Thomas said.
Thomas pointed to a recent Citi/Hildebrandt report that urged law firms to look carefully at their leverage model and the cost of their leverage. Thursday’s layoffs were part of retooling the firm’s leverage to better fit with the concept of providing leaner teams to staff individual client matters, Thomas said. And managing leverage doesn’t mean just reducing associate numbers. Thomas said partners and a number of other classes of timekeepers were affected by the layoffs. He would not say how many staff members were affected. The firm also started this year a project management certification program for its lawyers.
Thomas said there would be a transition period until the layoffs became effective, but he did not say how long the laid-off attorneys and staff would remain at the firm.
Thomas took over leadership at Reed Smith in the fall of 2013 after longtime managing partner Gregory B. Jordan left to serve as general counsel of PNC Financial Services. In that time, he has shaken up leadership and emphasized the firm’s focus on five key industry groups.
Thomas said lateral hires over the last 12 months along with the partner promotions the firm made earlier this year reflect Reed Smith’s continued focus on those industry groups. But he said he wouldn’t make a correlation between that focus and the lawyers who were let go.
Without giving specifics, Thomas said the layoffs were not tied to a specific geographic area or practice.
Brad Hildebrandt of Hildebrandt Consulting has advised Reed Smith for several years. He said there is a lot of downsizing going on in the profession right now given a lack of demand in certain practice areas, such as litigation. He said Reed Smith was proactive about it and did it all at once rather than “bleed to death” by cutting small groups over a long period of time and making people in the firm nervous.
“There is some point where you have to size the firm to your client base,” Hildebrandt said.
Thomas said this round of layoffs addresses the firm’s concerns on efficiency and he doesn’t expect other layoffs.
“There is definitely a human cost here and a human impact that we are aware of and sensitive about,” Thomas said.
Hildebrandt said Reed Smith grew very fast over the last five years and “whenever you do that, there will always be a time where you have to sit back and say, ‘Are you the right size here?’”
Hildebrandt said there will be more layoffs at other firms in the near future.
The last time Reed Smith conducted a mass round of layoffs was during the height of the recession in late 2008 and early 2009.
In April 2009, Reed Smith cut 17 associates and 55 support staff in the United States and put nine U.K. associates and 19 U.K. staff members into redundancy consultation. That came on the heels of the December 2008 layoff of 115 staff members.
The firm had reduced its legal secretary head count by 50 in April 2008, but said at the time that it was done in an effort to get more in line with a desired attorney-to-secretary ratio rather than for economic reasons.
Gina Passarella can be contacted at 215-557-2494 or firstname.lastname@example.org. Follow her on Twitter @GPassarellaTLI. •