Legal News

Managing Partners More Confident, But Layoffs Still on Horizon

By Ashby Jones

We’ll admit it. A few years ago, when the folks over at the Citi Private Bank’s Law Firm Group unveiled their “Managing Partners’ Confidence Index,” we were a little skeptical. It struck us as a somewhat squishy concept to capture in a numeric score — the “confidence” level of the nation’s law-firm heads. It also seemed that managing partners’ confidence might never flag, given that times had been so good for so long.

But we think we were wrong. As the fortunes of BigLaw have dipped dramatically over the last 16 months or so, so too has the number assigned to the MPs’ collective confidence level. So far they’ve presented a pretty accurate signpost to how the following six months might play out.

With that prelude behind us, let’s turn to the “MCPI” numbers for Q2. (Click here for the report’s “executive summary.”) This quarter’s report seems fairly evenly split between good news and bad.

The good news: the overall confidence index was up 23 points to 91. We’re still in “negative” territory, but only slightly. Summarizes Citi’s Mark Costiglio: “Managing partners are much less pessimistic about the broader economy and the legal market, and there’s a sense that the worst is behind them.”

Other good news: A slight majority of law-firm leaders said they anticipate business levels to stay the same over the next six months. And 59% of the managing partners anticipate a stable or improving economy over the next six months.

The not-so-goods: Expenses. MPs continue, it seems, to fret over expenses, especially lawyer compensation. And that, LBers, could lead to a continuation of the parade of horribles: layoffs, hiring-freezes, salary-cuts and the like. From the executive summary:

With weak anticipated demand, MPs are looking to reduce expense growth, primarily by cutting or freezing headcount, and this recession continues to be marked by record layoffs among law firms. Additional measures include shelved summer associate programs, delayed start dates for first year associates, and programs paying associates to take time off to do pro bono work or pursue other interests. A few firms have even taken the unprecedented step of reducing associate pay, and we expect others could soon follow suit.

Full post as published by Law Blog - WSJ.com on June 23, 2009 (boomark / email).