16 September 2002
These are challenging times for law firms. While corporate lawyers stare at empty time-sheets wondering when the axe might fall, real estate, litigation and employment lawyers have never had it so good. Yet for most firms this is not enough to make the numbers add up. Some City corporate departments are staring into the abyss wondering if the silly season will ever come back again and weighing up the consequences if it does not. Crucially, this downturn no longer belongs to just the TMT firms but to us all.
In particular, the downturn belongs to the young ones. With static salaries and redundancies, morale at law firms is at an all-time low. For the younger generation of lawyers, 'Generation X' (which translates approximately as anyone who is roughly eight years qualified or less) is experiencing an unpleasant dose of something hitherto unknown: reality.
Generation X was the first to experience the 'newly-qualified' market, a phenomenon born in the boom of the mid-1990s to accommodate the expanding legal market. As the newly-qualified rate turned overnight from £42,000 to £50,000, these guys knew that those who controlled the recruitment market and law firms played second fiddle in the recruitment war. When Generation X wanted a new job, they were offered about half a dozen. Now they're signing compromise agreements.
Those lucky enough to remain employed have enjoyed minimal salary increases. So they must be the happy ones? Not so. It says something about our profession that a salary increase caused so much unrest. Assistants typically moved up into the next salary band (which may have risen marginally or remained static). Never mind the plummeting stock market or the fact that the dotcoms are 'dotgones', this generation has grown up enjoying the whole cake and does not appreciate crumbs.
Some are deservedly in a state of shock. Having received consistent positive appraisals, and in some cases an indication that partnership is within reach, these same lawyers have now been asked to seek new pastures. One lawyer, recently made redundant, asked his employer why his previous appraisal had been so positive in light of his being laid off. The partner allegedly replied that he had not wanted "to create a fuss".
It isn't just the assistants who are unhappy. Partners in some firms are watching themselves ride down the lockstep as their clients slowly retrench or at worst disappear. Restructuring the equity is not just something that a handful of regional firms are implementing; it has become a management focus. "Our goal is to get staff turnover to single figures," said the senior partner of one of the most successful mid-tier law firms at a recruitment presentation in early 2000. His firm has now achieved this, much to his dismay, because now he does not have enough work to feed the hungry assistants. Now he needs to increase staff turnover. (Could this be coincidental with the recent introduction by many firms of more rigorous appraisal systems?)
Some partners are confident about an autumn mergers and acquisition recovery, others believe it will not come until spring 2003. For the first time in around 10 years, law firms are not all experiencing the same phenomena. The boom was generally enjoyed by all - even the most obscure law firm managed to ride off the back of the technology boom. (Some rode so far into the TMT sunset that the journey back may take a considerable time.) Yet firms are emerging out of the darkness at a varying pace. Some claim the upturn is approaching, others are still cutting costs. Most are somewhere in between.
It has been a frustrating year for all. Assistants feel betrayed by the end of an era in which they were king. Partners have watched profits slip or, if lucky, grow at a minimal rate. The green shoots are not wholly evident yet, although there are rays of light. Whenever the so-called good times return, the landscape will look slightly different. For one thing, Generation X will have grown up. Admittedly, it will not have lived through the blitz like a couple of generations before, but it will have experienced professional mortality, something which might make lawyers a more humble lot. Well, at least for a few weeks.