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The executive education program at the Wharton School of the University of Pennsylvania typically will have hosted three or four law firm leadership training sessions by the time May rolls around.
But firms have been slow to take advantage of Wharton Executive Education's leadership offerings. Executive Director Judy McHugh said that the program has held just one law firm session since its fiscal year began last summer, and there aren't any scheduled at present.
"We have seen a slowdown," McHugh said of the group law firm executive training sessions that often last between two and four days and can cost between $150,000 and $300,000. "I think the economic landscape has really affected the industry."
McHugh isn't the only one noticing that law firms seem reluctant to shell out for leadership training. Although hard data are scarce, leadership consultants and diversity advocates report that firms generally are spending less on those initiatives because of the economic downturn.
Of course, other law firm programs such as business development, marketing and mentorship have also seen their budgets slashed since firms went into cost-cutting mode last fall. But the funding cuts to leadership training and diversity initiatives are especially notable given that firms loudly touted their growing commitment to those programs in recent years.
SHORT TERM, LONG TERM
"The things people should be focusing on for the long term are giving way to cost cutting in the short term," said Larry Richard, a psychologist and consultant with Hildebrandt International who specializes in leadership training. "Some people see it as irresponsible to be investing in those long-term programs."
Leadership consultants said that firms are reducing leadership training and scaling back earlier training commitments. Diversity advocates said that firms are eliminating or downsizing some of the more costly elements of their programs, such as retreats and outside speakers.
Law firms largely remain quiet about the topic. Reed Smith -- which has received a lot of attention for its extensive Reed Smith University training program -- and New York-based Weil, Gotshal & Manges are among the firms that declined to comment about their spending for leadership and diversity training in 2009. Several other firms said that they're trying to be smart about their leadership and diversity spending.
Last month, the Minority Corporate Counsel Association (MCCA) polled 94 major U.S. law firms about their projected diversity spending in 2009, compared to 2008. MCCA Executive Director Veta Richardson said that 25 percent of the respondents planned to spend less this year, and that internal spending is the most vulnerable.
Firms often divide diversity spending into internal costs such as retreats and speakers, and external costs such as minority bar association dues and diversity conferences. In the MCCA survey, 28 percent of respondents planned to cut internal spending; 22 percent said they would reduce external spending.
"Many firms pointed out that they are making a concerted effort to streamline their internal expenses," Richardson said. "They aren't hiring as many outside speakers. They're turning more to their talent within to talk about diversity issues."
Richardson has experienced that trend first hand. The number of speaking engagements she has done at firms has skyrocketed in recent months, but she's a special case. "Frankly, I think it's because I'm a free speaker," she said.
Lauren Tapper, director of diversity at New York firm Kramer Levin Naftalis & Frankel, said that her firm is trying to be smart about how it spends, but isn't slashing the diversity budget. Instead, the firm has looked for costs savings in other areas.
"We are closely looking at our spending, but I expect to spend about the same as last year," Tapper said. "We're putting more focus on making sure we are attending the right types of events."
Houston firm Baker Botts won't significantly scale back its diversity program this year, but it will rethink some of the ways the diversity budget is spent, said diversity counsel Sylvia James.
"We are aware of the climate," said James, who also is the president of the Association of Law Firm Diversity Professionals. "We are going to be very strategic this year. We will be taking a close look at some of our sponsorships and maybe we'll sponsor at the silver or bronze level instead of platinum."
The effects of the soft economy on law firm diversity is a hot topic right now among lawyers active in diversity efforts. The MCCA's fall conference will spotlight ways that law firms can promote diversity at lower costs. The New York City Bar Association plans a diversity conference in late May.
"We'll be looking at diversity in a tough economic time," said Zakiyyah Salim-Williams, director of the New York association's diversity office. "We'll have law firms and employers there to come up with strategies for how to combat [declining funds for diversity]."
While diversity funding is a concern, Richardson said, the biggest threat to diversity at law firms is the recent wave of attorney layoffs. She has heard anecdotal evidence that minorities and women are being let go in disproportionate numbers, though no studies have been conducted yet to gauge the impact of layoffs on minority attorneys.
"When the economy recovers, organizations will have to focus on rebuilding. They will have to be more aggressive in their outreach and retention efforts," Richardson said.
The layoffs aren't just threatening minority attorneys, however. James said that diversity directors at a handful of major law firms have been let go in order to save money.
"Pretty early on, we started losing diversity directors," James said. "I'm concerned because we've made a lot of gains on diversity and we have a lot of momentum going. We don't want to lose that progress."
While the law firm diversity advocates has been keeping close tabs on the situation, the picture is less clear when it comes to law firm leadership training. Although leadership experts said that law firms have pulled back their efforts in recent months, they don't all agree about the extent of the retreat.
Richards, the Hildebrandt consultant, estimated that 60 percent of the law firms that were seriously committed to leadership development before the recession have cut back on their leadership spending. The other 40 percent have either maintained or stepped up their efforts, he said.
"We've seen a number of firms that had committed to leadership projects cancel or cut down those projects," Richards said. "There is a smaller group of people who have thought long and hard about this issue and see it as an important expenditure that will help them deal with this crisis."
Altman Weil consultant Thomas Clay said that some larger law firms appear to be cutting their leadership training costs, but not on an overwhelming scale. Small and midsize firms seem to be staying the course when it comes to leadership training, he said.
"I know of one firm that has set aside its leadership development plan, at least for the time being," Clay said. "The economy has prompted a lot of people to think about doing away with things like retreats our outside training. You don't want to look insensitive, especially if you've let attorneys go."
Smaller leadership budgets are forcing firms to rethink the types of training that they want to pursue. For example, Richards said, leadership programs geared toward young attorneys have "fallen off a cliff." However, Hildebrandt has seen a sharp uptick in individual executive leadership counseling, which is geared toward small groups of high-level attorneys who may be facing challenges such as a major slowdown in their practice area. That training is targeted and significantly cheaper than large-scale leadership programs, he said.
Law firms aren't interested in developing new leadership programs right now, Clay said. They're focused much more on training leaders at the practice area level -- a smart move, he said, considering that many of the challenges law firms faced center on particular practice areas such as real estate and corporate work.
Not all law firms are curtailing their leadership programs. Wilmer Cutler Pickering Hale and Dorr has maintained its training schedule, which typically involves one- or two-day sessions every couple of years as attorneys move up the promotion ladder.
"We are still extremely committed to it and believe it's even more important in this economy, with the changes we're seeing in the legal world," said WilmerHale co-managing partner William Perlstein. "Clients are looking for better management and efficiency right now."
WilmerHale has made some minor adjustments. Instead of sending fourth-year associates to a two-day leadership retreat this month, the firm will hold the program in its Washington office.
"That was conscious decision," Perlstein said. "It was a symbol that we're going to save money in areas that aren't critical."
Any firm considering paring its leadership training budgets significantly should proceed with caution, Clay warned.
"Is it short sighted? Without a doubt," he said. "I would look to save costs in other areas before I cut leadership programs."
