Times are tough and law firms are facing unprecedented pressure on their finances, but are redundancies really the best way to tackle high staff costs?
While it makes sound business sense to cut back on salary costs at a time when workloads are dwindling, psychologically, redundancies can be damaging to a firm.
Staff at Mills & Reeve recently managed to save the full-time equivalent of around 25 jobs by volunteering to work four-day weeks as well as undertaking internal secondments and sabbaticals (TheLawyer.com, 9 February).
Mills & Reeve is not the only law firm to have taken such action – BPE Solicitors put 13 members of staff on four-day weeks last month and Charles Russell gave the same option to several members of staff facing redundancy – but so far the use of flexible working as an alternative to redundancy has not been widespread in the legal sector.
For several years most UK firms have been trumpeting their flexible working credentials, with most keen to offer the option to staff. However, when it has come to the point where flexible working could be used to save some jobs, few firms are keen to embrace it.
“I think it’s fair to say that, in the majority of cases, firms have been better at making the noises than actually doing it,” says Kerma Partners legal consultant Friedrich Blase.
He argues that for many firms practicalities prevent them from going down the part-time route, with most lacking the internal structures to handle large numbers of staff working flexibly. Then there is the fact that many people simply do not want to work part-time.
Mills & Reeve HR head Sandy Boyle admits that several areas of business were not suited for sabbaticals or part-time working and admits that the firm’s programme has been challenging to implement.
Blase believes law firms have simply not invested time and money into institutionalising how they assign work and how people rotate between projects. Law firms, he continues, have faced no outside pressure to change their approach to working and have merely used flexible working as a talent-acquisition strategy.
And talent acquisition hides firms’ other dirty secret about flexible working: namely, that many would rather not keep the myriad lawyers they hired in the boom years.
“Irrespective of what firms say, some of the people who are being let go are being let go because the firms don’t think the quality of their work is good enough,” says Blase. “And that’s not going to improve if you let them work four days a week.”
Putting staff on four-day weeks signals to them that you want them back full-time at some point in the future. By making staff redundant, with all the cost and disruption that involves, firms are signalling that they do not want those people back at any time. Redundancy is a long-term proposition, with cost savings only materialising several months or more down the line.
As such, both approaches belie different outlooks on a firm’s future relative to its history. The pivotal question, and one which is almost impossible to answer, is how long it will take for the market to come back. Once a firm has found an answer to that, it can begin looking at whether the numbers it needed in the past will be required in the future.
Like the subprime market, the legal market has been riding on an artificial bubble over the past few years, with costs and salaries rocketing as turnover and profits kept rising. As a direct, intended consequence, staff populations exploded.
The party is clearly over for now and most firms are grudgingly accepting reduced partner profits. But it is clear that, to prevent profit reduction from turning into a massive drop, the staff and cost bubbles will need to be burst too. How best to do that will be important in framing future battles.
Blase believes that offering part-time working to staff can give huge medium-term potential to a firm.
“It allows it to break away from the undistinguished mass of firms before the war for talent returns,” he claims.
Most firms seem to have already made their choices. But of those that have not, some may find the initially steep flexible working path an ultimately smoother ride than the redundancy fast-track.