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December 3, 2008 5:39 PM

Reed Smith Managing Partner On Layoffs: Capacity Didn't Meet Demand

Posted by Brian Baxter

In a firmwide memo to employees on Wednesday, Reed Smith announced that it will lay off 115 support personnel in its U.S. offices and eliminate up to seven support staff and 11 associate positions in the firm's largest office in London.

Support staff layoffs will affect individuals employed in Reed Smith's IT, finance, marketing, practice administration, knowledge management, human resources, and office services departments. According to the memo, cutbacks reflect less than four percent of the firm's total workforce. (News of the layoffs was first reported on Above the Law.)

In June, sibling publication The Legal Intelligencer reported that the firm let go of 50 legal secretaries from its Pittsburgh, Chicago, and Philadelphia offices. According to this year's Am Law 100 rankings, the 1,200-lawyer national firm reported gross revenues of $892 million and profits per each of its 268 equity partners of roughly $1 million.

The Am Law Daily caught up with Reed Smith managing partner Gregory Jordan to talk about the reductions.

Hi Greg, thanks for taking the time. So what was the impetus for the layoffs?
As we move into 2009, we're trying as best we can to match our capacity with our expected demand. We've done relatively well through 2008, but from listening to our clients we expect this year to be a pretty tough one for business. To be prepared for that we have to make sure we're built the right way on the capacity side for whatever gets served up [this year].

And so these cutbacks affect support staff worldwide but only associates in the U.K.?
Yes. It's 115 support staff in the U.S. who come from all areas. In the U.K., the way the law works there, we have started a 'redundancy consultation exercise.'

Sounds ominous.
According to U.K. law, you include all people whose positions might be eliminated as part of that exercise. And we expect the elimination of up to seven positions on the staff side and 11 positions on the lawyer side. Those are all in the business and finance departments, which contains our corporate securities, real estate, tax, and transactional-type work for financial institutions.

Will the firm be cutting bonuses, as other firms have?
Well, we operate a bit differently from the New York firms, so we're still working on what the compensation plan will look like for 2009, including bonuses. But I've told both our associates and our partners that this is a more difficult climate than any of us have been in and we should all expect that to be reflected in the compensation. So there shouldn't be too many surprises in that regard.

Have you had to let any partners go?
The action we're doing today doesn't involve any partners. Because we've been a high-growth firm, we have a regular process throughout the year of adding and evaluating people. So we constantly have people coming and leaving throughout the year for different reasons. So while some partners have left throughout the course of the year, none are affected by our actions today. (Note: In the past month or so Reed Smith has continued to pick at the remnants of defunct firms like Thelen. See here, here, and here for stories on the roughly 20 or so former Thelen lawyers the firm now employs.)

Besides the layoffs, how else does the firm plan on weathering this economic storm?
We're better positioned than some firms because we've got a diversified model, both geographically and practice-wise. We're about 53 percent litigation, 47 percent transactional firmwide. That's a model that helps hedge in times like this and the litigation side is running ahead of pace. We hope and expect that to continue.

What practice groups specifically are performing well?
We have a lot of practices that are particularly strong right now like insurance coverage, financial services litigation, shipping litigation, bankruptcy, regulatory and enforcement, and trade and commodities. These are all running very strong in this environment. At the same time we expect that the transactional side will be slow well into the first couple quarters of 2009. Our crystal ball is no clearer than anybody else's, but everything we hear tells us that we need to expect a pretty tough year for business.

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