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Staff cuts because productivity increases or because legal demand drops off

From 2006 through 2008, voluntary and involuntary departures from Ford Motor’s legal department reduced its lawyer numbers from 200 to 120, a 40 percent slash. During that period, as recounted in Corp. Counsel, March 2010 at 72, the company’s sales collapsed – it lost $30 billion – and it laid off 33 percent of its worldwide employees. Hence, and somewhat roughly, the legal department shrank in proportion to the shrinkage in revenue.

Years ago, Alan Lackey, the general counsel of Shell Oil, told a conference I attended that he had laid off 25 percent of his legal staff and barely noticed a difference in productivity. His point was that work expands to fill the available time and that people don’t bother to analyze how they get work done or the relative value of the work they do. Lackey’s layoffs presumably were based on increased productivity, not decreased numbers of such activities as deals, contracts, construction, and lawsuits that need legal counsel.

My point distinguishes between layoffs that track a decline in legal work needed and layoffs made possible by management improvements. Painful in either situation, layoffs from increased productivity commend a general counsel more than do layoffs because business is off.

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