Buchanan Ingersoll & Rooney confirmed last week that it has been in the process of staff cuts.
Firm Chief Executive Officer Thomas L. VanKirk said the final numbers have not been determined, but he expects the number of legal secretaries and other administrative staff affected will be more than 15 but less than 25. Whatever the final number will be, he said it would constitute less than 2.5 percent of the firm’s workforce.
VanKirk said that the cuts were not layoffs, but that the positions were being eliminated in order for the firm to get more in line with its goal of a 3-to-1 lawyer-to-secretary ratio. He said, however, that not all of the positions would be legal secretaries. Some will be a consolidation of administrative positions. The terminations will occur in all 13 of the firm’s offices. He said some offices would be affected more than others. Some of the cuts have already been made and others will be within the next couple of weeks, he said.
VanKirk emphasized that the cuts had nothing to do with performance issues.
“There will be people … who will be eliminated who are very, very good employees and valuable contributors,” he said. “It really is a true consolidation of positions.”
Buchanan Ingersoll hasn’t been as negatively affected by the downturn in the economy, he said, as firms with a heavy focus on derivatives or collateralized debt obligations, for example. But VanKirk said the firm plans to use the economic downturn as a way to not carry extra employees. In a strong economy, having extra staff is a luxury, he said, but firms need to take a harder look during down cycles.
The current cuts will not bring Buchanan Ingersoll to its ultimate goal of a 3-to-1 attorney-to-secretary ratio, but VanKirk said he hopes additional staff cuts won’t be needed. He said the firm is trying to get everything in order for 2009 and get all of the cuts done now.
Although staff layoffs have been the expense-cutting measure of choice for Pennsylvania firms, it’s attorneys who make the biggest difference to the bottom line.
Bill Brennan of Altman Weil said lawyer staffing needs to be based on the volume of work a firm has coming in and then non-lawyer staffing should be adjusted to fit that model.
According to Altman Weil’s 2008 Survey of Law Firm Economics, the average gross receipts per attorney equal about $430,000 for all firms nationally. About $170,000 is the average overhead expense per attorney, of which $61,000 is attributed to staffing expenses.
In subtracting the $170,000 in overhead expense from the $430,000 in gross receipts, that leaves $260,000 that is paid to attorneys or toward partner profits. While it can’t be an exact example of how much a firm would save in cutting an attorney versus a staff member, the survey shows that $260,000 is going toward the average attorney while staff equates to $61,000.
“That proves the point that law firms need to concentrate on making sure they have the appropriate lawyer staffing and that should dictate the appropriate level of support staffing,” Brennan said.
VanKirk said he does not anticipate any attorney layoffs, though he cautioned that no one could have predicted the current chain of economic events. He said he hopes the economy doesn’t continue to get worse, but feels the firm has done all the necessary planning to weather the storm.
While he doesn’t anticipate attorney layoffs, VanKirk said that doesn’t mean the firm’s headcount won’t be lower at the end of the year than it was at the beginning of 2008. The firm will lose some attorneys because it asked them to leave “as part of normal evaluations” and others will leave on their own accord, he said. There won’t be a rush to fill a lot of those vacancies, he said.
According to one source familiar with the firm, there was a meeting last week to ease any associate concerns, which was followed by an announcement of staff cuts. The source put the number of cuts at 25 or more.
VanKirk said he spoke, as he always does, at one of the firm’s quarterly associate meetings Nov. 17. Financial information is shared with the associates at those meetings, he said.
Buchanan Ingersoll has seen a number of attorney defections since last year and there have been questions about its financial health and excess office space.
A number of office heads and practice group leaders have left the firm since 2007, and Buchanan Ingersoll missed target billable hour and budget projections in the first few months of its fiscal year 2008, according to an internal business report obtained in August by The Legal ‘s sister publication, Legal Times .
In an interview at the time, VanKirk said several of the defections were a positive for the firm and said the firm was ahead of its 2007 revenue for the same period.
Aside from what firms have said were performance related attorney cuts, most Pennsylvania firms have been able to avoid the mass attorney layoffs that have plagued other markets. Staff cuts have been more prevalent, however.
Duane Morris cut seven people from its marketing team in August and an additional 15 administrative positions, mainly in the Philadelphia office, from other departments the same week.
At the time of Duane Morris’ cuts, Blane R. Prescott, a consultant in the San Francisco office of Hildebrandt International, said law firms are businesses like any other and tend to bulk up in good times and adjust their size in bad economic times.
“Staff positions are definitely one area that tends to get first notice by law firms,” he said at the time. “The number of size adjustments going on in law firms is much more pervasive than is being reported.”
Ballard Spahr Andrews & Ingersoll let go of 13 support staff, and Reed Smith let go of 50 legal secretaries firmwide this year. Intellectual property boutique Synnestvedt & Lechner let seven staff members go a few days after four partners in the firm left for Saul Ewing. The firm has since disbanded, with the bulk of the attorneys joining Fox Rothschild.
Blank Rome saw the departure of nine associates after the firm’s annual review period. Dechert initially had given pink slips to 13 associates because of a downturn in the real estate and structured finance practice but later said those associates were offered positions in other practice groups. The firm has since been surrounded by rumors of additional layoffs, which Dechert Chairman Barton J. Winokur adamantly denied.
Most firms have pointed to reasons other than economics as the cause of the layoffs, but like VanKirk, Ballard Spahr Chairman Arthur Makadon said in June that staff cuts at his firm were at least in part because of the current economy.
The firm could have undergone the action two years ago, but it wasn’t prompted to take a closer look then because the economy was stronger, he had said. •