Feast and Famine at Law Firms: Bonuses Up, But So Is The Likelihood of Layoffs
'Tis a season for feast and famine at law firms, particularly those that feed off business from structured finance, equity transactions and M&A (mergers and acquisitions) work. On the one hand, the market slowdown that we blogged about back in August is now impacting law firms, which are tightening their belts as reported by Bloomberg. (11/20/07). Though to date, only Clifford Chance has laid off any associates (six), Thacher Proffitt & Wood has reassigned a dozen associates to other departments. And one firm, McKee Nelson has offered associates financial incentives to either voluntarily leave the firm or take a year-long sabbatical. (For more on the McKee Nelson option, see this post at my other blog My Shingle.)
But the situation isn't all doom and gloom for associates just yet. Bloomberg reports that law firms are handing out huge bonuses; some as large as $115,000 for work done over the past year. And news of bonus announcements keeps coming in at Above the Law's 2007 Associate Bonus Watch.
According to Bloomberg, firms have, thus far, avoided the mass layoffs of 2001 that followed the dot-com bubble burst and 9/11 simply in part, because they engaged in balanced growth and did not over-hire. That's one factor; but in my view, the rise of blogs like Above the Law, which closely monitor law firm business, have also played a role in deterring layoffs, except as an absolute last resort. Right now, I'm guessing that no law firm wants to publicly flaunt its weakness by being first to fire associates.
Still, if the economy continues to slump, I have no doubt that firms will resort to layoffs to protect the sacred PPP (profits per partner). The question is whether we'll see kindler, gentler reductions such as those put in place by McKee Nelson, or mass layoffs, where firms spin terminations as a way of getting rid of less-talented associates, rather than economic necessity. What are your thoughts?
Posted by Carolyn Elefant on November 20, 2007 at 06:16 PM | Permalink
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