Managing the downturn: Alternative endings
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24 May 2013
With ;more than 1,200 jobs either already lost or on the line in the UK’s top 200 law firms, those responsible for making the cuts are keen to argue that downsizing is a regrettable but inevitable response to the prevailing economic conditions.
These statements may be true. It does, after all, make sound business sense to cut back on staff costs when the economy falls into decline. But they still smack of the Government’s claims that the UK’s economic woes are a byproduct of events in the US. In both cases, strategic decisions that were made closer to home are conveniently ignored.
One of the decisions that has become commonplace in most large UK law firms over the past 20 years is the move to grow niche transactional areas and to encourage overspecialisation at the expense of broader skills.
As Peter Smart, managing partner at Leeds firm Walker Morris, points out, this can be a dangerous strategy when work in specific areas starts to dry up.
“Firms are finding it quite difficult to relocate and redirect individuals because they get very specialised even at the back end of the training contract,” he argues. “This narrows down options both for the individuals and the firm.”
But other managers argue that the decision to specialise is a response to client demand, over which they have little or no influence.
“I don’t think you can talk about being too specialised, because we react to what clients want – and they clearly have wanted specialised advice,” says Lovells senior partner John Young.
Nabarro managing partner Nicky Paradise agrees with this sentiment, saying: “It’s not us, it’s the clients driving this overspecialisation. It doesn’t suit us at all to have people we can’t move around. If you’re not an expert, the client doesn’t want you. We’ve got all these directories at the moment dividing us all into ‘experts’.”
Whether firms are just passively responding to client needs or not, the reality is that overspecialisation does tend to make redundancies more likely when particular practice areas fall off a cliff.
Of course, firms do have options other than redundancy when a practice area sees work dry up. Retraining and redeployment can ensure that staff stay on the books and make a valid contribution to their firm – yet not every firm has embraced these alternatives to redundancy.
“I don’t think creative alternatives to redundancies are being played out sufficiently,” says Weedie Sisson, principal coach at Peer Professional Development, a career consultancy for the legal profession. “These alternatives take a little more effort and conversation than going through the redundancy process, which is a specific route.”
Paradise at Nabarro says her firm always looks at the possibility of redeployment first as a matter of course. “Some people have more transferable skills than others, and we’re trying to do that as much as possible,” she says. “This is one of those times when overspecialisation might not be such a great thing.”
Given the niche way in which law firm training and practice groups are organised, is retraining the sine qua non of any significant redeployment initiative?
Walker Morris hopes to pick up anticipated growth in restructuring work in the new year by giving nine hours of retraining to 30 lawyers in peripheral areas – albeit they will remain in their respective practice areas.
For its part, DLA Piper has gone one step further by providing formal restructuring retraining and actually redeploying 13 into that department from its corporate, finance and property groups (The Lawyer, 24 November). The firm puts them on a week-long intensive course, with the option of doing a further 10-day College of Law-accredited course resulting in a diploma in restructuring.
Individuals are identified on the basis of having had previous experience working with the insolvency department, according to the group’s head Stephen Halladay.
The week-long course covers seven areas: insolvency regimes, administration and receivership, security issues, business sale issues, property, directors’ duties and a restructuring workshop.
The numbers game
How does the cost of retraining compare with that of making redundancies? At DLA Piper, eight of those moving into restructuring and insolvency are from London, with another five from offices elsewhere in the country. When they come together for the week-long course, the firm will have to shell out on travel and accommodation for a portion of them, and also factor in the loss in fee-earning and client development time for those attending the courses.
Halladay will not put a figure on the monetary cost of carrying that out, insisting that “we didn’t do any calculations on a piece of paper”.
But Lovells London managing partner Ruth Grant, whose firm has moved a handful of associates into restructuring and insolvency from areas such as corporate, argues that such training can be overrated.
“Frankly, one could spend a week doing a course, but the degree to which that would make a difference is debatable,” she says. “I expect firms doing it feel that they want to give somebody something at the end of it.”
Grant argues that retraining is more likely to be offered if firms have difficulties encouraging their lawyers to make the move. “We haven’t had that problem,” she says. “Most people can see where the work is.”
But Sisson argues that those providing retraining should be praised. “Those that are doing it can probably be named on one hand and should be models to follow,” she insists.
Moving on up?
Another alternative to redeployments to busier departments in the UK is to relocate lawyers to busier offices abroad. It has been much reported by The Lawyer that firms including Allen & Overy, Clyde & Co, Linklaters and Pinsent Masons have taken this option.
Suhail Mirza is a senior associate in the corporate department at Pinsents and is one of 25 to have been either redeployed within the UK or relocated abroad by the firm since the start of the downturn, having moved from the London office to Dubai this summer.
Mirza is quick to point out that he sees his switch as a positive, long-term career move and a potential step to partnership. However, there is no denying that the work he is doing in Dubai – listings, cross-border joint ventures and private equity work – is pretty much non-existent in London.
Mirza’s colleague David Bowman is a property associate who made the move to Dubai from Leeds last month. The expectations are that this move will be for one year initially, with the possibility of reassessing it afterwards.
“I think my prospects would have been good back in the UK had I remained,” he says. “I was working on development work with the universities team and it was taking up quite a lot of time.”
While Bowman is doing more contentious than transactional property work as a result of a slowing market, it was the business development opportunities in Dubai that swung it for him.
For firms with existing capacity on the ground and credible brands, relocating people to emerging markets can be a relatively cheap way of maximising resources.
Partners are typically on the same types of packages as they are in the UK or US, but according to Ben Williams of search recruiter BJJW Offshore, they would expect help with relocation and housing. Associates will get three months’ rent and a couple of family tickets home “if they’re lucky”, he says.
“If you’re being deployed because there’s no work, the firm’s not going to bend over backwards. It all comes down to desirability,” he adds.
However, cultural, religious and legislative restrictions in some jurisdictions mean that certain individuals will not feel comfortable with making the transition.
It’s cool to be kind
If a firm does not have booming overseas offices, and retraining and redeployments have been looked at and not considered cost-effective, it is important that redundancies are performed in the most transparent and open manner, according to Sisson.
“There have been studies showing there’s a positive and significant correlation between engaging with staff and profitability and productivity,” she says. “It’s very important in any redundancy or redeployment exercise that the message about how and why it’s affecting employees should be handled professionally and openly. It helps to stave off the ‘What’s the point in my hard work?’ question.”
Outplacement services (ie career coaching for those facing redundancy) are a growing factor in redundancy processes. At Nabarro the 22 staff facing redundancy are being offered this as part of a package that includes monetary compensation. The same is true for most other firms, although Memery Crystal offered this package to just one of the 16 staff who were made redundant.
According to Sisson, who is American and who has worked on both sides of the Atlantic, the absence of formal outplacement arrangements is not purely a feature of a Darwinistic job market in which only the toughest survive.
“Outplacement is a less specific feature in US job-cut programmes because we have more of a coaching, engagement and counselling type culture in general. So possibly individuals are more personally set up for change,” she says.
But Sisson thinks this is happening over here too. “In the UK generation Y is more mobile than generation X,” she explains. “They’ve got their social networks and are better connected early on. That doesn’t mean they couldn’t make use of outplacement – it helps to put them in another frame of mind, because as we know redundancies can actually be a blessing in disguise for some.”
Try telling that to the lawyers who have already lost their jobs.