The final push

When Dentons axed seventy staff last month it was the biggest redundancy programme in the City. Or was it? Jon Robins asks whether Dentons’ upfront approach is preferable to the sniper tactics of some of the other firms

Virginia Glastonbury, chief executive at Denton Wilde Sapte, took time out from the internal miseries of implementing the largest law firm redundancy programme in recent years to deliver a spirited attack on the less-than-impressive employment practices of other firms in the City. “City law firms have been exiting people on a rolling basis, but this was not a way that we wanted to do things. This is a more transparent and open way of doing it,” she said. “‘I hope that other firms will be encouraged to do this, as it causes resentment when staff are let go in such a way, and not all firms are following the correct procedures.”
Trying to seize the moral high ground while at the same time axing 40 fee-earners, 20 secretaries and 10 support staff might not prove a winning strategy with those poor souls in the firing line. But you get the point. There is a growing list of mostly mid-tier firms that have been forced to downsize in the past year – SJ Berwin announced that it was letting 16 staff go earlier this month, while Charles Russell cut 19 staff in April. There have also been cuts at Berwin Leighton Paisner, Nicholson Graham & Jones, Osborne Clarke and Stephenson Harwood in the past 12 months. Nor are the magic circle firms immune: Clifford Chance has nobody fooled with its “ongoing headcount management”, which is currently threatening between 20 and 30 layoffs.
However, is Glastonbury’s suggestion of covert redundancies a fair assessment of what is going on in the market, or rather a clever ploy to deflect some of the heat away from Dentons?
“There are two things that surprise me at the moment,” says Mark Jones, managing partner at Addleshaw Goddard. “Firstly, that there are as many firms as there are denying that redundancies are going on, and then that there should be any surprise that it’s happening.” Last April, then as Addleshaw Booth & Co, the firm had to initiate its own drastic move, cutting 11 partners. But as Jones sees it, the number of CVs hitting his desk is clear evidence of behind-the-scenes downsizing.
“It doesn’t matter if you do what we did and do it early and overtly, or whether you do it later and covertly – most firms need to do it,” Jones continues. “Having gone through the the second half of the ’90s, I’d be surprised if any law firm had told me they had any overcapacity. It’s inherently implausible.”
The perception of a drip-drip-drip of lawyers being let go appears to be the experience of the recruitment consultants. “A lot of this is just a question of terminology,” comments Dan Wilkins, business manager at Hays ZMB. “We see many people who come in and effectively say they are ‘redundant’ from the firms that haven’t announced redundancy programmes. Is it a redundancy when they’re told there isn’t a huge amount of use for them here, here’s £25,000, sign this and don’t tell? That’s happening
across the City.” He reckons that 100 such redundancies have come into his offices this year already.
Glastonbury, though, is also making a narrower point about Dentons fulfilling its employment law obligations.
“They appear to be the only major firm that’s said that it will comply with the legal consultation requirements which kick in where 20 or more people are made redundant within a period of 90 days,” comments Jane Mann, head of the employment department at Fox Williams, who advises law firms on their redundancy packages. Basically, this route prescribes a consultation period of 30 days (or 90 days if there are 100 or more employees going to be dismissed) with the appointment of employee representatives and the drawing up of selection criteria.
“No other law firm has done that yet,” continues Mann. “Either that’s because they have yet to reach the 20-people threshold, or they’ve been making redundancies over a long period of time.”
Another possible scenario is that firms have not been calling them redundancies but instead ‘performance dismissals’. “They’ve basically been ‘performance managing’ people out after appraisals,” says Mann.
Chris Cayley, a director at recruitment consultancy First Counsel, is seeing a lot of “rigorous performance management”, but he believes that it remains to be seen whether this “management attrition” is anything more than a sober response to tougher market conditions, as opposed to forestalling inevitable deeper cuts. “I don’t believe that every firm that’s losing people through performance management is using it as a euphemism for redundancy,” he argues.
Redundancies are traumatic in any workplace – not least in a partnership. “I had to sit with someone I’d known for 25 years and say, ‘I’m sorry, it’s over’,” Addleshaws’ Jones recalls. “But I think the marketplace genuinely accepts that we faced the issue sooner than many firms; and our partners, staff and clients accept that we dealt with it in an as objective and fair way as we could.” He acknowledges “a wobbly period” after the forced departure of his partners. “But 12 months on and, in the kindest possible way, it’s history now,” he adds.
KLegal was forced to axe 42 support staff in London and Scotland and 20 fee-earners in London. As managing partner Nick Holt explains, “a small part” of the reason was “post-merger rationalisation” following the firm’s team-up with McGrigor Donald, but the other factor was that it was overloaded with corporate lawyers in London.
Holt shares Dentons’ somewhat sceptical take on the ‘rolling programme’ of redundancies in the City. “We were the first to do it in an honest and open way and we got an inordinate amount of publicity for it on that basis,” he says. “A lot of firms are going through the kind of things that we took a view on last year, and so with us it was more a question of more decisive management than traditionally takes place in law firms, where people wait and wait.”
Over at Charles Russell, where eight lawyers and 11 support staff were made redundant earlier this year, managing partner Grant Howell takes a similar line. “Perhaps one could argue that the firms that haven’t made cuts have found some magical elixir, but I’m not so sure,” he says. “They may not be addressing the issues because it’s something everyone’s looking at.”
Will there be any further cuts? “No. That’s the hope and certainly we don’t plan any more,” replies Howell.
KLegal’s Nick Holt also believes his firm has done enough to prevent more cuts. “We did the right thing at the right time, even though it wasn’t a pleasant thing to do,” he says.
Unsurprisingly, many of those lawyers who are about to find themselves back on the job market can expect a pretty tough time of it. Dentons has said it expects that many of its 48 trainees who might also be looking elsewhere (out of a total of 58) will be placed with in-house clients or “snapped up quickly by other firms”.
“That’s just nonsense,” comments Wilkins at Hays ZMB, “because City firms just aren’t recruiting newly-qualified lawyers.” His prognosis is that the going will also be hard for two year-qualified lawyers, “whether they come from Dentons, Slaughter and May or a 10-partner firm in Mayfair”. He continues: “It’s going to be hard because, while we aren’t inundated, at the same time there are a lot of people on our books who are looking for jobs because they have no choice. They’ve been made redundant or been told that they don’t have much of a future.”
At the moment Dentons is in the throes of its consultation period. According to Mann, running a consultation exercise should be “a bit like planning a military campaign – you need a plan of campaign and a strict time-line”.
Charles Russell took the view that it was best to reveal who was going to be let go on the day that the redundancies were announced. “We were talking about 19 people out of 550 and it was important to get the message across, because otherwise there’d be all sorts of rumours on the bush telegraph,” says Howell.
Dentons has to comply with the 30-day requirement under the employment legislation. Partners were informed of the need for its swingeing redundancy programme on Thursday 1 May, the bad news was broken to employees the following day when the consultation period began, and 21 employee representatives were appointed within 48 hours. The members of staff made redundant are expected to leave by 14 June.
“Many employees see it as a very protracted way of going about dealing with a very difficult situation,” acknowledges David Fowler, head of personnel at Dentons. “While I subscribe to the view that legislation probably tends to be cruel, I [also] believe that we have a much better programme as a result of having to deal with it.”
As for selecting candidates for redundancy, employers have first to identify a pool of candidates and draw up criteria for selection; this can include, for example, an ability to foster good client relations and an effectiveness at bringing in new business. “These are things that you can usually measure objectively within a law firm because of the statistics that are provided internally within a firm,” explains Mann.
Other more subjective criteria can be included, such as whether someone is a team player or not. “But if you pick someone solely on account of not being a team player, you expose yourself to the risk that there’s a lack of objectivity in the selection,” says Mann.
Fowler at Dentons will not be drawn on his firm’s selection criteria, other than to say that length of service plays only “a minimal part”. But he does add: “It’s not about performance management, and in certain areas there are going to be some very good people who are going to be made vulnerable.” The firm is looking to meet 30 per cent of its target number through voluntary redundancies.
According to Mann, the collective redundancy provisions can at least provide the management team with some “tools” to deal with the bloodletting. “They have time to communicate to the employee group why the situation has arisen and how the scheme is going to be implemented, and that can serve a function and help it to be regarded as a fairer approach,” she explains.
It also enables the management to communicate with staff directly about the real problems. “Partnerships are quite closed and tend to be full of rumour and innuendo, which is often completely misconceived,” says Mann. “So if you bring it out into the open, it quite possibly might actually have a beneficial effect.”
“I hope in time people come to respect the fact that it’s been done openly and not as covertly as some other firms have been doing it – although I don’t expect that to be an immediate reaction,” Fowler reflects. “In time, people will come to appreciate it as a less cruel approach than this prevailing mood where individuals can just be picked off.”