COVID-19, and the accompanying economic upheaval, has radically changed the legal landscape. We’ve known for a while that furloughs, stealth associate layoffs, and salary cuts were part of this new normal, but now comes word from Law.com that partners are increasingly finding themselves pushed out the door during these uncertain times.
It seems this is a new Biglaw trend — firms are “counseling out” both equity and nonequity partners that are not as productive as they’d like. And it’s largely coming in corporate practice groups, which have been particularly hard hit by COVID-19. But it didn’t start solely because of COVID; an Altman Weil survey found a hefty percentage of firms thought their partners were not busy enough, and the pandemic has exacerbated the problem:
Altman Weil legal consultant Eric Seeger points to his firm’s Law Firms in Transition survey, which found that, among the 182 firm leaders surveyed, 31% of respondents said their equity partners are not sufficiently busy. For nonequity partners, that figure rises to 51%.
And that survey came polled firms in February and March, pre-pandemic. Since then, billable hours at many firms have fallen by 10% to 20%, Seeger said.
The firms are seeing these partners out the door (or sometimes, in the case of equity partners, pushing them down to the nonequity ranks) and using that savings to retain big rainmakers, who are in danger of being poached by other firms.
“All firms are going to do everything they can to protect their most significant contributors from the threat of poaching by other firms. And that is often going to mean getting more money to those people so that they’re paid fairly, meaning market competitively,” said legal consultant Kent Zimmermann of the Zeughauser Group.
This effort to “right size” has taken on new life since, according to legal industry experts, more firms have moved to allow partner removal based on executive or management committee vote, as opposed to a traditional all-partner votes. And you can expect even more partners leaving their firms under less than strictly voluntary circumstances:
“Those conversations are happening. I know it,” said Peter Zeughauser, a law firm management consultant at the Zeughauser Group. ”We’ve talked to some of our clients about it. It’s going to pick up steam.”
Though these changes to the industry seem pretty radical, it’s really only the typically high profits in Biglaw that have previously insulated the industry from these tough cuts:
“Big Law has an unusually high profit margin, and it allows for a lot of sloppiness on this stuff,” Zeughauser said. “There has been a need for this for some time, but firms have done so well that they haven’t had to.”
So, um, thanks COVID?
“As they say, there’s nothing like a good disaster to get things in order,” said one Am Law 100 leader. “A lot of firms don’t have the rigor to do it. But it has been a long time coming.”
But it still has to suck for those fired forced into a career pivot during a freaking pandemic.
Kathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).