Monday, March 16, 2009

L'Affair Layoffs

Like I said, I have some thoughts running through my head on this topic that I'll be exploring in greater detail. One that's troubling me is the "Cravathization" of firms. I think I may have read a while back somewhere (possibly on Adam Smith, Esq.?) about how a lot of firms mimicked the Cravath model of promising the top talent at top rates. This resulted in all sorts of absurdities, such as a bunch of firms all raising salaries because one of them did. Under the Cravath model, there is no room to be seen as "below market." Now that there is no market to speak of, those decisions are coming back to haunt the very same firms. I have Orrick in my crosshair. They led the Westcoast rise to 160 and now lead the worldwide fall of the 300. Why? How was a market downturn not foreseeable in 2007?

Consider this an open thread on this broad topic.

Edit: Folding McWho's open thread on this into this post.

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13 Comments:

Anonymous Anonymous said...

I don't understand why some firms haven't pushed their start dates back. Are any firms doing well enough that they really want a bunch of new associates starting in September? It just seems that there are no longer repercussions for pushing 3Ls back.

3/16/2009 7:18 PM  
Anonymous Anonymous said...

First, few if any associates start at biglaw in September. Most start in October and often as late as possible due to bar trips.

Second, just give the firms time. They are probably trying to figure out if they need to bump 3Ls a whole year or not.

3/16/2009 7:56 PM  
Anonymous Anonymous said...

My firm is trying to implement a program whereby they can force employees in slow groups to go to a 4 day work week (not necessarily getting a Fri or a Mon off) or a 1-3 sabbatical for reduced pay. No layoffs at all so far, so I guess it's a "take one for the team" solution to keeping it that way.

3/17/2009 5:10 AM  
Anonymous '93 Alum said...

Although I don't have a list of the firms in front of me, Anonymous # 1 should know that about a dozen firms have done exactly what he/she suggests. Start dates have been moved to the spring in some cases, and delayed a full year in a few, with the understanding that some of those put off for a year will likely end up finding alternative employment. Same thing applies to summer internships which are being delayed, canceled, and scaled down.

3/17/2009 8:33 AM  
Anonymous Anonymous said...

'93 Alum,

With all due respect, I think we're all painfully aware that lots, if not most, firms have pushed back their start dates. I think 7:18 is asking why some firms still haven't jumped on that push-back-start-dates bandwagon.

My uneducated guess: Some firms are just too stubborn to change previously announced start dates, maybe because they view themselves as different than all those other firms. And not all firms were leveraged 6.26:1 (Orrick) or even 4.31:1 (Latham).

3/17/2009 9:36 AM  
Anonymous Anonymous said...

Speaking of firms being leveraged, I only know of one that isn't: JD. Anyone know of others? JD (knock on wood) hasn't had any layoffs yet, and have set start dates for September. How do other non-leveraged firms compare?

3/17/2009 12:01 PM  
Anonymous Anonymous said...

What is JD?

3/17/2009 12:11 PM  
Blogger Armen said...

9:36 is using leverage in reference to associates to partners ratio, not the amount of debt carried by a firm. The amount of debt or credit line or whatever else firms use to do business is not important until you have partner defections or some other event that triggers a default. See, Heller and Thelen.

3/17/2009 12:12 PM  
Blogger caley said...

Does anyone know if there are firms still out there with partner-associate leverage ratios as high as O or L&W?

Also, assuming decisions to lay off are based on leverage, are these decisions made office-specific or firm wide? In other words, if my firm's NY office is overleveraged but the office I'm hoping to get to in fall is not so extremely leveraged, does that improve my job security?

3/17/2009 12:20 PM  
Anonymous Anonymous said...

Caley,

I imagine it depends on whether your firm staffs cross-office. If it does, then it's the total firm-wide leverage that matters. If all offices are run semi-autonomously, then office specific leverage matters.

I'm just making this up, but it seems reasonable.

3/17/2009 12:23 PM  
Anonymous Anonymous said...

Here are (dated by now) leverage numbers.

http://www.law.com/jsp/tal/PubArticleTAL.jsp?id=1202426909972

Just looking at that list and considering who hasn't done layoffs, it looks like Weil, Paul Weiss, Kirkland, and Wilson are still highly leveraged.

3/17/2009 12:29 PM  
Blogger McWho said...

7:18,

Some firms really are doing fine. There are 200 "biglaw" firms (and may others that do big business and are not national firms) who have stayed out of the news. Generally, they didn't leverage associates as much in the boom times, didn't expand quickly, etc. It also helps if you are a litigation boutique, or some other part of the law that is more recession-proof.

3/17/2009 12:52 PM  
Blogger PG said...

"It also helps if you are a litigation boutique, or some other part of the law that is more recession-proof."

Exactly. Head-hunters are still calling folks in litigation.

3/18/2009 2:58 PM  

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