Seyfarth Shaw made big waves in the legal industry last week when it laid off as many as 40 lawyers and staff amid reportedly disappointing first-quarter revenues.
The move raised obvious questions for lawyers at Chicago-based Seyfarth and other large firms. Is soft demand for legal services here to stay? Are other firms about to follow suit? And most obvious of all: Is my job safe?
But law firm attorneys aren’t the only ones looking for answers. Their clients may have questions too.
Among the first, according to Dallas lawyer Sterling Miller: “Is there anyone who is really elbows-deep in my projects who is being let go?”
“You hire individual lawyers, you rarely hire law firms,” noted Miller, a former general counsel at Travelocity and Sabre Corp. who’s now a partner at litigation and data privacy boutique Hilgers Graben.
Even when mass layoffs don’t affect a client’s matters, “a smart firm would be reaching out to their clients and getting ahead of the story,” Miller said. “If it’s just a handful of lawyers, you are probably just shrugging your shoulders. But if it’s a big number, you’re getting a little bit nervous … You may start thinking, ‘How secure is this law firm? Is it going to make it?’”
In Seyfarth’s case, the cuts were meant to help the firm “maximize performance and best serve our clients,” according to a statement from managing partner Peter Miller. In part, the layoffs drew attention because they came not during a recession, as what happened at Seyfarth and many other firms in 2009, but in the wake of revenue and profit increases for the firm in 2016. Martin Grego, a Seyfarth spokesman, declined to comment further.
Steven Rossum also views layoffs from both an in-house and outside counsel perspective. A former general counsel to AirTran Airways, Rossum is a partner in Smith, Gambrell & Russell’s Atlanta office. He believes terminations don’t always raise alarm bells.
As a GC hearing firm layoff news, “You want to make sure that your relationship, or the people performing your company’s work, are going to be continuously in place where they can continue your work without interruption,” Rossum said. But “as long as things are seamless and nondisruptive, you don’t care as much as how the firm runs its business,” he said.
If clients do have questions, he said, they’re likely laser-focused on the relationship, not a firm’s overall health: “‘Are you still going to do my work, are you going to change my rates and are you going to answer my call on the second ring?’”
Corporate GCs understand that “people come and go for better opportunities, and sometimes they don’t make it,” Rossum added.
Two law firm consultants—whose jobs sometimes include encouraging firms to shed lawyers—said layoffs are usually no biggie for most clients or prospective clients.
“Informed people understand most law firms are wrestling with overcapacity. Most firms have room to strengthen performance by addressing overcapacity,” said Kent Zimmermann of the Zeughauser Group. “The negative buzz goes for a couple of days or a week, and then it’s gone,” he said. Meanwhile, “the cost of not addressing chronic overcapacity is usually far greater.”
Tom Clay, a consultant and principal at Altman Weil Inc., wholeheartedly agreed. “You know if people aren’t busy you are going to let them go. Clients aren’t going to see that as a big revelation,” he said.
“We all know in our hearts and minds we have too many lawyers, and too many that don’t have enough work,” he said.
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