Some law firms will die if they do not put some cost-cutting measures into effect immediately, according to a law firm consultant. Many large law firms have already announced compensation cuts, furloughs and other cost-cutting measures but others have not. With the pandemic wreaking havoc on the economy generally, it is clear that law firms are not immune nor are their clients. While cuts in the short-term may help mitigate some of the economic effects of the economic downturn, only time will tell how the pandemic will affect the legal industry generally. Will law firms face a V-shaped recovery or a more prolonged road back such as that experienced after the 2008 financial crisis? The answer likely lies in the performance of their clients and the economy as a whole. Time will tell, and in-house legal departments will not be immune from cost-cutting measures themselves.
“At least a dozen more large and midsized law firms cut pay and furloughed employees in the past week because of the novel coronavirus pandemic. But it’s not nearly enough, according to a former BigLaw lawyer who once worked as a consultant. Hugh Simons, a former senior partner at the Boston Consulting Group, says cuts are a matter of survival for many law firms, but they are dragging their feet….“The consensus estimate for 2020 revenue is a decline of 15% to 20% from last year,” Simons wrote. “And yet, as of April 26, less than a quarter of the Am Law 200 have reduced salaries or laid off personnel. This feels like a sluggish response given what the partner profit implications might be.””
Read: Some law firms will die without quick cuts, consultant says; which ones acted this past week? at ABA Journal – Top Stories* Like this? Click here to get our weekly email featuring in-house news, jobs and announcements *