Seat-of-the-pants projections by Hildebrandt as to the loss of associate positions over the next 5-7 years were published this fall to much hullabaloo. By their lights, a very specific 27% of the 65,000 AmLaw200 nonpartner positions, or approximately 17,500, are likely to be cut or recategorized downward under the influence of the current market’s prevailing winds.
The general notion that law firms are going to have to grow leaner and more efficient in both the associate and partnership ranks, which could well include reducing their numbers at least in the short term, has certainly been the gospel at our shop for over a year now (see “What the New Law Firm Looks Like”) and the most recent data is showing the truth of that view. Evidently assigning specific numbers to the net loss, however inexact the process, has jolted some to the potential bottom line impact on the industry.
The data over the last year or so is starting to demonstrate in stark real numbers the leaning of the traditional legal workforce. The National Law Journal‘s recently released annual ranking of the 250 largest U.S.-based firms by headcount showed that total lawyers dropped by 1.1% this year, or approximately 1400 positions, compared to a decline last year of 4%–the biggest two-year decline in the 33-year history of the survey and only the second time on record that total headcount has dropped for two consecutive years.
Significant declines reached more than half of the firms surveyed, with the biggest drops at the largest firms. Of the 50 largest firms, 34 had headcount decline, and three lost more than 100 lawyers
Much of this year’s decline came in the associate ranks — which fell by nearly 1,000 lawyers, for a drop of 1.5%, marking the lowest point for the number of associates since the survey started tracking them in 1985. Percentages of associates in lawyer positions has now dropped from a high of over 60% in 1987 to @ 48% this year.
Partner numbers increased, but only slightly, by 0.6 percent, continuing a major slowdown over the last few years in the making of new equity partners.
NLJ 250 firms also reported this year employing an average of 49 “other” attorneys, compared with 46 in 2009, or a 6.5% gain. Steptoe & Johnson LLP reported that 34.9% of its attorneys were “others,” and Covington & Burling reported 23.7%, while the law firm employing the highest number of “other” attorneys was Jones Day, with 274.
“Other” attorneys are defined as nonpartner and nonassociate lawyers and do not include temporary or contract attorneys. This year’s jump continues a recent history of fluctuations in “other” attorneys. Last year, the average plunged by nearly 10%, while in 2006 and 2007 “other” attorneys increased by 15% and 1.4%, respectively.
During the recession, in order to keep the troops busy, law firms may have given their associates work that would have normally gone to contract attorneys. But as the economy continues to improve, the ranks of “other” attorneys are likely to continue to swell, due to their lower cost and often more targeted experience.
As for the future of partners, a recent ALM survey of heads of the AmLaw200 firms found that 67% of those surveyed plan to ask partners to leave their firms next year; 31% plan to de-equitize others; and 57% are realigning compensation to reward partners who cooperate in change-agenda initiatives. The anticipated de-partnering is a significant but traumatic part of the resizing and the compensation step is a critical one in the competition wars (see in both cases our entry “Why Partner Compensation Will Go Down“), but neither are likely to be welcomed by the partners in the trenches.
Does your firm have a growth and compensation plan that takes into account the new reality and a protocol for managing expectations and change?