Local law firms holding their own so far, but worrying - Philadelphia Business Journal:

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“We might see a revenuw increase but not 10 percent like in the Cozen O’Connor CEO Tad Decker said. “The problem isn’t so much 2008 but 2009. There is a lingering, positive impacgt from transactions started in 2007 that will helpthis year’ss bottom line.” According to a Citigroup surveuy of 165 law firms from around the profits per equity partnerr were 9 percent lower in the first half of the year after increasing by an annual average of 9 percengt in each of the previous six years. The surveuy said at the most profitable firms, demand for servicez dropped dramatically while expenses increased at an even morerapisd pace.
The normal counter-cyclicak bankruptcy and commercial litigation practices were not as as clients have tried to avoid the expenser of litigation in favorof out-of-court-settlements. In the past two two major national firms, Heller Ehrma n and Thelen, voted to dissolve, leavinv hundreds of lawyers lookingvfor work. Other firms chose to cut from their largesgtexpense — personnel. Just two weeks ago, New York’zs laid off 70 lawyers and 100 staf f members whileSan Francisco’s laid off 40 lawyers and 35 New York’s laid off more than 130 attorneys in two separat e cuts earlier this year.
Philadelphia’s major firms, whichy save for Dechert have not invested in the securitization and real estatde finance practices that crippled the aforementioned have not been forced to issuemass layoffs. But firm managiny partners and consultants said annuak performance reviews that usually take placwe in December and January coule be tougher forall lawyers. Unlike the past, when firms wouldd often use reviews as an opportunity to cull lawyeras for stated performancereasons — thus avoiding the term layoff that can hurt firm branding with law students — managing partnersd expect firms to be upfront.
“Years ago, there was a stigm a attached to layoffs,” Chairman Fran Milone said. “Today, if firms believ they should make cuts, they don’t hesitate to call them Decker said that while performance reviewx used to focuson money, many associatez will be happy just to keep theidr jobs. “You won’t see any 40 percent job cuts, but firms will be tougher in evaluations and quickefr toevaluate long-term employment prospects,” he Law firm consultant Ward Bowef of Newtown Square’s Altman Weil said firmse will focus on identifying and then compensatingb star associates.
“They can’t afforde to keep underperformers during timeslike these,” Bowedr said. “Unfortunately, working in a slow area can affecyt performance reviews because billables are created by the partners to which they are FoxRothschild Co-Chairman Abraham Reich said lower-performinf partners are at risk. “People will be held to a higheer standard,” Reich said. “We’re evaluating personnel for the long I have not seenand don’t think we’ll see any mass but we are facin g challenges that we have not seen Uncertainty with the future is the issue.
” Lawyers and legal recruiterw say lateral hire interest has also slowed save for top who have become even more valuable during the downturn. “Myt sense is that the threshold is highet forincoming laterals,” said recruiter Robert Nouria n of Coleman Nourian. “It’s an investment with no immediat payoff sincelaterals don’t bring receivables with them and it takesw a few months for them to star adding to the books.” Reich and otherr managing partners said they are cuttinf costs wherever they can. Areas such as travel, entertainment, administrative and even marketin (Duane Morris cut a numbe of marketers earlierthis year) have been subject to the knife.
Stradlet Ronon Stevens & Young Chairman William Sasso said the firm sent a smaller contingent to a conferencee of mutual fundcompanies — its bread-and-butter practice in Palm Springs, Calif. Bower said some firmx have eliminated or curtailed spending forfirmwide retreats. Schnader Harrisonm Segal & Lewis Chairman Ralph Wellington said his firm is bein more conservative about hiring summer internsx fornext year.
Firms lookingg at short-term credit lines to help tide them over have encounteref tough negotiations with their longtime banks that have becomse skeptical because of recent firm failures or Bower said while firmws try andcut costs, they are also dealing with strugglin clients. Bower said clients are taking longer to pay theirbills — 45-day turnarounds have turneed to 55 or 60. A numbef of clients are now folding orbeinh acquired. That leads to short-terj work, but once that runs its course, it createss pressure to replace it withnew business.
Bowe said clients will also resist rate increasess and even are looking for Wellington said his firm will raise ratesd next year but most likely at a more modesg percentage thanthe past. “Th e dye is cast for 2008 once you are six monthds through it so the recentcrash won’t impact thingd too much,” Wellington said. “But 2009 is goint to be tough.”