The Wall Street Journal describes the layoffs of 60 lawyers and 110 staff recently announced by Weil, Gotshal & Manges as “the starkest sign yet that the legal industry continues to struggle after the recession.” What's not clear is who, exactly, is struggling?
It's not the owners of the business at the high end of the industry. The overall average profits per equity partner at Am Law 100 firms reached record levels in 2012. Even during the Great Recession's darkest days, in 2008, profits among that group remained comfortably above $1.2 million before resuming their climb toward almost $1.5 million last year.
And it's not the equity partners at Weil, specifically. They earned profits of $2.2 million on average last year, according to The American Lawyer.
So Who Suffers?
One group of victims consists of 60 young people who did everything right until everything went wrong for them on June 24. They’re intelligent, ambitious, and hardworking.
Exemplary performance in high school earned them places in good colleges, where they graduated at the top of their classes. They then attended excellent law schools and excelled, even as the competition got tougher.
All of those accomplishments landed them great jobs. In the midst of a dismal legal job market, they went to work at one of the nation’s most prestigious law firms. Making more than $160,000 a year, many of them believed they might soon throw off the yoke of six-figure student loan debt.
Now, they’re unemployed.
Another group of victims consists of the 110 staffers who also got the boot. According to The New York Times, approximately 55 of them were secretaries. These behind-the-scenes workers often go unappreciated by the lawyers they work for, who mistakenly take all of the credit for their own success.
A third group is a reported 10 percent of Weil partners, many of whom will suffer cuts to their compensation totaling “hundreds of thousands of dollars,” according to the Times.
It’s All "About the Future”
Announcing the layoffs, Weil executive partner Barry Wolf described the move as “about the future of the firm and strategically positioning us for the next five years.” But layoffs aren’t about weeding out associates who don’t measure up to the rigorous quality standards necessary for equity partnerships. They’re about matching supply (of associates) with demand (for legal work) according to undisclosed criteria.
In fact, it seems a bit strange to talk about a firm positioning itself for the future while simultaneously dropping a morale bomb on its associates (and some partners) during the height of the summer program. The best and the brightest young prospects are working in big firms where luring that talent into the firms is a top priority. Bad public relations from a high-profile layoff can have a chilling effect that outlasts a single news cycle.
And what is that future going to look like? Will Weil be hiring any new associates over the next 12 months? Or 18 months? Or even 24 months? If so, I know 60 candidates with big-firm experience (at Weil) who may be interested.
There is no shortage of current students who will continue to seek high-paying jobs at Weil, Gotshal & Manges. But what if negative publicity dissuades those few with the rare qualities necessary to become superstar partners from even signing up for on-campus interviews? By its very nature, such longer-run damage is impossible to know, much less measure.
Big Law’s Cheerleaders Applaud the Move
Law firm management consultants applauded Weil’s move. That’s not surprising, because they have been central players in the profession’s transformation to just another business. They consistently endorse businesslike steps to maximize short-term profits. They expect other firms to follow Weil’s lead, and perhaps some will.
Law firm consultant Peter Zeughauser, for one, told the Times, “Weil is a bellwether firm and this will be a real wake-up call.”
The etymology of bellwether may be relevant. In the mid-15th century, a bell was hung on a wether, a castrated ram that led a domesticated flock. In that way, the noise from the bellwether made it possible to hear the flock coming before anyone saw it.
In an informal Am Law Daily survey, other firm leaders have distanced themselves from Weil. Before following that lead ram, perhaps they’re giving some thought to where it is going.
Steven J. Harper is an adjunct professor at Northwestern University and author of The Lawyer Bubble: A Profession in Crisis (Basic Books, April 2013), and other books. He retired as a partner at Kirkland & Ellis in 2008, after 30 years in private practice. His blog about the legal profession, The Belly of the Beast, can be found at http://thebellyofthebeast.wordpress.com/. A version of this column was first published on The Belly of the Beast.
