All year we reported on the hiring freezes, the pay cuts and the layoffs at Missouri law firms. So, you’d expect our fifth annual Missouri Lawyers Weekly MOney 20 financial review of Missouri law firms to chronicle 2009 as the year of recession and retrenchment, of turmoil and tightened belts, of Sturm und Drang.
But of doom and gloom it was not. Not by a stretch, and not by the numbers. For law firms, 2009 was the year of flat and happy.
The statistical fact of the matter is that, for all the economic upheaval, Missouri law businesses operated pretty much business-as-usual in 2009. The enterprises got smaller, to be sure, but they hummed along much as they had in prior years. The industry recession did little to alter the fundamental staffing model or the jaw-dropping profitability of Missouri law firms. If anything, it improved both.
That’s not to understate the profound professional and personal crossroads so many, an unprecedented many, highly skilled lawyers encountered as they suddenly found themselves in oversupply. Indeed, depending on which side of the exit interview you sit, the numbers might argue that not all the career carnage had to be.
What’s statistically stunning is that 64 percent of returning MOney 20 firms (12 out of the 19 included in last year’s rankings) used the occasion of the recession to improve their operating profit margins. Law firm cost-cutting might have been prudent and business-justified, but the improved margins suggest the moves weren’t so much urgent as opportune.
Clearly there was some housecleaning going on. You can see that in the broader index of the Missouri Lawyers Weekly Big 50, our annual rankings based on Missouri lawyers headcount (page 26). As the Big 50 managed to get less big, they also made themselves less top-heavy, which makes for happier partners meetings when it comes time to divvy up the profits.
Large and midsize firms across the state eliminated a net 269 equity partner positions in 2009, a 13 percent reduction from the year before. Not coincidentally, the Big 50 created a net 43 new non-equity positions, which works out to one place of refuge for every six disenfranchised partners.
Of counsels found themselves out of luck. It’s a designation conferred on the newly aligned, loosely affiliated or semi-retired. In 2009, it was a rose that lost its bloom. Big 50 firms slashed 31 percent of their of-counsel positions, a net 187 jobs, reducing that already small proportion of the Big 50 professional workforce to an even smaller 8 percent of total lawyer jobs (see the accompanying charts).
And, while so much of the attention has focused on the decimated ranks of associates, their proportion of the total legal workforce actually increased. At the end of the downsized day, associates comprised 41 percent of Big 50 lawyers, up from 39 percent the year before.
Which is to say the global economic ills had the salubrious effect of improving overall law firm leverage.
As you’ll read in the pages that follow, it was a tumultuous, flat-line year, one in which lawyers and law firm managers faced the challenges of a lifetime. The underlying businesses, meanwhile, weathered the worst rather well.
S. Richard Gard Jr. is the president
and publisher of Missouri Lawyers Media.