Mega-firm Reed Smith had a rough year in 2015, The American Lawyer reports–a year that perhaps led to the highly publicized 45-lawyer layoff in January 2016. According to their annual Am Law 100 report, gross revenue fell 2.5 percent, revenue per lawyer went down by 1.4 percent, and profits per partner declined an alarming 8.3 percent.
However, global managing partner Sandy Thomas called the results “solid,” and told press that the layoffs were simply an “efficiency measure,” although he also referred to the slumping commodities market, noting that “we are not immune,” (as quoted in The American Lawyer).
Schiff Hardin laid off seven current associates and retracted offers for four incoming associates yesterday, reports the ABA Journal. This comes after the widely publicized mass exodus of 22 partners in January, which included Schiff’s former managing partner.
Schiff isn’t the only big law firm that’s conducted massive layoffs this year. Reed Smith and Baker Donelson have also cut large numbers of attorneys and support staff in the recent months. In January, Reed Smith, the 19th highest-grossing law firm in the U.S. last year, laid off 45 attorneys and an unspecified number of staff, announced the Wall Street Journal.
Schiff Hardin managing partner Marci Eisenstein said in her statement that, despite the layoffs, the firm is “coming off a record year,” and are anticipating “another strong year in 2016,” (as reported by Above the Law).
The world’s largest law firms are still feeling the heat from their stagnated approaches, as discussed in last week’s post. A report released by CounselLink concluded that firms with 201 to 500 attorneys–termed “large enough” firms–are “increasingly winning the market share at the expense of the largest U.S. law firms.”
CounselLink Strategic Consulting Director Kris Satkunas suggests that the success of these ‘large enough’ firms is generally due to lower billing rates (for similar levels of service) and the increased willingness to engage in AFAs, the ‘Alternative Fee Arrangements’ widely preferred by clients today. She reports that as a result, corporate clients are “finding the same value from this size law firm for less or at least more predictable costs–and that is driving the migration of legal work into this segment of the law firm market.”
This trend is exemplified in the recent layoffs by megafirm Reed Smith, a 1750+ attorney firm who laid off 45 lawyers and a “comparable” number of administrative staff in January 2016, according to their press statement. Sandy Thomas, the global managing partner at Reed Smith who gave the statement, blamed the layoffs on the “fundamental shift in the nature of the demand for, and the delivery of, legal services in recent years.”
Another ‘big law’ firm, global giant Dentons, (now, with a 6,600 employee headcount, the largest law firm in the world), has been the subject of skepticism for its continued ‘bigger is better’ growth philosophy. Jordan Furlong of global law firm consultancy Law21 argues that since there are already many multinational firms, “having dozens of offices and thousands of lawyers isn’t enough to set you apart, and I’m not sure if 80 offices and 8,000 lawyers will do it either” (as quoted in The American Lawyer).
Time will tell if “bigger really is better” for today’s law firms, but for now, all signs seem to point to an ideal amalgamation of factors for middle market firms to flourish.
The list reports that law firms featured in the Best 50 employed more female equity partners, at twenty percent, than the national average (seventeen percent). The Best 50 compilation also boasts that sixteen percent of the firms now have three or more women among their “top ten rainmakers,” a five percent increase from 2014.
Five firms appeared on both the Working Mother’s ‘Best 50’ list and The American Lawyer’s “Eight Firms Where Women Thrive“: Quarles & Brady, Baker & McKenzie, Sidley Austin, Holland & Hart, and Reed Smith.
Read more from the report here.