Ronald H. Shechtman, Pryor Cashman's Managing Partner and Chair of the Labor + Employment Group, wrote for Law.com about the inherent advantages midsize firms may have during a downward business cycle.
In "Why Midsize Firms Are Well-Positioned to Weather an Economic Downturn," Ron notes that "while I share the concerns about the state of the economy (and will not go so far as to make specific predictions), I am less worried about how a downturn will impact midsize firms like ours. Pryor Cashman and others in our cohort have survived and even thrived in recessionary conditions in the past, and I am confident that we can do so again."
Ron says that as the economic landscape starts to turn, he is having conversations that make him optimistic about midsize firms' prospects:
I recently heard from a major financial institution for whom we do some work that some of their firms are pricing themselves out of the work they are doing, and they asked us for proposals in several areas where we can compete with Big Law in capability. Our practice groups are already structured to provide services comparable to bigger firms, but at higher efficiency and lower prices, so we were well-positioned to compete for this business.
What especially impresses these prospects is the lack of leverage in the midsize model. Big Law pricing relies on leveraging associate hours vs. partner hours, but our firm and our peers have staffing ratios that lead to almost 1:1 partner vs. non-partner time.
This lack of leverage sits on top of a lower reliance on blockbuster M&A work than most large firms, which is a strength in a recession. Capital market offerings and large-scale merger activity are the first things to fade in an economic downturn, and big corporate practices are already feeling the pinch. Our corporate groups have always focused on midmarket activity, which historically has not dropped off as steeply in uncertain times.
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