And then they came for the partners

A recent client advisory released by the consultants at Hildebrandt Baker Robbins and the Private Bank division of Citigroup reaches the lawyerly, circumspect conclusion that a “persuasive argument can be made” that we are witnessing “fundamental and long-lasting changes in the legal market.” (See also this Eversheds report discussed here.)

Among Hildebrandt’s none-too-surprising findings:

• Outside counsel spending dropped nearly 11% in 2009. (By contrast, between 2001-2007, demand rose about 4% annually.)

• AmLaw 100 firms were harder hit by the drop in demand than firms in the AmLaw200 and smaller firms.

• Good news: a significant rise in demand for M&A, general corporate, tax, capital markets, and real estate in Q4 of 2009, suggesting to some the economy has bottomed out.

• During the years just before the Recession, the number of partners increased at higher rate than the number of lawyers generally. As a consequence many firms now find themselves “overpartnered.”

On that last—“overpartnering”—point, Hildebrandt predicts that firms will address this situation through the use of “sharper compensation differentiations, early retirement packages, and ‘tough love’ conversations.” The authors also “expect to see a general paring back of the ranks of income partners across the market, as well as a general weeding out of marginal equity partners.”

On the part of partners, there is a marked lack of to discuss this prospect of their peers—made guys!— getting whacked. In this new reality, increasing numbers of partners will be cast aside as if there were merely—gulp—fungible associates. Liz Kurtz, of the consistently excellent Technolawyer BigLaw newsletter, managed to get two BigLaw partners to speak to her on this touchy topic, albeit anonymously:

Said one:

"Do I think that partners can realistically expect to escape this recession unscathed? Of course not. Do I think that some partners should be shielded from the consequences of their own failure—or inability—to perform? Frankly: no. But it's such a sensitive issue that no one is willing to discuss it outside of the firm."

Said another:

[G]etting rid of weak performers is classic 'survival of the fittest.' But if too many partners are let go, it can be very traumatic to the practice group or the firm as a whole—like cutting off an arm to save the body.

posted by brian