On the front-page of Tuesday’s Wall Street Journal, Weil, Gotshal & Manges announced that it laid off about 170 attorneys and support staff and slashed compensation for about 30 of its 300 partners. The firm ranked 13th in gross revenue last year by The American Lawyer at $1.23 billion and its profits-per-partner reached $2.23 million. And while this announcement is a dark day in the legal world, we’ve observed ways in which Weil has avoided potentially devastating damage to the reputation of the firm.
This announcement is generating a lot of dialogue in the legal industry — understandably so. The cuts are deep and they’re happening at one of New York’s most prestigious white-shoe firms. And, it’s the first such announcement of this scale since Dewey & LeBoeuf’s spectacular collapse in 2012.
In the last year, similar cuts have hit companies in all business sectors. IBM, for example, announced this month that it will dismiss between 6,000 and 8,000 employees across several states.
If you gathered a group of business leaders together and asked them what would be the worst announcement that they would need to share with their customers, employees and the public, the “layoff announcement” would probably be near the top. From a humane perspective, it’s creating havoc on your employees’ lives. From a business perspective, it’s creating a need to revamp how you run your company. Tack on to this announcement the power of social media and it only proves that being a leader (or communications manager) isn’t easy.
Some law firm leaders may wonder what this announcement and the media coverage it garnered means for their firms, which may be considering similar moves to bring supply and demand into alignment.
Just about every legal consultant quoted about Weil relays the same message: similar announcements are coming from other law firms. Many firms have been making cuts during the last year, but those cuts have come under the radar and involved primarily underperforming partners. But that will change as law firms realize that they can no longer function like it’s 2006, when hiring, billing and client needs looked much different.
So who’s next? That’s the question on the minds of industry analysts. As the news reverberates in the marketplace, it’s worth noting that Weil’s actions provide a few important lessons on communication.
First, the marketplace responds favorably to transparency and authenticity. Weil Executive Partner Barry Wolf has done an effective job of explaining that his firm made this difficult decision to protect and preserve a strong financial position versus making it from a dire financial position like the one that triggered Dewey’s collapse.
In Tuesday’s Wall Street Journal article, he makes a point of clarifying that Weil owns no debt, no unfunded pension obligations for partners and no long-term guarantees to partners — the three factors that contributed to Dewey’s death spiral.
Second, the firm has established goodwill by providing six months’ severance to the affected attorneys and staff. They could have saved money by doing two or three months, but they opted for six. From a reputational standpoint, the firm will be rewarded for this decision. This also reinforces an important point made at a recent entrepreneurs’ forum in Chicago that Greentarget co-hosted with the Council of Public Relations Firms: Organizations that “do” good things and simply “be” rather than “seem” are those that garner the most respect and admiration from stakeholders.
In the face of an incredibly difficult management decision where digital media takes the conversation to an entirely new level, we would argue that Weil Gotshal & Manges is effectively navigating the storm and providing a roadmap for other companies to follow.