Dim light on law firm recovery: A lot of law firms with too many people and not enough work
From the Boston Business Journal by Lisa van der Pool
Are law firms finally climbing out from the bottom of a deep, deep abyss? Possibly. But if so, it’s going to be a long journey.
Citi Private Bank’s quarterly report on the Managing Partner Confidence Index notes that while the last six months have been trending down, that pattern was snapped during the second quarter of this year.
“Managing partners are much less pessimistic about the broader economy and the legal market, and there’s a sense that the worst is behind them. MPs are more concerned about the financial health of their own firms, especially with regard to expenses,” states the report, which was released last week.
The report also notes that managing partners expect the general economy to recover faster than the legal market or their individual firms. Indeed, managing partners expect growth over the next 12 months to be negligible, according to the report.
Firms continue to deal with a sluggish legal market and “slowed collection cycles and continued client demand for discounts.”
And layoffs at law firms are far from over. More than one-third of the managing partners surveyed expect to slash non-equity lawyers in the near future and one-in-four “anticipate shrinkage in the equity partnership,” according to the report.
“I certainly would agree that the economy is recovering slowly,” said Jim Westra, managing partner of Weil, Gotshal & Manges LLP’s Boston office. “I think the demand for legal services will pick up, but improvements will be tempered by excess capacity. There are a lot of law firms with too many people and not enough work. I think that a lot of firms are going to have to retrench and reduce head count to sustain an acceptable level of profitability.”
