The ins and outs of law firm partner meetings are usually kept top secret.
The meetings are the one thing partners refuse to miss and associates usually have no idea what goes on.
But Above The Law provided a peak today behind the closed oak doors, printing what appears to be a leaked recap of a June partnership meeting at Simpson Thacher.
They reprint them with all sorts of caveats from ATL: “[T]he notes appear authentic to us, and they’ve been making the rounds at Simpson, but the firm has not officially confirmed their authenticity. In addition, a firm spokesperson stated that STB does not maintain official minutes of partnership meetings.”
If you are hoping for something super-juicy — how partners actually get paid, how they evaluate associates, how they finally admit to not at all meaning it when they say face time is not necessary — well, that’s not there.
But it does describe how they considered true layoffs, rather than what they have done, which is an “aggressive performance-based reduction.”
Obviously, we could “right size” faster if we implemented a lay-off (100 attys). And, we could target the younger corporate classes in New York and the younger classes in California. However, none of the top-tier firms has engaged in lay-offs. We do not want to be the first top-tier firm to engage in lay-offs. From a financial point of view, given the market practice that has developed, with respect to severance, the cost savings produced by a lay-off, as opposed to our aggressive performance-based reductions, is modest [no savings this year / $30K per/point next year]. [The course we are on produces a 100 attorney reduction over a two-year period/ probably only 75 down from today’s headcount.]
First, we are sure there are several attorneys at Simpson breathing a sigh of relief after reading that they were targeted for reduction.
But what we find most interesting is how much what other firms were doing (or not doing) appears to have factored into their decision.
All businesses are of course competitive, but major law firms take it to a new level, possibly because they really all do offer the same thing — their only products are their legal minds. They only lay-off if others are, they all pay their associates basically the same thing (though this memo said Simpson pays “modified lock-step”) and they pay nearly identical bonuses.
This is one reason we think the industry will take such a long time to actually move away from billable hour or fully reconfigure first year programs — when no one will take huge action until someone else does, true change takes a very long time.
The other more interesting part of the alleged memo is the recognition of future problems that will occur due to hiring way fewer lawyers in the financial crisis than in past years.
The course we are on does produce irregular class sizes – large 2007 and 2008 classes and small 2010 and 2011 classes. We recognise that will present some issues.
This is another thing all firms seem to do. They hire the number of associates that meet the firm’s needs at the time, but the associate’s start date is more than a year after they are hired, when things can completely change. So if the economy picks up in the next few years, firms will either have to take on less work or work their associates to the bone.
They can of course hire more attorneys at that point, but with all other firms doing the same thing, finding properly trained third-years could be difficult. It’s a permanent problem of the system that hires are made so far in advance, but it’s another thing not likely to change soon.
See the full memo and Above The Law’s analysis, including discussion of Simpson’s performance-based reductions here.
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