Despite the unsettling uncertainty of the current economic downturn, many law firm leaders appear to be staying mindful of an important lesson from the last recession: don’t go overboard on personnel cuts or hiring freezes because, eventually, you’re going to wish you hadn’t.
For years, even after the economy began to improve, the ghosts of the Great Recession haunted many law firms that had hastily cut head count and halted associate and lateral hiring.
This time around, there seems to be more of an awareness that a lot of those attorneys and staff that might appear expendable in the current economic climate will eventually be missed when things start to turn around.
>> After a recent survey by Wells Fargo Private Bank found that U.S. law firms have so far largely avoided financial ruin amid the COVID-19 pandemic, Joe Mendola, senior director of sales for Wells Fargo Private Bank Legal Specialty Group, pointed to relatively modest cuts to staffing as a heartening sign, particularly compared to the Great Recession.
“That’s a little bit of a difference from past economic downturns. Firms have not reacted with large cuts overall. It could very well be that expectation that there will be a pick up in the latter part of the year from pent-up demand,” Mendola told ALM’s Dan Packel in June.
Earlier this month, Amdie Mengistu, senior consultant of partner practice at Whistler Partners, made a similar observation to ALM’s Samantha Stokes, noting that some firms are even still hiring lateral partners.
“During the last few months of the pandemic, compared to 2008, we’ve had less layoffs and more lateral hiring. It hasn’t been as catastrophic as we expected,” he said.
>> One of the clearest examples of law firms taking the long view when it comes to hiring and recruiting is the number of midsize firms forging ahead with full-length summer associate programs amid the pandemic.
As Marcie Borgal Shunk, a law firm consultant and founder of the Tilt Institute, explained to ALM’s Christine Simmons, midsize firms are intent to keep their summer programs intact this year in order to “continue to diversify the talent pool.”
“You will hear managing partners and leaders say one of their biggest mistakes was to cancel summer associate programs or freeze hiring [in the last recession], because it left them with a gap in their talent pool,” Shunk noted.
>> Meanwhile, as some law firm leaders are seeking to avoid repeating past mistakes, others are trying to recreate previous successes.
Philadelphia’s Cozen O’Connor, for example, has hired aggressively for both transactional work and class action litigation, adding 25 attorneys, including eight shareholders since March 1. The firm was similarly opportunistic in 2009, bringing on nearly 70 attorneys from crumbling Wolf Block.
“That was the worst economy of our lifetime,” executive chairman and CEO Michael Heller recently told Dan Packel. “We were willing to make that investment, and it’s paid off. We take that similar philosophy now when other firms are looking to tighten belts.”
That included a bet on the real estate practice, which was experiencing very weak demand at the time.
“When no one wanted to touch real estate, [Cozen O'Connor] did touch real estate,” Garrison & Sisson recruiter Dan Binstock added. “For years, they were benefiting from that.”
Haynes & Boone, which has added 11 new partners and a total of 39 attorneys since the start of 2020, was also aggressive during the Great Recession. In 2009, the firm was able to consummate the acquisition of IP boutique MacPherson, Kwok, Chen & Heid following a four-year courtship, establishing a presence in California for the first time. The following year, it took just four weeks to seal the deal with a six-partner group of Paul Hastings partners in New York in which the firm long held interest.
“We’ve stuck with the plans that we’ve had, and we’ve been able to maximize those,” Powers told Packel about the firm’s approach in both the last recession and the current one. “Any time there is a market disruption and you are a beacon of stability within that disruption, you can show that stability.”