In-House Legal Department Predictions for 2012
The good news for in-house lawyers in 2011 was that there were raises for base salaries and a slight uptick in hiring. The bad news is that those improvements were relative. Base salary raises were very slight compared to the rate of inflation,. They also came after several years of salary freezes. Bonuses did offset some of these lackluster base salary numbers, but being tied to company performance, not everyone enjoyed them.
The uptick in employment did not stem from the creation of new positions per se, but rather as an effort to replace departing attorneys and rebalance overworked corporate legal departments that had suffered heavy layoffs during the Great Recession. In other words, the number of available in-house attorney positions remained quite low. On the other hands, there was some positive movement out there, which we expect to continue in 2012.
What Will In-House Legal Hiring Look Like in 2012?
The hiring trend that we identified in 2011 by corporate legal departments is likely to continue in 2012. The good news is that corporate legal departments are planning to hire in 2012 – about 40%. The bad news is that the majority of the hires will not be full-time attorneys.
Corporate legal departments are dealing with a heavier workload in part by using more paralegals and contract lawyers. About 67 per cent of corporate legal departments are comprised of lawyers with the rest made up of paralegals and other support staff. Legal departments are still operating with flat or decreasing budgets, and therefore, they are seeking the highest level of competency at the lowest cost. Compliance and contract review has been increasingly delegated to paralegals and contract managers. In other words, corporate legal departments are hiring more "staff" rather than "lawyers" in an effort to improve efficiency rather than “bulk up.”
What Are Corporate Legal Departments Looking for?
Corporate legal departments that are hiring full-time lawyers are doing so primarily to replace departing lawyers or add a specialty to handle work in a growing area. While corporate legal departments may be conducting some hiring, they are definitely looking for “more bang for their buck.” What exactly are they looking for?
Corporate legal departments are looking for experienced (5-10years) all-around corporate lawyers with a broad legal background, strong business acumen, and proven management skills. And that’s just the tip of the iceberg. Factors that are also taken into consideration includes national law firm background, few transitions, specific industry experience, and proven in-house track record of success.
The ideal candidate is a businessman who happens to be a lawyer, not the other way around. This is in response by corporate legal departments to want to demonstrate to the C-suite that they have what it takes to handle legal matters in a manner that contributes to the bottom line. Today's in-house attorney has to be packed with achievements that show how he/she can contribute to the company's bottom line; being an excellent lawyer is simply not enough.
What Are In-Demand Practice Areas?
General Business/Corporate Law (M&A a Plus) – Attorneys that can handle a company’s various transactions, regulatory and compliance matters, while understanding the business, and managing internal and external counsels, are the most in-demand. Attorneys with all of the above, and a strong M&A background are also prized.
IP/Licensing – The wave of protection for innovation that was driven by the Great Recession continues. As a result, licensing is a very hot in-house practic. An increase in patent prosecution has also heightened the need for attorneys with experience in trademarks and patents.
Contracts & Compliance – Corporate legal departments have an ongoing need for support to handle contracts and licensing. They are increasingly hiring contract administrators to manage procurement issues, and paralegals for compliance issues. There are some attorney-level hires, but these tend to be contract attorneys or contract administrators with a law degree.
International – As companies look to focus on expanding their core businesses and increase their market share, they are likely to look outside of the U.S. as part of their competitive strategy. This will drive the international law practice. U.S. companies will continue to look opportunities in the three most popular emerging markets—Brazil, India and China. Some other markets that may generate some new and renewed interest may include Mexico, Vietnam, Korea and the Middle East, with Turkey, Saudi Arabia, and the United Arab Emirates as attracting most of the attention. This boost in international transactions will come primarily from companies in the consumer and infrastructure sector seeking to expand into new markets.
What Will Compensation Look Like in 2012?
Total compensation for in-house counsel will most likely continue to rise, albeit modestly in 2012.
Base salaries will see moderate increases (around 3%). Raises will be primarily reserved for in-house attorneys that bring something unique and/or can save money by managing projects, people, and budgets. In other words, senior lawyers (10+ years) with management responsibilities at publicly trade companies, and specialty area lawyers (healthcare, patent, IP, etc.), will enjoy higher compensation levels.
Average In-House Attorney Compensation:
4-9 years = $100K-$180K
10+ years= $130K-$220K
Bonuses are where the difference will be made up.
Gone are the days of earning a bonus at your boss’ discretion. Today’s in-house counsel bonus is driven by: individual performance and company performance. In-house lawyers are held accountable for their contributions to the bottom-line, and are asked to share the risk of their company’s performance. If the economy continues to improve in 2012, and companies perform well enough to be able to share the rewards, then bonuses will continue to rise.
What Else Could You See in Your Stocking for 2012?
Companies are reticent about reaching into their pockets to offer more cash up front in the form of salaries. They want to see a return on their investment. That said, for hard-to-find candidates and performers – there are making efforts, if not with cash, by offering other incentives that include:
• Telecommuting
• Flexible Hours
• More Vacation Time
The Bottom Line
Hiring will still be very tight for 2012, but we will continue to see some improvements. Performance-based compensation is also here to stay. This is still driven by the economy, and while we have been through the worst since 2007, we have not quite gotten back on track yet. Our economy is still very unpredictable and fragile. Companies are hoping for the best, but still preparing for the worst. Most organizations are remaining conservative regarding their fixed costs, including their salary expense. Therefore, this will continue to make for a sluggish hiring market. We may see some small increases in base salary if the economy continues to slowly gather momentum. At the end of the day, much of the growth will be in bonuses. Hiring will focus on staff that can handle more commoditized work, and experienced management-level corporate attorney and specialists.
When Is It Time to Hire A GC?
While the general trend by most companies is not to hire, when outside counsel bills are stacking up, and executives get too bogged down with the process of drafting sales contract, the time might be right to hire the company's first in-house general counsel.
When a company starts to emerge from its startup status, and the overhead increases with each partner and associate that is engaged to handle more of the company’s work, the right economic decision is usually to bring in a GC.
Most companies that are ready to bring legal in-house share the same concerns: mounting outside legal costs, increasing legal work, and the need for someone who really knows the business well to position the company for the future.
A GC can not only help a company gear up for the next stage of growth and success, but also help a company prepare or prevent a potential crisis. On needs only look at the recent corporate scandals, such as stock option backdating, to understand just how important it is for companies to be properly protected. One of the many reasons companies are considering hiring a GC is to have someone who can immediately see the big picture for the company, and be able to keep them out of trouble.
What should a company look for when trying to hire its first GC? Typically, a “jack-of-all-trades” with a solid ten years of prior legal experience, and industry specific experience. A good GC should be able to the build an appropriate governance structure and do good corporate governance on a shoestring budget. Prevention of problems can go a long way towards saving a company money, something that corporate America seems to be in agreement with.
In general, the size of companies' in-house legal staff has been on the rise, according to reports from the ACC, growing by nearly 40 percent in the last decade. While companies have been shedding some lawyers during the recession, GC hiring has been steadily on the rise. In light of increasing regulatory demands and corporate scandals, and a soft employment market, this may be a good time for companies to assess their needs, and consider building a legal department.
In-House Legal Employers Are Slow to Pull The Trigger
While we are still very far behind pre-recession hiring, hiring has improved since December. According to the Conference Board, a research organization, the number of job openings advertised online has grown by more than 400,000, to 4.2 million, an upward trend that began in the spring of 2009.
The good news is that there are some jobs, and perhaps a rising number of them. The bad news is that these jobs are not getting filled. Why?
There are a couple of factors at work. First, corporate legal departments that are in the market for new hires are generally looking for very specific types of attorneys, often in niche practices, or with the type of caliber and experience that only a very small number of applicants can fit the bill. In short, they are looking for something as “scarce as hen’s teeth.” No necessarily impossible, but pretty close.
The bottom line is that those corporate legal departments are having trouble finding candidates to meet these highly specific, and often next-to-impossible requirements, and once candidates are found, hiring executives are taking longer to pull the trigger.
Positions that typically took less than 90 days to fill before the recession are sometimes taking four times longer. The reason is simple: hiring executives are holding out for better candidates.
These executives are working under the assumption that there is a large and talented pool of candidates fighting over very few in-house jobs. While that may be true, the fact of it is that there are a lot fewer candidates these same executives are looking for than the market bears. In other words, there are not as many “pearls” in the sea as they may think.
Yet, those making the hiring decisions are convinced otherwise. As a result, interviews are taking longer, and candidates are asked to conduct more rounds than ever before, and wait around longer for offers. I have seen candidates wait as long as 6-9 months before a company would pull the trigger.
Today, if a corporate legal department is interviewing a “superstar” candidate, it will nevertheless feel compelled to wait to speak to 5-6 other “superstars” before committing to anyone. The fact is that there may not be that many out there. The tougher the requirements, the smaller the pool, regardless of the economy. But this is not connecting with hiring executives.
The general thought is that with all the available talent, time-to-fill would go down, but it's just the opposite. When you're still trying to find quality candidates, it's actually taking longer.
With news of the market still being down, corporate legal departments feel obligated to continue looking for better candidates. They want the perfect candidate, when in reality there is no perfect candidate.
The result: positions are taking longer to fill, and often corporate legal departments are losing great candidates because they are not ready to pull the trigger. When that happens, everyone seems surprised. This may be a good market to hire, but the tougher the requirements, the smaller the pool, and the more options these “superstar” candidates have, no matter what the market.
Good New for In-House Job Seekers: Law Departments Plan on Hiring
As companies continue to slowly emerge from the recession, many are looking for ways to save money on their expensive legal bills. Corporate legal department, according to a recent Altman Weil's Chief Legal Officer Survey, are increasingly telling firms to just forget it, and taking more work in-house.
Altman Weil's Chief Legal Officer Survey, released Wednesday, showed that sixty-three percent of the officers surveyed reported that they had increased their internal budgets from 2009 to 2010, and 29% claimed that they would decrease their use of outside firms in the coming year.
That’s great news for attorneys and paralegals looking to go in-house. The survey showed that 41% of chief legal officers indicated that they plan to hire new in-house lawyers in the next 12 months, and 32% said they would increase the number of paralegals on staff over the same period.
The survey, conducted in September and October, is based on responses from 174 officers from law departments. 28% of respondents run law departments in corporations with over $10 billion in revenues.
Of course, the great majority of companies taking on more work in-house will do so with its existing legal staff, placing increasing pressure on an already overworked staff. However, this mark s a shift from companies simply trying to negotiate law firm fees, to looking at alternatives, including bolstering their own internal capabilities. That’s great news for attorneys who are already in-house, in terms of increased job security, and for those looking to break into the in-house world in terms of opportunity.
Newsline – 02/22/10
- What the New White House Counsel Made Last Year. New White House counsel Robert Bauer made just under $1 million last year as the head of the political law group at Perkins Coie, according to a financial disclosure form he filed this month. Bauer reported $958,788 in salary and bonuses from the firm, where he was a partner in its Washington office. That's almost 20 percent above the firm's 2009 profits per equity partner of $802,111, as reported this month by The AmLaw Daily. He also reported $14,000 in speaking honoraria and a $7,500 fee from teaching at Yale University last spring. Bauer, who started at the White House in late December and succeeded Gregory Craig, reported household investment assets worth between $2.38 million and $5.55 million. It’s a good thing that Bauer has such a nice nest egg stashed away, because he is now slated to earn about earned $172,200 per year - the highest salary paid to any of the White House counsels, and what his predecessor Craig earned last year (see our previous Blog post "What Do White House Lawyers Earn?"' It’s not bad by any standard, but these attorneys are clearly not in it for the money. Craig had also left a very lucrative private practice with the Washington, D.C.-based law firm of Williams & Connolly, where he was earning $1.7 million a year. It is refreshing to see attorneys motivated by other things besides the bottom line when making a career move. The National Law Journal
- Levi Slashes its Outside Counsel. Levi Strauss has been busy making cuts, and we’re not talking about jeans either. Last spring Levi Strauss & Co. cut the number of outside law firms that it uses down to just two — one of the most sweeping reductions yet by a large company. The lucky survivors were: Orrick, Herrington & Sutcliffe to handle all of the worldwide legal work, and Townsend and Townsend and Crew for its global intellectual property matters. General counsel Hilary Krane said that in addition to yielding improved work at lower cost from her outside firms, the deals have also had a side benefit: better performance from her staff attorneys. While this may come across as sweeping reform by a clothing giant, this may signal a new trend for companies: fewer outside counsels to assist better-staffed in-house legal departments. Corporate Counsel
- SEC Says BofA GC Didn't Get Fired Over Legal Advice. The Securities and Exchange Commission is going against the generally accepted speculation that former Bank of America general counsel Timothy Mayopoulos was fired because of his unwelcomed legal advice regarding the merger. In a court filing on Wednesday, the SEC says Mayopoulos got fired to create a position for Brian Moynihan in an effort to keep him from leaving, according to stories in the New York Law Journal and the Wall Street Journal Law Blog. Moynihan served as general counsel for 44 days before taking over as CEO. The SEC position reinforces congressional testimony by Moynihan that, before his appointment as general counsel, he had planned to leave Bank of America because he was not pleased with the position he would get after the merger. Yeah, right! The SEC’s conclusion lacks fundamental logical credibility! Here's the story: GC gives advice executives do not want made public, GC gets escorted out of the building 24 hours later, and is subsequently treated like a pariah. Despite receiving excellent reviews during his tenure at BofA, Mayopoulos was given little love after he was told to pack his stuff and leave. When Mayopoulos reached out to two of the bank's executives to obtain references to try and find a new job, he was snubbed by one and got a cool reaction from the other. Th internal dialogue was probably something like this: A reference? Yeah, you did a great job for us, but I'm not sure we can do that for you. You know, rules and all. Good luck though. I'd hate to see how Mayopoulos would have been treated had he not done a good job. ABA Journal
- Ford Gets Mileage Out of Fewer Lawyers. When Ford's sales collapsed — from 2006 to 2008, and the company lost a cumulative $30 billion, something had to be done. The response: Laying off a third of its 300,000 employees worldwide. The Company’s In-House Legal Department was no exception to these cuts. Ford's general counsel David Leitch made the painful move of slashing his staff by 40 percent, from 200 lawyers to 120. His department continues to perform at the same level, he said. And it hasn't increased its use of outside lawyers to make up for the loss of in-house attorneys. However, while Ford’s attorneys “have adapted, and are more efficient and effective than they ever thought they could be" when the economy turns around, Leitch will have a new challenge on his hand. If your car takes on a lot of mileage, it’s bound to break down sooner rather than later. If you want your car to keep performing at a high level, you’ll either need to ease up on it, or get a new one. The same can be said about employees who’ve been asked to “do more with less,” over a long period of time. His overworked counsels will probably be the first to look for greener pastures, and he will need to either up his internal numbers or use of outside counsel to keep up with demands. Corporate Counsel
Avoiding the Brain Drain: Do You Have a Succession Plan?
By the year 2010, a large percentage of the workforce will be retiring. Many of these retiring “Baby Boomers” will include General Counsels and other senior-level legal counsels in the majority of the largest corporations in the United States and Canada.
As current lawyers reach retirement age between 2010 and 2015, most companies lack formal succession plans to prepare for the eventual departure of these senior attorneys.
One of the most critical components of business survival for most companies, but yet most often overlooked, is the planning for the internal succession of key leaders, including those in corporate legal departments.
That said, creating and implementing a succession plan takes time, resources, and most companies do not give it the attention it deserves. However, without a formal succession plan, companies may find themselves confronted with a costly brain drain.
Companies may stand to not only lose institutional knowledge and relationships, but also experience a lag in productivity, and bear the added financial costs associated with not having someone readily available to take on a key position.
It may take many years to identify and groom an attorney to advance into a leadership role; therefore, companies should start to invest the time and resources to develop succession plans as soon as possible.
While succession planning is not an exact science, here are some suggestions for corporate legal departments to consider when developing a succession plan:
1. Identify Potential Successors
Starting with a short list, select the attorney(s) who show the most potential and who work(s) well with the organization. Is there a likely candidate or an unlikely candidate missing from the list?
2. Develop a Formal Training & Mentoring Plan It is important to implement training and mentoring programs for high-potential employees, and include them in strategy discussions relating to the operation of the department. This will provide succession candidates the opportunity to build their skills and leadership abilities in practice management, new business development, marketing, strategic planning, and client service.
3. Establish a Timetable
Orienting an individual into a successor’s role takes time. At minimum, a 12-month window gives both parties the opportunity to transfer knowledge and manage relationships.
4. Plan the Transition
Let employees learn from the person they will be replacing. They should work together on projects, interact at the board of directors meetings, participate in client meetings, and otherwise get involve in the day-to-day activities and responsibilities of the position. Having the successor shadow his or her successee can be one of the most valuable way to impart and retain knowledge.
Skillfully done, succession planning can safeguard legal department from the “brain drain” that the Baby Boomer retirements might cause, as well as the high financial costs of finding a replacement.
Hiring A General Counsel
The economy, globalization, mergers, compliance concerns and business competition have all influenced the way the general counsel legal function is seen and used. Today, CEOs are looking to their general counsel as both business and legal advisors who must consider all of the issues that a company faces. In addition to being a strategic business partner and a legal advisor, the general counsel must also lead, organize, manage, train, and educate.The increased complexity of the general counsel role has made filling these vacancies more challenging than ever. Even the most experienced CEOs and human resource professionals can find it difficult to effectively assess candidates and identify the more subtle skills required for this position. Here are five suggestions for companies to consider when hiring a general counsel:
The most effective way to replace a departing general counsel is to elevate a candidate from a company’s existing legal department. Increasingly, general counsels are becoming responsible for creating succession plans, serving as mentors and developing internal talent. These efforts often result in strong internal candidates being available for the general counsel position.
While internal candidates should be a part of every company’s long-term succession planning process, not every company can support this type of activity. This process typically requires that a company already have a general counsel in place, as well as enough internal attorneys with the experience and competencies required to develop as general counsel candidates. In other words, succession planning works best in larger legal departments. Where a company seeks its first general counsel or does not have the bandwidth to grow internal candidates, outside recruiting becomes the obvious method of sourcing general counsel candidates.
2. Prioritize Core Competencies
The greatest barrier to successfully hiring a general counsel comes from improper management of expectations. In general, companies that are looking to hire their first general counsel tend to look for the “perfect” candidate rather than the “right” candidate. While these two categories do not have to be mutually exclusive, the approach used for each can yield very different results. The real problem lies in burdening the “perfect” candidate description with a slate of requirements that are generally unnecessary and unrealistic, rather than identifying and prioritizing core competencies required for the role as they relate specifically to the company.
Most companies would be thrilled to hire the general counsel of a major public company with all of the sophistication and hauteur that someone in this position would bring. However, not only is this exclusive candidate pool extremely small, but also most companies don’t have the wherewithal to recruit these types of candidates. Most importantly, the great majority of companies don’t need a general counsel from this candidate pool. The biggest challenge facing these recruiting companies is to set appropriate requirements and expectations for its general counsel candidates. While these requirements can be exacting, decision makers need to be realistic about identifying competencies that are truly important and relevant to the role in their company.
Being realistic at the outset of the search, and setting meaningful priorities and requirements will result in generating a strong pool of candidates from which one candidate will make an excellent fit. Companies who stay focused on long wish lists will not only narrow the candidate pool unnecessarily, but will also risk keeping a critical position open for several month, or make a hire who seems perfect on paper but who will fail because of cultural fit issues. Some of the competencies that companies should consider when searching for a general counsel include:
- Combining strong technical skills, sharp intellect, and experience to resolve difficult, complex legal and business problems.
- Being able to effectively manage diverse personalities and relationships, internally and externally.
- Thinking outside of the box, and being able to come up with new and creative ideas in business and legal matters.
- Leading others by communicating a compelling vision that moves individuals, teams, and the organization to perform at a higher level and embrace change.
- Seeing the trees in the forest and being able to focus on critical tasks that add value.
- Communicating effectively at all levels of the organization, in written and verbal communication.
- Delegating by making individuals accountable, providing feedback, as well as recruiting, mentoring, and growing talent for current and future roles.
In conducting a general counsel search, your organization needs to be ready to invest financially, as well as in terms of time and effort. Since the general counsel will act as the trusted advisor to the CEO, the process will be more successful if those conducting the search involve the CEO early and often. Rather than only including the CEO in the initial meeting or on the review of the final candidate(s), the CEO should be regularly included in each step of the process. To recruit the best, even in a down economy, companies also need to be willing to invest financially. While general counsels make transitions for a variety of reasons that are not always financially related, high performers are usually looking for comparable if not better compensation packages than what is being offered by their current company. Today’s general counsels are compensated at levels similar to other members of the senior management team. It is not unusual for a general counsel to be one of the top five most highly compensated company executives. What do the general counsels at the nation’s top companies earn? According to a 2009 Corporate Counsel survey, general counsels at Fortune 500 companies make:
- An average salary of $596,393
- An average bonus of $1.16 million
- An average stock award of $1.1M
- An average option award of $669,719
Companies that can establish disciplined yet flexible guidelines will be able to recruit outstanding candidate quickly and effectively. Technical skills, good business judgment, management skills, and fit with the organization are all critical. That said, there are certain areas where a company can show some flexibility and still be able to recruit excellent candidates without having to “settle.”
While companies tend to prefer to hire general counsels that come from their specific industry, some flexibility in this area can be afforded without having to compromise on competencies. If candidates in a company’s primary industry are in short supply, it may be appropriate to look to related industries for prospects. For instance, if a company is highly regulated, candidates from other highly regulated sectors can bring the type of experience a company would benefit from. Conversely, there can also be crossovers between industries that are not highly regulated, such as the consumer or industrial sector. While this might not apply to companies in certain industries that require industry-specific experience because of the specific regulatory nature or the complexity of the sector, such as healthcare or financial services, most other companies can benefit from considering candidates in crossover industries.
5. Consider Professionals
Today’s general counsel is a critical member of a corporation’s senior leadership – an accomplished legal professional who will be required to provide top-flight legal and business advice. Evaluating and quantifying the skills required when assessing candidates for general counsel positions can be challenging, even for the most experienced CEOs. Conducting a search for a general counsel is not only complex and challenging, but it is also a time consuming and costly process that a company cannot afford to miss. As a result, an increasing number of companies are turning to professional legal recruiting firms to fill their general counsel positions.
Legal recruiting firms can advise companies on the type of person and salary required to attract top talent, as well as devise strategies to recruit the right individual in accordance with the company’s needs and requirements. Professional legal recruiting firms maintain a constant stream of qualified candidates and potential job seekers. They are intimately connected with the legal community in both law firms and corporations. As a result, they can offer companies the type of qualified candidates they would not be able to find on their own through online or newspaper ads, alumni associations, applicant databases, job boards or other familiar sources of people. Most legal recruiters are also former attorneys. As a result, these legal recruiters tend to be better positioned than laypersons to evaluate another attorney’s skills and aptitude, and identify “great” from merely "good" attorneys. In other words, legal recruiting firms are designed to deliver faster and better results, saving a company both time and money.
Looking for a Revenue Source: How About a Plaintiff’s Lawsuit?
The Future of Wyeth’s In-House Legal Department in Pfizer Merger
The Pfizer/Wyeth proposed deal could be bringing a glimmer of hope to law firms and investment banks that have seen mergers and acquisitions activity on the decline since 2007.
But one lawyer's hope may be another's misery. What's to become of Wyeth's 300+ legal department?
According to an article by The Legal Intelligencer, Pfizer Inc. has made no secret of its intentions to slash thousands of jobs once a planned merger with pharmaceutical competitor Wyeth goes through.
How Wyeth's 300-person worldwide legal department will be affected is still a question mark.
"The good thing," the source said, is that for a merger of this size, there is "remarkably little overlap." Wyeth, for example, has vaccine and biopharmaceutical departments that Pfizer doesn't have. It also still has a consumer health care division. Pfizer sold off a similar division in its company not too long ago. All three of those Wyeth divisions have attorneys dedicated to them, the source said.
One can hope that current Pfizer CEO, Jeff Kindler, a 53-year-old Harvard Law School graduate and former legal clerk to U.S. Supreme Court Justice William J. Brennan Jr., will look kindly to Wyeth's legal department. However, in light of the recent history of mergers and the fate of in-house legal department, the future of Wyeth's legal staff is precarious.
Mergers typically result in legal departments layoffs. Here are a few examples of big company mergers and ensuing legal departments layoffs:
- Akzo Nobel - International Chemicals: resulted in a 25% reduction in legal staff (Dec. 2008)
- Linde-BOC: reduced lawyer count by 40% (August 4, 2008)
- BellSouth - AT&T: resulted in a 30% reduction in legal staff (May 5, 2008)
- Nextel-Sprint: resulted in a 30% reduction in legal staff (Sept.13, 2005)
- Oracle - PeopleSoft: resulted in a near 100% reduction of its lawyers (Dec 13, 2004)
- El Paso - Coastal: resulted in a 30% reduction in legal staff (January 29, 2001
- Honeywell - Allied Signal Inc.: reduced lawyer count by 50% (December 1, 1999)
If you do the math, as a member of the legal department's merged company, you have a 30-50% chance of losing your job post-merger.
Some of the post-merger consolidation issues faced by legal departments include duplication of positions, attorney attrition from those unwilling to stay or relocate, replacement of top legal positions by new management, the sale of business units supported by attorneys etc.
In the majority of case, layoffs and a reduction on staff will ensue in the short-term. However, over time, law departments tend to maintain about the same number of lawyers per unit of revenue. How well the newly merged company is doing financially-speaking will have a significant impact of the size of its legal department.
This may be a small consolation to members of the Wyeth legal team facing cuts. We can only hope for the best.
Alternatives to Slash & Burn Layoffs: Keeping Your Hard Earned Talent
Layoffs are short-term fixes intended to save a company money. Companies feeling the financial squeeze want action and quick results. Layoffs offer a fast solution with immediate bottom-line results. But could they ultimately work against a company’s best interest by costing more in the long run?Hiring talented employees, including lawyers, is a very expensive proposition for companies and law firms alike. The cost of recruiting and/or replacing an employee making over $100,000 per year typically costs companies more than $60,000. Law firms typically spend an average of $75,000 to recruit a single summer associate — which includes hiring costs, overhead, salary, entertainment, and training. The cost of replacing an experienced mid-level associate jumps dramatically to $200,000 - $500,000.
Smart companies don’t want to lose the people they have worked so hard to recruit and train. Not to mention the expense. So, what are some the alternatives?
• Compensation Cuts Across the Board. This is a “We Are In It Together" approach that Caterpillar has decided to take this past December. What is particularly important about the cuts at CAT is that they are even bigger for executives. According to Caterpillar's arrangement, for 2009, executive compensation will decrease up to 50%, compensation for senior managers will be reduced 5% to 35% and other management and support staff will see a reduction of 0% to 15%. CAT is not alone in this process, other companies have followed suit. In December, FedEx Corp. also slashed the pay of more than 35,000 employees, including a 20% base pay cut for its chairman and chief executive, Frederick W. Smith.
• Reduced Hours & Unpaid Holidays. According to the New York Times, a growing number of employers, hoping to avoid or limit layoffs, are introducing four-day workweeks, unpaid vacations, and flexible work schedules. In November of this year, Dell Inc. offered nearly all of its employees up to a week of unpaid leave as part of an effort to cut costs in the last quarter of 2008. Although Dell reduced its global workforce by 10 percent over the last year, it hoped to save the company further layoffs by offering this voluntary leave program. The New York Times also reported that Cisco offered a four-day year-end shutdown, Nevada casinos implemented a four-day workweek, and Honda offered voluntary unpaid vacation time.
• “Sabbaticals” and Other “Flex Plans.” During the last downturn of 2001, Accenture announced a voluntary sabbatical program known as "Flexleave." Offered to about 1,400 consultants mostly in the United States, the program gave them 20% of their salaries and continues benefits over a six- to 12-month period. Stock options remained in place for those who took the offer. The only caveat: while employees could take another job during their leave, they could not work for a competitor.
There are a number of other alternatives, more or less palatable for employees but less noxious than layoffs, such as: hiring freezes, voluntary severance packages, offering early retirement to those close to the retirement age, reducing travel expenditures, delaying capital projects, and eliminating non-staff positions filled by temporary workers and independent contractors.
Bottom Line: Human capital is the most important element of any company’s success, and when that capital is being reduced, it ends up being a more costly proposition than its short-term savings.
What is your company doing to avoid layoffs? What alternatives would you propose?
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