Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. This week, we give some communications advice to lawyers afraid of blowback from a successful 2020. Sign up to receive this column in your inbox on Thursday mornings.
Many Big Law firms are poised to report that 2020 was their best financial year in a decade.
Some firm partners are struggling to square that fact with the broad suffering brought on by the coronavirus pandemic.
The pandemic has now claimed more American lives than the number of U.S. soldiers lost during World War II, with nearly 450,000 deaths and counting. Unemployment spiked, and businesses were lost, after the virus forced lockdowns. Simply put: 2020 was an awful year.
“I’ve heard from several chairs that they don’t want to talk about how well their firms did in 2020 because they don’t think it’s productive,” said Kent Zimmermann, a consultant for law firm management at The Zeughauser Group.
A report by the Financial Times this week said Kirkland & Ellis, the largest law firm by revenue based on AmLaw data, expects its 2020 top line to approach a record $5 billion—nearly $1 billion more than the firm brought in during 2019. A former partner at the firm confirmed those expectations, requesting to remain unidentified to protect relationships at Kirkland.
In 2019, Kirkland equity partners earned more than $5 million in profits on average, AmLaw data show. How much better will partners do because of the 2020 results?
Kirkland declined to comment for this column. The firm has historically refrained from speaking publicly about its financial results.
A current Kirkland partner, who requested to remain unnamed discussing internal firm business, told me that people feel grateful and don’t want to boast about the results. Others expressed that same sentiment in the Financial Times story.
But Kirkland won’t be the only firm with a record year. Profits among the 50 largest firms are expected to be up on average more than 11%, according to a report from Wells Fargo Private Bank Legal Specialty Group.
Those results, sooner or later, are going to be public. Most AmLaw firms will self-report their figures, which are later disclosed. That hollows out the arguably high-minded claims that they’d rather not discuss their performance.
If a firm did great, its clients and staff will know. There are reasons unique to both those groups why firm management should address their 2020 results head-on, and with real, tangible empathy.
Start with the clients. The concern is that clients whose companies experienced layoffs or other hardships may resent their law firms’ successes. Not a good look! But it can happen.
“Some clients may be turned off,” Zimmermann said. “They won’t announce it publicly, they may just act accordingly. And that’s the concern I would have.”
Clients may use it as a reason to push back on law firms’ rate increases, something I wrote about a couple weeks ago. (Say what you want about supply and demand, but price discovery in the law firm market is far from efficient or rational.)
To counter that resentment, firms could point out that clients’ needs are what drove their banner years. Firms should be proud of the work they did helping companies navigate the most stressful business environment in at least a decade.
“A lot of the work done last year was high-value, panicked work,” said Joe Mendola, managing director of Wells Fargo Private Bank’s legal industry team. “This was bet-the-ranch type of stuff, and clients will pay for that.”
I’ve written about the practice groups that notched record years. Lawyers helped companies tap record amounts of debt to keep their businesses intact while their doors were forced to be closed.
Bankruptcies don’t happen without lawyers, and more Chapter 11 cases were filed in 2020 than any year since 2013, according to data from the American Bankruptcy Institute.
Employees themselves became a health (and therefore legal) risk this year, so it’s not surprising lawyers were on hand for guidance. Remember all the Covid-19 “task forces?”
Firm leaders should, when possible, share specific examples of work that aided clients at a time of dire need. That will reassure other clients that those same services will be there for them when they need it.
Law firms could also share how many more hours their lawyers worked on average last year. It’s worth reminding clients that the practice of law is mostly a manual endeavor, even if law firm associates are robustly rewarded for the time they put in.
As millions of Americans turned their homes into their offices, the average length of a workday extended nearly 2.5 hours, Bloomberg reported this week. Law firm associates have long felt they live to work—and not the other way around.
Firms should also be prepared to respond to concerns rising from staff, many of whom were furloughed or saw colleagues laid off. Far be it from me to tell anybody what to do with the money they’ve earned. But if partners are truly uncomfortable with their success, they could act proactively.
It could be an opportunity to share the firm’s profits with a broader slice of the workforce. Among corporate America, law firms have been leaders on employee benefits issues like expanding parental leave.
Politicians are currently debating a higher minimum wage. Not many law firm employees earn below $15 an hour, but firms could announce raises for staff in-line with the spirit of the debate.
To be sure, plenty of firms have raised funds internally for staff whose families have been hurt by the pandemic. And firms have handled pro bono work related to pandemic relief.
If firms are afraid of blowback from a successful year, silently submitting financial results only creates a void for bad feelings to fester. Firms would be better served standing up for the work their lawyers did last year—and taking steps to show they are generous and empathetic.
Worth Your Time
On Layoffs: It’s not all roses out there. Morrison & Foerster will lay off roughly 4% of its U.S. staff as it expects “fundamental changes” from the past year will outlast the pandemic.
On Day Trading: GameStop’s surge may be losing steam, but the test for Robinhood Markets Inc.’s new in-house legal team could be ramping up. Brian Baxter reports three top lawyers left the online brokerage in January as it continues to build up a legal and compliance department.
On Diversity: New data from the National Association for Law Placement revealed women and minorities made only small progress in joining the partnership ranks at law firms, in 2020, Elizabeth Olson reports. The industry still has a long way to go. Black lawyers, comprised about 2% of the partnership ranks at major law firms last year and Black women specifically accounted for less than 1%.
On Law Firm Hiring: Quinn Emanuel opened an office in a new partner’s home in Atlanta. K&L Gates hired more than 20 lawyers to start a Nashville office. Wilson Sonsini Goodrich & Rosati re-hired Michael Russell to co-lead its M&A practice after he had a five-year stint at Goodwin Procter. And King & Spalding rehired Paul Murphy, who’d served as chief of staff to FBI Director Chris Wray, a former King & Spalding partner himself.
That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.