Archive for the ‘Layoffs’ Category

Today, we conclude our three-part mini-series on the mechanics of the stealth layoff.  We have now discussed the first two parts of the stealth layoff: establishing the record and informing the associate.  The final piece is negotiating for voluntary leave and is, in many ways, the most interesting aspect to the stealth layoff: it explains why stealth layoffs are “stealthy.”

So how does it work?

Often, but not always, the firm will offer the possibility for the associate to quit voluntarily.  If the firm doesn’t offer, you can always suggest it as well.  The exact terms of the departure can be negotiated, and depends on specific circumstances.  All of the following are possibilities:

1) Departure within a normal, two-week notice so there’s no suspicion of a layoff.

2) Removal from payroll immediately but opportunity to continue to come into the office in order to find a new job.

3) No access to a physical office, but firm provides continued access to e-mail, office phone (through forwarding system) and keeps attorney bio on firm website until a new job can be found

The weirdest story is that of an associate who was laid off but kept coming into the office to work and eventually made partner.  Go figure.

Why would a firm offer these incentives?

As much as Biglaw firms appear to fire or conduct layoffs of associates and staff with complete coolness and detachment, it’s never an easy task.  The vast majority of partners would likely rather be playing golf than sitting in their offices firing associates.  No one wants to be the bearer of bad news, justified or not.

Firms also feel like their reputations take a hit when a layoff occurs.  Especially during tough economic times, a layoff signals to the entire legal community that the firm is economically weak and potentially unstable.  In a world where Biglaw firms compete against each other for vital business, any indication of weakness is, at best, damaging, and at worst, fatal, to a firm’s reputation.

If an associate agrees to this arrangement, it’s considered a voluntary leave.  This makes it much more difficult for the associate to sue the firm later for wrongful termination.  For the firm, it’s another way to “litigation-proof” the layoff.  The downside for the associate is that, unlike a layoff which allows you to collect unemployment checks, a voluntary leave precludes the associate from taking advantage of such benefits.

Finally, when associates are publicly fired or laid off, that action sends shock waves through the firm and depresses associate morale.  Fear spreads through the firm like an out-of-control wildfire.  Am I next?  When is the next layoff happening?  When does the bloodletting stop?  Try working under those conditions when you find yourself surrounded by empty offices and a mortgage to pay.

For all the above reasons, firms would rather have the associate leave “voluntarily.”  It’s far more pleasant for the firm to maintain its pristine track record of never having fired or laid off anyone.

Why would an associate agree to this stealth arrangement?

First, it prevents a certain amount of embarrassment or humiliation from the layoff.  Second, it is much easier to land a new job if you can represent to your prospective new employer that you are gainfully employed and want to leave for reasons other than a forced termination.  Third, it provides a boost to your confidence.  If the pretense is kept up by both sides and no one else is wiser for it, you can start to believe that, in fact, you did want to leave voluntarily.

Sometimes, self-justification is the most important thing.

Next week: tactics for searching for and landing a new job while being gainfully employed at your current firm.


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Today, we continue our discussion of the mechanics of the stealth layoff.  After the partnership has established a firm, iron-clad written record of the associate’s poor performance, it is prepared to move forward in informing the associate of the impending layoff.

Depending on the situation, a firm will sometimes attempt to “wean” the associate from work prior to an actual notification.  Other times, due to the state of the economy or other reasons, the targeted associate may have little work.  In fact, if that associate really does perform poorly and deserves to be laid off, it’s very likely that he or she has been struggling to find work for an extended period of time.  Either way, if the associate has little to no work, this situation allows the partnership a favorable opportunity to inform the associate of the layoff and quickly have the associate depart within days.

The more interesting scenario is when–for reasons too complex to discuss in this post–an associate is laid off based on largely fabricated reasons.  It’s well-known that during tough economic times, firms attempt to preserve their reputation by performing stealth layoffs that are ostensibly “performance-related” but really are driven by low business revenues.  The irony of this situation is that an associate who is in fact quite productive may be laid off with a group of other associates in anticipation of a worsening economic situation (and partners looking to protect their quarterly profits).  In this situation, the firm is left in the rather awkward position of informing an associate of an impending layoff but still keeping that associate around long enough to properly transition all of his or her cases.  It’s not a situation that the partnership relishes, so it’s a lot easier to inform an associate of a layoff if he or she is not busy.  Instinctively, this also explains why associates always attempt to “protect” their jobs by keeping themselves as busy as possible during tough economic times.  The more indispensible an associate can appear, the more reluctant the firm will be in delivering the axe.

When the axe does arrive, it usually does so in the form of a “meeting” with two partners.  Sometimes, it’s done during the annual associate review; other times, it is done so during a “performance evaluation” that is not part of the associate review.  Other times, it’s simply characterized as a meeting.

There are several reasons why two partners are usually involved instead of one.  First, there is strength in numbers.  No partner wants to be the one to inform an associate that he or she is being laid off.  It’s uncomfortable and an aspect of a partner’s job that is undesirable.  Having another partner present dilutes the responsibility associated with the layoff.  Second, partners want to present a united front.  It makes it symbolically a “firm” decision, when there are times the layoff is prompted or catalyzed by one primary partner.  (There are of course times when a mass layoff is engineered from the very top, but this is not always the case.)  Third, to the extent that a future lawsuit is filed by the associate against the firm, the partnership can have corroborating witnesses at trial to impugn the associate’s testimony of the conversation that takes place.

The conversation itself almost always takes place in a partner’s office.  This is designed–consciously or sub-consciously–to create an unequal playing field.  When the associate is called into the partner’s office, there is a clear sense of a power disparity.  In some cases, the conversation may take place in a more neutral zone such as a conference room.  But it never takes place in the associate’s office.

The substance of the conversation is based on the written record that has been prepared.  It’s reminiscent of the final court scene from A Man For All Seasons, where Thomas More eloquently (and with futility) argues with moral and legal persuasive force why he should not be convicted of high treason against King Henry VIII.  During this conversation, the partnership will set forth the “charges” against the associate, and ostensibly provide the associate an opportunity to respond to the charges.  It’s all a theatrical performance whose outcome has been preordained.

At the end of this week, we wrap up this three-part mini-series by discussing the “stealth” in stealth layoffs.

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I have received numerous requests to write about the stealth layoff, a topic that is by its nature a secret.  The question is, if a stealth layoff is by definition disguised and “stealthy,” how does one go about writing about this topic?

I set out to interview associates who have left their firms to determine exactly the circumstances under which they left, and what the process entailed.  Due to the highly confidential nature of these interviews, the names of these individuals and their firms have to remain anonymous.

There appears to be common elements to any stealth layoff.  This week, we will delve into the mechanics of the three main parts of the stealth layoff:  (1) establishing the record; (2) informing the associate; and (3) negotiating for voluntary leave. Part 1 of this three-part post discusses the partnership’s approach and strategy in establishing the record.

The layoff begins with the partnership building a “record” against the associate — poor work product, bad attitude, mistakes, missed deadlines, inefficiencies, and/or inability to work with other members of the legal team.  Some of the criticism may be justified; others may not be.  As any lawyer knows, there are always at least two sides to any story.  There’s no exception when it comes to stealth layoffs.  At the end of the day, it doesn’t really matter whether the criticism is justified or not.  Once the partnership decides that an associate is targeted for a layoff, the firm perception of that associate is negative and he or she cannot do anything right.  On the flip side, a rising star can do no wrong.  Mistakes or carelessness can be forgiven or explained.  Blame is shifted to someone else.

Because there are always different sides to a story, the partnership needs to create a record to prove that the associate is in fact incompetent.  Its primary purpose is to serve as insurance against a potential future lawsuit by the associate for wrongful termination.  Usually, the record is established through the use of a file that contains the associate’s allegedly poor work product and the negative comments from as many partners as possible who have worked with the associate.  The key for the firm is to discount any positive performance and to emphasize the negative aspects.  The partnership also prefers to have as many partners get “on board” as possible to show that the associate was unable to work with a majority of partners as opposed to an isolated incident involving personality differences with one partner.

The second part of establishing the “record” involves developing a history of problems.  Thus, partners are encouraged to remember past problems–some even several years old–in order to show that the associate had been given numerous chances to succeed, had been informed of the performance issues, and had not done enough to rectify the purported problems.  The interesting thing about this is that apparently, this record is sometimes created retroactively.  In other words, it’s not a record that is created contemporaneously with the associate’s development at the firm, but only after a decision had been made to layoff that associate.

After the record has been firmly established (at a law firm these records tend to be as legally iron clad as possible), the partnership then informs the associate of the decision.  Part 2 of this mini-series will discuss the mechanics of the conversation between associate and partnership.

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I’d like to go back to an issue that I touched upon in an earlier post but didn’t address fully: the relationship between competency and firings.

It’s a well-known fact that there are more associates fired from their jobs (asked to leave, asked to resign, forced out the door — whatever you want to call it) during bad economic times than good.  But when someone is fired, as opposed to being “laid off,” there is supposed to be a difference that goes beyond semantics.  Being fired means that it was done “for cause”; in other words, an associate was either not sufficiently competent or had major personality issues that couldn’t be resolved.  For simplicity’s sake, we’re only dealing with competence today, and will save the personality topic for a future post.

On the other hand, being “laid off” means that the firm had to let go of otherwise competent associates for business reasons: namely, to protect partner profits during an economic downturn.  Law firms are, after all, businesses, and partners aren’t going to keep 100 associates around when there is only work to keep 70 associates busy.

But when firms decide to do a round of layoffs, how do they decide who to let go?  If the calculus has nothing to do with competency, then what is the criteria used to make such decisions?  On the flip side, if an associate was “safe” from being fired during booming economic times, but was later on fired for incompetence during a recession, was incompetence really the straw that broke the camel’s back?

It appears that the relationship between competency and layoffs / firings is not so simple.  Nor is the distinction between a layoff and a firing particularly clear or well-defined.  In theory, one can make pretty definitions about what a layoff is (not related to competence) and what a firing is (based on incompetence).  In practice, these definitions are about as useful as a solar-powered flashlight with no battery.

The reality is that during times of boom, the money is rolling in so fast that relatively little attention is paid to associate competence.  There is so much work to do that partners can’t find the warm bodies needed to staff their cases.  Partners become desperate for additional help, because they hate to turn down cases on the basis of insufficient resources.

In times of plenty, an associate who is marginally competent can remain under the radar for months, even years, at a large law firm for several reasons.  First, the volume of work usually means that a particular associate who may not be able to handle the responsibility indicative of his “level” or “year” may well be useful doing entry-level work.  During boom times, work is coming in so quickly that having anybody being able to pitch in on any task is useful.  Second, there is so much money flowing in that neither partners nor clients tend to scrutinize the bills as carefully.  Client representatives who are in-house counsel at major Fortune 500 companies aren’t particularly concerned when the company is raking in record profits.  Partners are also less concerned because their clients don’t care as much, and because the firm is rolling in dough.  Thus, it’s possible for an associate to bill inefficiently for extended periods of time with no one — partner or client — realizing what is happening.  Third, mistakes made by an associate tend to be minimized when a partner is happy with her slice of the pie.  Generally, that’s how the world works: when everyone is rich and happy, no one complains.  Crumbs are swept under the rug.  Warts are airbrushed.  Perception works in mysterious ways.

In lean times, like what we see happening today, the opposite is true.  Associate competence gets placed under a microscope, because there isn’t enough work for everyone.  Partners and senior associates hog most of the work, and junior associates are left to fight over the scraps.  Not having work during bad economic times is like wearing a scarlet letter on your forehead.  You’ve been branded, whether rightfully or not.  The assumption is that you don’t have work because you’re incompetent.  This starts a vicious cycle where the perception turns into reality as partners avoid giving you work based on the perception that exists.  In addition, bills are scrutinized by clients to the most minute detail, and in turn, partners seek to ferret out any signs of inefficiency.  In times of bust, partners look at associates as “dead weight” — while associates make the same salary in good times and bad, the partners make far less when the economy tanks.  Suddenly, the income gap between partners and associates have narrowed considerably, usually a sore point with partners.  And if an associate is only working 50% to 70% at full capacity, the partner wonders why she’s paying this associate a full income.  With that perspective, partners tend to “look” for flaws, any reason at all to pitch the dead weight overboard.

So, the conclusion to all this is:  the perception of competency changes with the economic times, and that perception–regardless of the reality–will have more of an impact on you keeping your job than any measure of your true competency.

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Stealth layoffs are like sudden disappearances: one minute, your colleague in the adjoining office is there, like every other day, and the next minute, POOF!, he’s gone. Vanished.  Disappeared.

Firms use stealth layoffs for a variety of reasons.  First, they are used to counter associate morale problems.  Job security is important, and firms know that people care about keeping their jobs.  So why call it a termination, or a firing, when the individual simply “resigns” for whatever reason?  Why induce hall chatter and nervous gossip when it’s needless?  Morale among associates and staff at Silicon Valley law firms was at an all-time low during the tech bubble burst: everyone was afraid, and associates knew their jobs were in jeopardy to summer associates who would likely replace them.  It’s an extremely difficult environment for anyone to work in when the big elephant in the room, the RIF, is omnipresent.  So stealth layoffs are a way for firms to prevent the elephant from entering the room.

Second, there is the issue of firm reputation.  Some firms like to say that they never let go of any associates or staff.  All of them “willingly” depart for one reason or another.  It makes for a great “feel good” story, and entry-level attorneys believe it.  They really do. Reputation is very important to law firms.  How one is perceived, vis-a-vis the major competitors, is a delicate orchestration of marketing and image-building exercises.  The stealth layoff is one instrument playing in this orchestra.  No firm wants the reputation of firing their attorneys or staff.  Clients don’t like it either.  Firing suggests incompetence, and unfortunately, incompetence inevitably bleeds its way back to the partners themselves.  Why does your firm fire so many people?  Why are you unable to select competent attorneys in the first place?  Is your hiring process flawed?  As a client, why am I paying for the time of someone whom you just fired?

Third, there’s the issue of associate or staff reputation.  The individual being terminated is going to need to find a new job, most likely at another law firm doing exactly the same work.  It’s not in that individual’s best interest to get fired, making it that much harder to obtain that new job.  Instead, the associate “seeks a better opportunity” at another firm that “fits his long-term career development.”

So stealth layoffs fulfill their purpose, and they further both the interests of the partners as well as the individual being laid off.  But query this: do stealth layoffs help or hurt associates who end up staying?

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Associates huddle behind closed doors, in someone’s office, or at a secret lunch location that partners don’t frequent.  The air is heavy with worry and fear.  They’ve noticed that there have been a large number of departures lately, e-mails from other associates with subject headers such as “Farewell!” and “my contact info” and “Thanks for all the memories.”  The rumor was that stealth layoffs were happening, but no one could prove it.  A few months later, their worst fears were confirmed.  The firm had openly let go of 84 associates and 38 staff.  The incoming summer class was told not to start.  Instead, they would be paid six months salary to never show up.  Essentially, they were fired before they started work.

Sound familiar?  I’m writing about the Silicon Valley bubble burst of 2001, when the above hypothetical scenario was the reality for the vast majority of the technology law firms in SV.  The consequences of 2001 were still felt by associates in 2002 and even 2003.  The economy eventually did pick up, the firms went back to the status quo of doing business, and now, eight years later, we’re in another recession.  Not a whole lot of difference between 2009 and 2001, or for that matter the real estate bubble burst of the early 1990s.

This week’s topic focuses on layoffs, “for cause” termination, and the “RIF,” otherwise known as reduction in force.  I’ll discuss these issues in detail during the week, but for right now, those associates concerned about job security should recognize the significance of this indisputable and obvious fact: there are many more associates working at law firms when the economy is thriving than when it’s struggling.  What does this signify?  Ask yourself this: Do associates, as a group, perform brilliantly when the economy is on the up and up, but suddenly lose their abilities to practice law in a down economy?  NO.  Obviously not! While there are always a smattering of legitimate “for cause” terminations, law firms should not disguise their RIFs as anything but what they really are.

So take heart in Bill Clinton’s famous rejoinder: “It’s the economy, stupid!”

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