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Legal Commentary: Adam Smith, Esq.
The "Cull" & Your Clients
So now the "cull" has come to partners in the Magic Circle.
As The Financial Times reports:
The cull of partners at Britain's leading law firms worsened on Wednesday as Clifford Chance unveiled plans for job cuts across its 21-country global office network.
The announcement came just over a week after Linklaters, its rival, revealed restructuring proposals that could lead to dozens of its 500 or more partners leaving.
The shake-ups at the world's largest and second largest law firms highlight how the financial crisis is now biting so hard that it threatens the partners who own and manage top legal businesses.
Clifford Chance said its changes were likely to lead to a reduction in its 633 partners, although it declined to say how many would be affected.
David Childs, managing partner, said the firm had decided to make cuts as part of wider moves to adapt to the impact of the credit crunch on clients' fortunes.
"What we are going to do now is work out what are likely to be the expected needs for legal services over the next three to five years. We are taking a much longer view and a much more forward view," he said.
Mr Childs added that the firm had launched its plan after conversations with clients led it to conclude that some areas of business - such as leveraged financing - were unlikely to recover quickly, while others, such as securitisation, might return in a different form.
The bad news is that layoffs are no longer limited to non-premier firms or those widely recognized to be under stress. The good news, if you care to interpret it so, is that there's no stigma attached to layoffs.
The question then becomes how to "do" layoffs more rather than less intelligently. I suggest there are some lessons inherent in the Clifford Chance experience.
- Don't limit it to associates and staff. This is taking out your anger, frustration, and anxiety on the defenseless. (Did I say anger and frustration?! Yes, on purpose; these are shockingly trying times, and it's not the worst thing to admit that you don't have all the answers. I do not, obviously, recommend indulging what may be a natural, if juvenile, temptation towards anger and frustration. We're all professionals here.)
- But to get back to the importance of culling partners as well: You must. Don't kid yourself that only associates are the ones with questionable performance and all partners are bulletproof. You know in your heart that's not true (partly because, rightly, partners are held to a higher standard) and now is the time you must act on it.
- Years ago in New York Con Edison, our local utility, would display a wonderfully pithy sign at worksites where it had to to barricade streets or sidewalks: "Dig We Must." I'm deeply sorry to report that with the decline in colorful English, or the corporatizing overlay suppressing what must have clearly been the inspiration of a single individual with a moment devoted to workplace pleasure and invention, those signs have long since disappeared in lieu of the ubiquitous, bureaucratic, depressing, and uninformative flurorescent orange and yellow tape and pylons with no informative signs.
But today's motto for our industry might be: "Cull We Must."
- So if "cull we must," how best go about it? You might, for starters, as it sounds Clifford Chance has done, talk with your clients.
- What do they see coming back sooner rather than later?
- What do they not see coming back any time soon?
- What are they willing to continue to pay premium rates for? (You can suss this out without asking directly, I trust.)
- Where have they come absolutely positively under the gun to reduce outside legal expenses at all costs?
- Decide whether you view this financial crisis as a year or 18-month long "V" or as a multi-year "U" recession. This, if I may state the obvious, will help you determine how to re-align your firm for the duration.
Finally, I would argue for clarity of communication, internally to your firm and externally to your clients. (I know, it's hard to argue against clarity, but I have a different point to make.) The need for you to speak clearly now to your key constituencies has never been higher. Why?
Simply because people are confused, uncertain, and anxious. Layoffs and "redundancies" are ubiquitous. Revenues are down. Profits are down. Firms are, plain and simple, getting smaller. Now, of course you can't promise people things you can't deliver on, but you can tell them what you know, what you foresee, and what is, at least for the time being, not happening in terms of layoffs.
And it's interesting what Clifford Chance is not doing: They're not abandoning globalization. Childs "stressed that it was "very focused" on developing its work in the US east coast and in Asia. Globalisation of the industry remained the "right model" even in troubled economic times, he said, adding: "Indeed, I think more law firms will go down that route.""
And finally, the last message from the Clifford Chance story: Talk to your clients. You have your pulse on the market, but your clients have their own different and significant and valuable pulse on the market. Listen to them. You might learn something. It could even help guide your internal decisions.
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