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What the Orrick Management Reveals about Points of Pain in Law Firms

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Recently, Orrick Herrington & Sutcliffe was in the news again after having laid off two of its 14-member executive staff, apparently to optimize resources and reduce costs. Well, everyone knows that you don’t reduce costs by removing profit centers, but cost centers in an organization. And that brings us to what the recent decisions of Orrick reveal about points of pain in a law firm.

Unlike most law firms, Orrick chooses to let non-lawyer executives run much of the firm’s management and processes. Until now, it had a 14-member executive staff, and according to Mitch Zulkie, the chair of Orrick, the objective is to create “a thinner, more nimble management team.”

So, which heads were the first to roll?

Human Resources Officer Gera Vaz and Chief Knowledge Officer Peter Krakauer.

What is important to note here and the bigger issue here is not laying off the persons in those positions, but abolitions of those positions, entirely.

These positions are of course points of pain to themselves and to others, especially where an organization is made up largely of professionals belonging to the same discipline, but where the HR leader or Knowledge Management leader does not have a strong background in the same discipline, or not perceived to have one.

Unless they can justify their existence, they would continue to be perceived as cost centers, though they are important for the functioning of any organization.

One of the most persistent problems with HR has always been that it fails to substantiate its super-important role in business objectives with proof that can be quantified. Unless HR tackles things differently, works proactively to find out the business objectives and profit making processes of an organization, and unless it creates policies where its contribution to the bottom line of profit can be recognized in black and white – this is always going to happen. When heads start rolling, the HR is bound to lose its own.

Orrick’s been in the game from 1863, and they are hardly expected to reduce any position that is clearly perceived as a profit center.

The other point of pain in law firm management is the Knowledge Center or those in charge of coordinating document flows and processes. Traditionally, lawyers themselves used to do that work, or hand the work over to secretaries. The concept that an executive could be paid as much as partners in a law firm only to organize knowledge management is something that is difficult for many to accept.

Consequently, unless people in charge of knowledge management, document processes and document flows are able to quantify and justify their costs, then they create points of pain for law firms. After the HR, who are rarely seen as anything more than filekeepers and gatekeepers – the people in knowledge management are seen as people who can be substituted by software.

So, before the executives were going, it was not surprising to find that earlier in the week, Orrick announced layoffs of 21 non-secretarial staff members and relocated 11 others to a lower-rent back office.

It’s a clear approach to optimization and cost reduction by removing points of pain in extreme cases, and reducing pain by reduction of associated overheads where possible.

When deciding policies, it’s good to keep watch on a firm like Orrick which has been running for 150 years, and even in 2012 managed to gross $866 million and a profit of $1.6 million per partner.

This recent news is important from an employer’s perspective to recognize points of pain because recruiting and layoffs of attorneys happen periodically in law firms. The executive staff was not reduced even when in 2008 Orrick laid off 40 associates and 35 staff, or when in 2009 it laid off another 100 attorneys and 200 staff.