Monday, March 30, 2009

The Cuts Keep Coming

Although firms in Australia and the general APAC region have not seen the same scale of numbers in relation to their own staff redundancies in Q1 2009, UK and US firms continue to reduce both legal and support staff numbers.

The numbers and scale of these US and UK firm cuts can be frightening and hard to comprehend for APAC firms. The general consensus is that APAC firms will continue to undertake small, barely visible yet strategic cuts where and when necessary in the coming six months, while also continuing the "don't replace" policy on staff. Some firms will indeed undertake formal redundancy programs, but the numbers will appear small in comparison to what follows.

Fried Frank is the latest to announce major reductions with 41 associates and 58 support staff being cut loose this week.

Skadden is another. The top ranked US firm by revenue (USD$2.2 billion to be exact) has over 2,000 non-lawyer employees across the firm's nine offices, and has this week announced a move to cut this by around 5% in the first round.

Other firms have survived very well during the past six months in relation to revenue and lawyer retention, and yet have still taken the opportunity to review support staff positions and internal management structures, while also seeing this as a perfect opportunity to counsel out under performing support personnel.

Decherts also announced more cuts this week, with 125 staff (63 fee earners and 62 support staff) packing their desks. This is in addition to 29 lawyers who were made redundant earlier in 2009, and another 87 support staff and lawyers who lost their jobs in December 2008 at the firm.

A&O went to press last week stating that 47 partners (9% of the total partnership) would be leaving by the end of this financial year, with an additional 35 partners having their positions in the equity pool reviewed. In relation to support staff, 9% is also the magic number - and that translates to a massive cut when considering the number of support staff the firm has across the global network.

One of the more interesting in recent press is Clifford Chance who are following Linklaters in dramatically altering the future shape of the partnership and their business (rather than simply looking for a percentage cut across associate numbers).

This will involve a reduction in the total number of partners (between 10-15%), a move to place some equity partners as salaried partners, and a long hard look at the firm's client base with a goal of reducing the number of clients. In relation to support staff, 35 were let go last year, with the market predicting a significant second round to be announced in the coming weeks.

Expect partner promotion numbers to be very low in the US and UK (and indeed the APAC region) this year and next, with 2011 being our estimate for when the next significant number of partner promotions are announced. Also spare a thought for Philadelphia's Wolf Block - the partners voted to dissolve the firm this month. We suspect it will not be the last.

A number of firms have started to handle their second and third round of redundancies a little differently to the first round culls due to media interest, with smaller groups and individuals being gradually let go, rather than large numbers being announced in one big hit.

Interestingly though, a number of firms have also suggested that some recruitment restrictions will be lifted by management in Q2 this year for certain positions.

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