Tuesday, January 06, 2009
More on reduced hours as an alternative to layoffs
Yesterday, we summarized an article in the National Law Journal that examined PAR's recommendation that law firms consider having associates work part-time as an alternative to laying them off. (Cost-saving option for firms: reduced hours, by Karen Sloan, Jan. 05, 2009; subscription required.)
Essentially, PAR's idea is this: if a law firm or practice group is experiencing a shortage of billable work, it can project the number of attorney hours it expects to need and encourage associates to reduce their hours, with a commensurate reduction in compensation, to a level that matches the projected need. For example, a practice group may decide that for the next six months, it expects to have about 4300 billable hours of work. If the practice group has six associates, it may conclude that it needs to lay off two associates and keep four associates who will bill about 45 hours per week. The alternative would be for all six associates to remain with the firm and bill 30 hours per week and receive two-thirds of their salaries.
Why is the reduced hours alternative any better than layoffs? First, it allows the firm to keep associates it has worked to hire and train, and when the economy improves (we're optimists), these associates can ramp up their hours quickly and handle the additional work. If the firm lays off associates, the firm will have a lag time before it can handle a significant amount of work as it hires new associates and gets them up to speed. The firm will also have to bear the costs associated with the layoffs and the costs associated with hiring new associates and training them.
Second, keeping as many associates as possible will maintain good client service. Clients tell PAR that they don't like having the associates on their cases repeatedly replaced; clients not only pay to get the new associates up to speed, but they invest time and effort in developing personal relationships with them and gain efficiencies as the associates become familiar with their business. Keeping the associates who have relationships with clients is a big plus for all involved.
Finally, keeping the associates improves intangibles such as productivity and reputation. The retained associates feel more secure in their jobs, feel more loyalty toward their firm, and can focus on being productive rather than worrying about when the ax will fall. The firm gains a reputation for being humane and creative, which helps in future recruiting.
Is the reduced hours alternative a perfect solution? Of course not. Tomorrow, we will look at some of the common objections and assess their validity.
Essentially, PAR's idea is this: if a law firm or practice group is experiencing a shortage of billable work, it can project the number of attorney hours it expects to need and encourage associates to reduce their hours, with a commensurate reduction in compensation, to a level that matches the projected need. For example, a practice group may decide that for the next six months, it expects to have about 4300 billable hours of work. If the practice group has six associates, it may conclude that it needs to lay off two associates and keep four associates who will bill about 45 hours per week. The alternative would be for all six associates to remain with the firm and bill 30 hours per week and receive two-thirds of their salaries.
Why is the reduced hours alternative any better than layoffs? First, it allows the firm to keep associates it has worked to hire and train, and when the economy improves (we're optimists), these associates can ramp up their hours quickly and handle the additional work. If the firm lays off associates, the firm will have a lag time before it can handle a significant amount of work as it hires new associates and gets them up to speed. The firm will also have to bear the costs associated with the layoffs and the costs associated with hiring new associates and training them.
Second, keeping as many associates as possible will maintain good client service. Clients tell PAR that they don't like having the associates on their cases repeatedly replaced; clients not only pay to get the new associates up to speed, but they invest time and effort in developing personal relationships with them and gain efficiencies as the associates become familiar with their business. Keeping the associates who have relationships with clients is a big plus for all involved.
Finally, keeping the associates improves intangibles such as productivity and reputation. The retained associates feel more secure in their jobs, feel more loyalty toward their firm, and can focus on being productive rather than worrying about when the ax will fall. The firm gains a reputation for being humane and creative, which helps in future recruiting.
Is the reduced hours alternative a perfect solution? Of course not. Tomorrow, we will look at some of the common objections and assess their validity.
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