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As economy stumbles, firms treading carefully with hiring

July 03, 2008 | MA Lawyers Weekly

As economy stumbles, firms treading carefully with hiring

Barbara Rabinovitz

Published: July 3, 2008

This is another in a series in which Lawyers Weekly gauges the impact of the economic downturn on the practice of law in Massachusetts.

A month ago today, the news about the U.S. economy seemed grim to the point of dire. The Dow Jones industrial average, which had been flirting with 13,500 points at the beginning of the year, plummeted to 12,210. The price of oil spiked nearly $11 a barrel to a record-setting $138.54. And the unemployment rate hit its biggest one-month increase since 1986.

A month later, with the statistics still stuck in negative territory, the belt tightening continues throughout the business sector, no less so in the state's legal community. Executives at lawyer recruitment and placement agencies speak of contraction in the hiring of lawyers; managing partners at local law firms say otherwise, although a major expansion in personnel does not seem to be in their near future.

"I definitely would say we're seeing a constriction; we're seeing a slowdown," reports Mark L. Kwatcher of Kwatcher Legal Placement in Boston.

The consolidation, he says, is occurring in what he refers to as "the transactional world," notably in the corporate and real estate practice areas.

"Generally speaking, in the 25 years of doing what I do, when I see a slowdown in the transactional world, it's followed by a need for more bankruptcy, litigation and workout attorneys," Kwatcher says. "And that hasn't happened yet."

Signing bonuses ‘not as prevalent'

In the interim, Kwatcher tells Lawyers Weekly, there have been "rumblings" about layoffs at law firms but no confirmed reports. "It's not something people run ads about," he notes.

Jane B. Sender of Sender Legal Search in Boston says she is hearing news of associates being laid off.

"I have seen some of it in the big firms," Sender says, but she attributes the terminations to the natural ebb and flow of lawyers at those firms, not to the moribund economy.

"Every year there are going to be some people who will be asked to look for a job, not necessarily because of a downturn," she adds.

She also points out that the largest of local law firms, those with multiple offices around the country, are able to absorb the shocks caused by a roiling economy. If one office is experiencing a slowdown, a much busier one, hundreds of miles away, can easily shift the work to the office that may be idling.

"A lot of the big firms here are part of big national firms," Sender says. "You get to even things out. If a Philadelphia office is busy, it can call on Boston."

Not that smaller firms are immune to the cooling of the economy this summer, according to Brian R. Cook, who heads the legal division of Daley & Associates, a Boston executive search firm focusing on professional services.

"Sometimes they can be hit in bigger ways than big firms," Cook says. "On a revenue basis, they don't have the overhead big firms have, so it isn't the same sort of shock. But they do have the potential for a smaller number of large clients, and, therefore, any single loss of a client can be devastating."

While scotching the notion that firms are reducing their members' compensation, Kwatcher says some firms that have paid signing bonuses for lateral associates are cutting back. "Signing bonuses are not as prevalent as they were a year ago," he notes.

As for the notoriously long hours lawyers work, he hints that those days may be a phenomenon of a more prosperous past for attorneys. "My guess would be that [lawyers] are not working as hard if their firms are less busy," he says.

Smaller firms, Cook points out, "don't have the issues related to large volumes of summer interns or new associates that need to be kept busy. But a reluctance [by moderate-size firms] to add to their numbers certainly stalls future growth."

The market for in-house attorneys, that appears to be yet another casualty of the slumping economy, according to Sender.

"Hiring a lawyer is adding to your overhead while outside fees [for the services of big-firm lawyers] is not in the budget that way," she says. "The company might shop around for a better deal from law firms rather than hire a lawyer."

Cook sees a silver lining in the dark economic clouds looming over law firms.

"We have found that, despite a stagnant economy that impacts some of the usual hiring aspects of the legal profession, there has been an increased desire to stimulate movement in lateral partners with portable billings," he says. "It's like the one thing that increases in a bad economy, and it applies to all size firms."

‘People look around'

At Boston's Goulston & Storrs, Douglas M. Husid, co-managing director, says the firm's hiring practices "don't change a whole lot as a function of the economy. We tend to manage relatively conservatively and to grow gracefully and gradually and consistently. We don't go out and hire lots of people just because the economy seems to be booming."

On the other hand, if the economy is in the bust phase of the cycle, "we tend to see these slowdowns as hiring opportunities," says Husid.

By way of example, he notes that Goulston, currently employing about 195 lawyers, has hired 16 attorneys since the start of the year.

"Corporate practices in the city are slowing," Husid says. "People look around and start to think a little bit about where they would be happy practicing law."

In sum, he says, "as a general principle, we tend to do comparatively well during tough economic times because we don't staff up dramatically for the boom times."

In Worcester, Bowditch & Dewey's managing partner, Louis M. Ciavarra, reports that in the past few months his 65-member firm has brought on four lateral partners and four first-year lawyers and is "actively" interviewing for two additional associate positions.

Ciavarra attributes that activity at Bowditch, which also maintains offices in Framingham and Boston, to cost-consciousness on the part of clients of other, much larger firms.

"We are finding [hiring] opportunities in lawyers with existing client bases who are feeling pressure from their clients to provide the same level of service at a lower cost," he says. "Businesses in the past may not have looked as closely as they needed to at what they were paying for legal services. Now the economy incentivizes them to look at those costs. ... [They] are recognizing that they can obtain the same quality of service at Bowditch than at a much larger firm - and at a much lower cost."

In the westernmost section of the state, in Springfield, the 43-lawyer firm of Bulkley, Richardson & Gelinas, large by that city's standards, is looking for "two to three people" in litigation and business/tax law, according to managing partner Francis D. Dibble Jr.

"I do think a number of firms in Springfield are finding business to be a little slow," he says. "We are finding most of our practice to be holding up or expanding, but there are areas that are slow; for example, we have a mergers and acquisition practice ... and a lot of deals are kind of on hold."

But the firm's litigation practice continues to be strong, Dibble says, adding that "bankruptcy and creditors' rights have seen some increased activity."

Nonetheless, Bulkley is trying to keep its "timekeeper-to-staff ratio" as tight as possible, Dibble says, "which sometimes means more investment in technology and generally fewer staff per lawyer."

Dibble's counterpart at the Springfield firm of Robinson Donovan, Jeffrey L. McCormick, points out that the job market for lawyers looking for work in western Massachusetts differs markedly from the far more competitive market in the eastern half of the state - to the benefit of those looking.

"Out here in the western part of the state," he says, "we don't always get the constant flow of people looking for jobs. Usually if we have someone who has the qualifications and has some sort of tie or desire to be out here, that person has a measure of success" in the job search.

At Robinson Donovan, currently employing 18 attorneys, "we do have a need for entry-level lawyers and possibly laterals," McCormick says. "We've had a few lawyers leave [in] perfectly amicable moves. We're seeing what is not atypical in the industry: People tend to come and go more than they did 30 years ago."

‘Not a lot of panic out there'

For all the doom and gloomy headlines, legal recruiter Kwatcher, for one, is not convinced that this economy is the worst ever in recent memory for lawyers. He remembers the late 1980s and early 1990s and the months following the terrorist attacks of Sept. 11, 2001, as being worse.

Sender recalls the so-called dot.com collapse of 2000 as another fallow time for lawyers seeking work. "There were significant numbers of layoffs [at law firms then] - hundreds," she says. "They were streaming in the door here."

"Certainly, this economy is funky," Kwatcher says, "but there's not a lot of panic out there. The firms, I believe, have this under control."

And from Sender: "I don't see a bust going on. Maybe, to some extent, the firms learned from the last time [the economy weakened] and didn't overhire."

James G. Leipold, executive director of the Washington, D.C.-based NALP, also known as The Association for Legal Career Professionals, expects that those concerned with the careers of lawyers may know soon what awaits those professionals in the wake of the economic downturn.

A research organization, NALP gathers information from recent law school graduates about their career moves. The data from the members of the class of 2007, many of them hired before the economy went into its tailspin, reflect "a banner year" for those graduates, Leipold reports, "[with] the highest employment rate and starting salaries the highest in many years."

Information on how the 2008 law school graduates are faring is still being compiled, and Leipold hesitates to speculate.

"My sense is it will vary from firm to firm," he says. "Some firms have geographical breadth, so if one is slow, another can pick up; others have a narrower portfolio. ... It's sort of wait and see. I think we'll see it play out this coming summer and fall."