- The layoffs were targeted at the “complex commercial litigation” groups in Boston and Houston. Presumably the partner compensation cuts were targeted as well, in some plausibly rational fashion. These are always judgment calls, and time may show them to be folly or prudence incarnate, but the takeaway is they were targeted. They were not XX% across the board meat cleaver reflexes.
- Most importantly of all, the the Executive Partner Barry Wolf volubly discussed in his announcement that the decisions came in reaction to secular, not cyclical, developments in the market for high-end legal services. Mr. Wolf’s key observations:
- “As we have discussed during various town hall meetings over the last few years, the market for premium legal services has entered into a “new normal” after the 2008 financial crisis.”
- “We are taking these actions from a position of strength” and, in particular, “we have zero debt outstanding. This has been the case throughout our history — and we have no plans to change that. Further, our partner pension plan remains fully funded with over $500 million of assets in it, and we do not have any compensation guarantees with partners other than for the first year a lateral partner joins the Firm.” (Sure, there are drop-dead obvious anti-matter parallels here with everything Dewey did so very wrong, but any managing partner who didn’t enumerate these simple facts for the record, in this environment, would merit psychiatric, not just PR, counseling. )
- Now we get to the critical points (all quotes from Mr. Wolf, emphasis mine):
- “It appears that the market for premium legal services is continuing to shrink.”
- “Actions to enhance revenue alone will not be sufficient to position the Firm as necessary for these new market conditions.”
- “We don’t see a dramatic shift back to the way things were.”
- “We believe that this not just a cycle but that the supply-demand balance is out of whack across the industry. If we thought this was a cycle and our business was going to pick up meaningfully next year, we would not be doing this.”
Mr. Wolf calls it “the new normal” and I call it “growth is dead,” but the fundamental point is inarguable.
We, as an industry, have on the order of 10% excess capacity—bluntly meaning “too many lawyers”—given the market’s new level of demand for what we do.
Now, the question I’ve been asked multiple times in the past 24 hours? “Is Weil the last?”