« Ind. Courts - More on: "McShurley vs. McKinney feud lands in Indiana Supreme Court" | Main | Ind. Courts - Who am I? Why am I here? »
Thursday, May 29, 2008
Law - "37 fired attorneys at Sonnenschein represent about 5 percent of the firm's 691 lawyers"
The Chicago Tribune reports today:
Sonnenschein Nath & Rosenthal, one of Chicago's biggest corporate firms, broke with that tradition Wednesday, acknowledging that the lackluster economy is taking a toll on billings and that it has laid off 124 employees, including 37 attorneys, six of whom are partners.Most law firms hate to admit the need to downsize to avoid any sign of financial weakness in an intensely competitive industry, and a mass layoff such as Sonnenschein's is even more out of the ordinary.
But over the past decade, the law business has undergone a fundamental change, outgrowing its conservative, clubby ways to engage in some of the most common business practices: mergers, the hiring away of talent and, increasingly, layoffs. Partners are being held to specific profit goals, and those benchmarks are being chronicled in legal magazines, increasing the pressure on firm management to take bold steps such as demoting weaker partners or pushing them out the door. * * *
The 37 fired attorneys at Sonnenschein represent about 5 percent of the firm's 691 lawyers. Of the 37, six are partners, four are "of counsel" and 27 are associates, a firm spokeswoman confirmed. The Above the Law blog first reported Sonnenschein's layoffs Tuesday night.
The majority of the layoffs involved paralegals, secretaries and other administrative staff. The total of 124 represent about 7 percent of Sonnenschein's workforce of more than 1,700 in 13 U.S. cities and Brussels.
The Chicago office, where the firm was founded, is its largest and was the hardest hit by the cuts. Ten lawyers and 30 support employees were let go out of a total of 691 employees in the Sears Tower.
The most affected practice areas were real estate and litigation, the firm's largest practices and traditional strengths. Financing for new real-estate projects has dried up after a mortgage crisis locked up credit markets. The cuts in litigation were more surprising, observers said, because the practice is typically countercyclical. * * *
Because of a more bottom-line focus, law firms are more reluctant to carry people in down times, legal recruiters said. Associates are especially vulnerable in the current economic environment because they usually don't have big-money clients. They are also more expensive after last year's salary bump. The salary for many entry-level lawyers at big law firms in Chicago is $160,000. * * *
Last year, Chicago firm Mayer Brown fired or demoted 45 partners as a means of winnowing less-productive members of the firm. The news, reported by the Tribune, stunned others in the legal community because the firm starkly framed its downsizing as a means of improving profitability.
The cuts at Sonnenschein came after a rapid expansion in recent years. The firm hired dozens of partners from other firms and opened five new offices in smaller markets such as Phoenix and Charlotte. It also quietly trimmed less profitable practices, resulting in the demotion or involuntary departure of more than two dozen partners, according to published reports.
The moves are part of an ambitious strategy to lift Sonnenschein's profitability from the middle of the nation's 100 largest firms into the top echelon. But the growth plans have not materialized as quickly as firm management had expected.
The firm hoped to boost its profits-per-partner, a key benchmark, from about $800,000 in 2005, to $1.4 million by 2008. In 2007, the firm's profits-per-partner came in at $915,000, according to American Lawyer magazine.
The economic downturn has not stopped Sonnenschein's recruitment efforts. It has hired about 50 lawyers, including associates, Portnoy said.
He added: "It's not inconsistent at all to add lawyers in areas where there is strong client need and strategic priority while simultaneously reducing lawyers in some areas."
Posted by Marcia Oddi on May 29, 2008 10:18 AM
Posted to General Law Related