Profits vs people - firms should tread carefully on staff cuts
"Even with a hard-nosed view of the profession, the context in which large commercial law firms manage their staff does matter. Times are hard, but they are not yet like 2009 when most firms had to push through major restructurings of their cost bases..."
June 28, 2012 at 07:03 PM
3 minute read
As I posted last week on our online story, I do genuinely admire Addleshaw Goddard's honesty in announcing a redundancy consultation on the same day it said that partner profits were up 37%. It's the kind of frankness that isn't too common among large UK law firms, which still rather favour sneaking out staff through more discreet means if possible. But, as to the decision itself, hmmm, that's a tough line to sell.
But it's a line that a good few of Addleshaws' peers look likely to be peddling this year, as there is currently no shortage of cost-conscious firms edging up profits with little or no growth in revenue. Addleshaws deserves credit, at least, for not dealing with dropping attrition through tougher performance reviews.
There isn't an easy answer to these issues. The default bleeding heart moaning at law firms that make staff redundant is often unrealistic. A business has to run like a business and I've got no patience for those who criticise law firms one minute for not being profitable enough and the next for how they treat their staff.
But even with a hard-nosed view of the profession, the context in which large commercial law firms manage their staff does matter. Times are hard, but they are not yet like 2009 when most firms had to push through major restructurings of their cost bases. Law firms that think there is no danger to letting staff go when the going is relatively solid are kidding themselves. Look at Norton Rose – three years on from its flex scheme and it's still getting a reputational upside for avoiding job cuts.
In contrast, I'm not sure DLA Piper has yet entirely shrugged off the damage it did to its brand with a programme of job cuts that didn't have the firm's usual sure touch.
On a wider level, there remains the basic issue about what message the profession is sending when stable and profitable businesses undertake sizeable job cuts. You don't have to be in the camp of thinking that law's a vocation to believe that the legal industry can easily diminish itself.
Commercial law is well paid and those that go into it are usually fairly focused on financial rewards, but there is more to law than that.
Probably, it would be better to have a debate about the extent to which the legal industry is straining to maintain remuneration levels and staffing models that need to adapt further to current market conditions, rather than relying heavily on job cuts. The realist's response to such sentiments would rightly point out that pressure on law firms to maintain competitive partner profits cannot just be ignored, particularly in light of the continued inroads made in Europe by more profitable American firms.
It's not an easy balance. But then handling difficult balancing acts is part of what law firm management get paid for. Suck it up.
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