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July 26, 2017

Seyfarth’s recent layoffs:  Much ado about nothing

Many people have been asking us lately whether Seyfarth’s layoffs of about 40 lawyers (out of over 900) a few months ago represent the beginning of the end for legal project management (LPM).  Our answer is very simple:  absolutely not. In fact, the entire LPM movement is still at the beginning of the beginning.

When the layoffs were announced, Law 360 published an article entitled:  “Seyfarth Shaw Layoffs Could Be New Normal For BigLaw.”  It quoted several leading experts about the challenges of a marketplace in which “demand for law firms remains sluggish.”  As Tom Clay, a principal at our strategic partner Altman Weil, put it: 

“This has nothing to do with Seyfarth and everything to do with what’s going on with the profession.  The reality is there isn’t enough work to keep everyone busy… Many law firms are going to have to … [resort to layoffs], and some have been quicker to act than others.”

Yet, given Seyfarth’s fame as the first large law firm to embrace LPM, the questions about implications have continued to linger.  The American Lawyer published a followup piece several months after the layoffs were announced, which asked again: “What [do the layoffs] say about Seyfarth’s lean strategy a dozen years in?  And what [do they] say about the broader LPM movement?”

Like the earlier analyses, this article argued that the layoffs resulted from changes in the profession rather than from LPM:

“Seyfarth’s financial results over the past five years have mostly outperformed the AmLaw 100’s…That occurred even as Seyfarth’s five year headcount outpaced the industry, 15.6 percent to 10.7 percent.  But that head count caught up to the firm last year.”  

In other words, Seyfarth has been doing quite well compared to other firms, but simply grew too fast.

The article also noted that: "Demand for the firm's SeyfarthLean Consulting arm, which helps clients make their legal departments more efficient, has never been stronger.”

Despite the fact that the experts agree LPM did not cause the layoffs, we predict that this is a situation where many lawyers will remain blissfully unaware of the facts, and will continue to use the layoffs as a reason to argue against LPM.   Many lawyers are unenthusiastic about the kind of attention to finance and management that LPM requires.  They would love to hear that they could forget about LPM, because it was just another fad that had run its course. 

Firms are embracing LPM not because their partners want it, but because their clients want it.  In its most recent Chief Legal Officers Survey, Altman Weil asked clients “What would you most like to see from outside counsel?”  The top three answers were greater cost reduction (53%), improved budget forecasting (43%), and non-hourly based pricing structures (36%).  All three are related to LPM, so, as we’ve often repeated, you could say that the top three things legal clients want these days are LPM, LPM, and more LPM. 

To sum it up, the fact that Seyfarth laid off about 40 lawyers means only two things:  they grew too fast, and they were wise enough to correct the mistake. 

The LPM sky is not falling. In fact, we predict that a few years from now almost no one will remember the Seyfarth hiccup.  The firms that will be healthiest will be the ones that have given clients what they are asking for: LPM, LPM, and more LPM.

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