The driver is, of course, profitability, which, particularly for corporate practices, has been badly affected by the downturn in the economy. As evidenced by The Lawyer 100, the annual survey of the top 100 law firm’s financial performance (see page 38 for how to get your copy), revenues are up from 7.695bn in 2001 to 8.48bn. But average profits per partner are down – 305,000 compared with 314,000 last year.
Cost-cutting began with firms introducing penalties for those not billing promptly enough. Then a few began cutting partner payments before moving on to tackle associate numbers and pay. In terms of graduate recruitment – historically one of the first areas to be affected in a difficult economic climate – some firms are now offering deferment packages to trainees (see page 13), although none have yet admitted to aborting their trainee recruitment programme altogether. Hardest hit have certainly been assistants – often the victims of appraisal processes increasingly designed with the singular purpose of managing them out of the firm. But even swingeing assistant lay-offs have not proved sufficient in some quarters, with several firms moving to take the drastic step of slashing partner numbers.
Last month The Lawyer revealed that Osborne Clarke and KPMG-tied law firm KLegal had become the latest firms to follow this path, with the redundancy of four and six partners respectively. These two follow the likes of Addleshaw Booth & Co and RadcliffesLeBrasseur, while a whole host of others have made significant cuts at associate level.
Such moves inevitably generate some negative press coverage, but before they’re condemned as badly managed firms, it is worth pointing out that it is almost universally accepted that cost-cutting in some shape or form has become necessary. It is those that continue to bury their heads in the sand, believing it will all go away, who will suffer in the long term. Those who act promptly and decisively will surely be those best placed to ride out the hard times, ensuring the continued health and well-being of the firm as a whole. Now, a little bit of bad press is surely worth that?