Mediocre AmLaw Ranking Sparked Mayer Brown Layoffs
I just got off the phone with Doug Kramer, Director of Global Communications for Mayer Brown Rowe & Maw, and he put the firm's decision to lay off 10% of its partners -- a total of 45 people -- into perspective.
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The causal event was that the firm was No. 51 in the AmLaw ranking of profits-per-partner. "When we rank 51st, well behind our peers, it raises a big issue in terms of attracting top talent and keeping it," Kramer said.
Wachtell, the No. 1 firm, makes an eye-popping $3.79 million in profits per partner ("PPP") in 2005. The No. 10 firm, Davis Polk, made $2 million in PPP. At a mere $1 million in PPP, Mayer Brown had to keep up with the Joneses.
Turning to the firm's image, I asked if the decision was motivated by greed. "I can understand how someone who wasn't aware of legal marketplace would feel that way. Why would the firm need any more? It's all relative. We badly want to keep our best talent and attract the best talent, and PPP is a key metric that the marketplace looks at. So when we're 51st compared with other firms that we're just as good as, we had to take decisive action," he said.
So the idea is that the layoffs will make the firm more attractive to laterals and ivy league law grads -- it's a chance to make a 7-figure income.
He said Mayer Brown's clients were reacting well. "We're getting a lot of empathy from clients, saying they've been there, done that. They say 'we understand pressure you're facing.' Clients are not viewing it as a negative, business people realize this has to be done to achieve long term growth and profitability. Not to say it wasn't painful, it was. These are great lawyers -- but their practices weren't in the strategic direction the firm wants to go -- it's not a comment on their performance."
Unlike other corporate layoffs, Kramer stressed that Mayer Brown is treating the castoffs humanely:
- They have the rest of 2007 to find another job.
- They're getting outplacement support.
- Their names have not been revealed, even internally.
- Mayer Brown did not leak the story. Ameet Sachdev of the Chicago Tribune learned about the layoffs by himself on March 1 and called the firm. Only then Mayer Brown distribute an internal memo, which appears on the Wall Street Journal law blog.
"These are talented lawyers who will land on their feet. It's no reflection on their performance. It's that their practices were not within firm's strategy. In some areas we were overstaffed and we had to do what makes sense from business standpoint from long term growth point of view," he said.
"Being a partnership need not be antithetical to being a well run business."
Interesting decision. But will any meaningful performance indicator increase if the firm lays off 10% of its performance capability?
In my experience, it's easier to improve performance by helping these "low-performing" partners to improve than bringing in brand new people. At least, low performing people already understand the culture. They just need someone who kicks their butts into momentum.
I'm also thinking that why would top-tier talents work for a firm that whimsically lays off not only associates but partners who've contributed their best and brightest to the firm for years. What confidence can these talents have in a firm that will do anything for higher profits?
"PPP is a key metric that the marketplace looks at."
Maybe it's time to educate the marketplace about the real success indicators of a law firm. Yes, profitability is important. But how about providing fulfilling career paths for partners and associates.
Also, profitability is an effect, created by certain causes. Maybe it's better to focus on the causes. Maybe there are systems and processes that cap profitability regardless of people.
And when it comes to profitability, the firms could look at its pricing strategy. Is the firm selling expertise through value-pricing or competitively priced time chunks through billable hours?
Also, in my experience, professional firms are extremely allergic to discipline. Their people are reluctant to make commitments and are downright resentful for being held accountable to those commitments. At partner level this is much worse than on associate level. In most firms there are no consequences for lack of accountability.
I believe if this firm shaped up discipline within the firm, then performance would go up significantly.
For instance at one of my former clients we implemented a penalty system. When people promise something but don't do it, they are "sentenced" to certain numbers of days of labour at a local temporary construction labour agency. They are good people, so we don't want to lay them off, but there must be a consequence for failing their commitments. When a lawyer or accountant puts in two weeks of hard labour on a construction site, sometimes outdoors in the freezing rain, his perspective changes and starts appreciating his position. And... starts taking his work seriously.
This just sounds like law firm double-talk. Of course, they dump the partners who don't produce, that they have carried for years. It's just like what Sidley did years ago by de-equitizing partners. This is just a sign of the times that 'collegial' gives way to productivity and profits.