Quick-hit, sugar-buzz cuts are not good for you or your firm
Yesterday’s ABA Journal carried in its New Normal section a scathing, withering (“scathering“??) critique–by California business attorney Edwin Reeser–of the quick-fix, sugar-buzz staff cuts that firms made during The Big Downturn.
We admit to having a bit of a sweet tooth for insightful writing on the rationality of law firm economics. We’re gluttons for the stuff. So we devoured the article as soon as we saw it, cracking through the bright candy shell of its intro before savoring the chewy nougat-ey goodness of the thesis inside.
[That reminds us; what the hell is nougat, anyway?]
We’ll paraphrase Reeser’s thesis below…mostly so we can keep this candy metaphor going as long as possible…
Here goes.
Because of their structures, law firms are incredibly dependent on profits-per-partner. They can’t tolerate its slightest decline. Falling PPP sends panic signals to the firm’s management committee like falling blood sugar levels sends hissy-fit signals to a toddler’s hypothalamus. And, like that hypoglycemic toddler, law firm management committees during The Downturn lunged for the fastest, handiest snack available: layoffs.
As these firms disgorged thousands of associates and support staff into the streets, PPP stabilized. But today that stability feels tenuous and perhaps a bit hollow. Because instead of coming up with a long-term, sustainable, nutritive plan, one that involved serious changes to the internal firm structures that caused the great PPP hunger, firms reached for what was immediately available.
That layoff bag of tricks is now empty. And its five-year use may have left cavities.
“Widening partner compensation spreads, borrowing large amounts on working capital lines to make distributions, dramatically increasing partner capital, tranching partnership status … do nothing to improve operations. They just preserve distribution levels for a few at the expense of the many.”
Reeser counsels a much deeper focus on operational efficiency and on a staffing strategy that he describes as “hire less, train more, keep longer.”
Or, as we’d put it…
Focus on the long term: this isn’t a sprint; it’s a…um…well, you know…
