North Carolina Lawyers Weekly
By DIANA SMITH, Staff Writer
Business isn’t bullish, but it’s not barren, either.
That’s the most recent verdict handed down from leaders of the firms ranked in Big 25, Lawyers Weekly’s annual survey of the state’s largest law firms.
Nationwide, the past three years were marked by doomsday headlines that reported floods of layoffs for both attorneys and staff at large firms as a result of the recession. Firms hunkered down by cutting costs, freezing summer programs and deferring starts for new associates.
North Carolina’s Big 25 weren’t exempt, either.
Although the state’s total number of lawyers remained relatively stable throughout the downturn, firms showed the first signs of the pinch by knocking out a hefty chunk of non-attorney personnel. The ratio of staff to attorneys between 2008 and 2009 dropped from 2.35-to-1 to 2.04-to-1.
That ratio has since held steady, and the overall number of attorneys in North Carolina is fairly stable. This year’s Big 25 comprised a total of 2,723 attorneys, only one more than last year.
Still, numbers show that firms have not recovered to their pre-recession levels.
Over half of the firms in this year’s survey reduced their number of in-state lawyers during 2010 anywhere from 0.8 percent to as much as 16.7 percent.
Top-ranked Womble Carlyle has steadily lost lawyers since 2007, dropping from a high of 370 to its current count of 345 attorneys.
Despite the bleak history, North Carolina’s managing partners aren’t down for the count.
“We’re leaner and meaner, but the momentum has picked up over the last six months,” said Mike Nedzbala, managing partner of Hunton & Williams. The firm lost 10 lawyers through attrition last year, which was the largest reduction in lawyers among the Big 25.
Managing partners at other North Carolina firms echoed Nedzbala’s sentiment, saying they’re cautiously optimistic that the worst is over. And according to Jim Jones, senior vice president of the legal consulting firm Hildebrandt Baker Robbins, they’re justified in that conservative, but positive, outlook.
Jones said that there has been a continued uptick in demand for legal services across the country since the fourth quarter of 2010.
But “the sluggishness of that demand and the fact that firms can’t raise rates the way they used to all argues for pretty modest growth” in 2011, he explained.
“You’re probably looking on average in the lower single-digit growth for profitability this year. We think the year will turn out positively, but it’s not going to be a gangbuster recovery by any means,” he said.
Indeed, only nine of the Big 25 reported growth during 2010, gaining from as few as one attorney to as many as 46. The highest spike occurred at McGuire Woods, which has locations in Charlotte, Raleigh and Wilmington.
Scott Vaughn, managing partner of McGuire’s Charlotte office, said that he was “pleasantly surprised” with the firm’s expansion. He attributed the growth to two things – “good planning and good luck.”
Their belt-tightening strategy was typical insofar as McGuire stopped raises and trimmed overhead by eliminating expenses such as office lunches.
But the firm, which came in at No. 3 in this year’s survey, never had layoffs and – unlike other firms – kept intact its summer program for budding lawyers. It also increased its total number of personnel from 308 to 324.
“We tried to invest in our people and honor our commitments, and when new people came in, we were fortunate enough to actually have work for them,” Vaughn said.
Having a variety of practice areas also helped firms that expanded to weather the storm, added Charles Ellis, co-managing partner of 14th-ranked Ward & Smith.
For example, when practice areas like real estate took a hit, the firm had other areas that held their own, such as creditor’s rights.
“The fact that we are diversified gave us a significant increase in demand for that work when others were down, and we brought four new attorneys on in 2010, two of whom were in creditor’s rights,” he said.
Corporate and transactional work, finance, labor and employment and litigation are also among those making a comeback, firm leaders reported.
Other signs of recovery
Concrete signs of a rebound are also showing up in hiring practices at the Big 25.
K&L Gates, which lost six lawyers to attrition last year, brought seven associates on board in January and has also added new partners. The firm is also resuming its summer program after a one-year hiatus.
Poyner Spruill is among the firms bringing on fresh blood and is “selectively hiring” laterals, said managing partner Bo Dempster Jr.
Good move, according to Jones, the legal consultant.
“Prior to 2008, demand was growing so rapidly that firms could do very well even if they didn’t have a good strategy or were just bumbling along,” he said. “It was kind of hard not to make money.
“That’s no longer the case,” he continued. “In a world of shrinking demand or now stabilizing demand, the only way that a firm can improve its market position is by taking market position away from somebody else,” he continued.
Numbers also show that salaries remained stable, with one exception.
Of the firms that reported salaries to Lawyers Weekly, pay was generally unchanged, ranging from $60,000 to $135,000 for new associates.
However, new patent hires at Alston & Bird got a $15,000 increase over 2010, from $145,000 to $160,000. Managing partner John Baron said that the increase is in keeping with the national market for intellectual property lawyers.
With that in mind, firm leaders say their motto for 2011 is tempered optimism.
“We’re lawyers. We’re careful by nature,” Vaughn said. “But I feel like we’re prepared for the long haul.”
