The Faculty Lounge

Size May Matter, But Not The Way You Think

A recent post on GC’s Eye View (“Thoughts on law and business from a General Counsel of a publicly traded company,” apparently in the UK) begins with the provocative observation that the largest accounting firms have 10-15 times the gross revenue of the largest law firms.  PriceWaterhouseCoopers, for example, reported about $29 billion in revenue for fiscal 2011, while Baker & McKenzie reported about $2.3 billion for 2010 (the blog quotes a slightly lower number for Baker’s gross, but you get the idea).

From this, our GC blogger seems to conclude that the Big 4 are much better and more successful firms than the AmLaw Global 100:  “I'm not suggesting revenue is everything,” he says, “but it's a perfectly reasonable measure of how much the rest of the world wants you around.”

Our GC goes on to explore some of the client-relations and marketing reasons the Big 4 have achieved the greater success that he postulates, leaving us interesting material to discuss another day.  Today, however, I want to devote a few words to the post’s bizarre beatification of bigness. 

With all respect, gross revenue is not “a perfectly reasonable measure of how much the rest of the world wants you around.”  It is a perfectly reasonable measure (subject to the vagaries of Generally Accepted Accounting Principles) of how much money you take in.  By itself, it says regrettably little about how effective, efficient, or successful you are.  General Motors, for example, grossed well over $100 billion per year in the 2000s, lost money hand over fist, and filed Chapter 11 in 2009, a year in which it still had a twelve-figure gross. 

So bigger is not necessarily better.  PWC grossed its $29 billion on the backs of nearly 170,000 employees, nearly 130,000 of whom provide client service, and nearly 8,700 of whom are “partners.”  (See here.)  Baker & McKenzie grossed $2.3 billion on the backs of about 10,000 employees, including about 700 equity partners (and about the same number of nonequity partners), with a total of 3,800 lawyers.  (See here.)  Which one is more profitable?  Which uses its resources more effectively or efficiently?  Would you rather be a partner at PWC or Baker?  From what I’ve told you, you have no idea.  And this leaves aside the fact that Big 4 accounting firms provide a much wider range of services than BigLaw firms, so laying them side by side is a little like comparing a kosher butcher with a supermarket.

But even apples to apples among BigLaw firms, bigger is sometimes just bigger.  Baker & McKenzie has over eight times as many lawyers as Wachtell Lipton, but is roughly one-fourth as profitable (measured by profits per equity partner), and one-fourth as productive (measured by revenue per lawyer).  In response to recent economic conditions, quite a few BigLaw firms reduced their lawyer headcount, had lower gross revenue, and yet increased profits per partner.  Were those firms less successful or well-managed (leaving aside what some might consider their shameful human sacrifices on the altar of profitability)?  In fact, recent studies suggest that large law-firm size (as measured by lawyer headcount) has no statistically significant correlation with profitability, controlling for other factors.

When all is said and done, two of the most intriguing and difficult questions in modern large law-firm economics are when size matters, and why.  Forget about economies of scale:  It’s widely assumed that available economies of scale have been achieved long before reaching the size of the NLJ 250 (the 250 biggest US-based firms by lawyer headcount).  At these sizes, the more relevant force is diseconomies of scale—the simple fact that the bigger and more dispersed your firm is, the more expensive and less efficient it is to manage.  Add the fact that almost all large American firms compensate their partners on a “marginal contribution” basis—that is, in amounts that are calculated to approximate the partner’s contribution to the firm’s profit.  Now sum it up:  Every partner gets out (more or less) the profit she creates; and every time you add a partner and the staff necessary to support her, you increase firm size and thus diseconomies of scale, resulting in a firm that has disproportionately higher costs of operation than before.  There thus is a cost to growth at the same time that each new partner takes out what she adds, so that new partners do not appear to create surplus profit that can benefit the other partners.  And there’s the paradox:  Why should any law firm grow when its economics appear to make it no greater, and in fact less, than the sum of its parts?  And yet many, many larger law firms have grown rapidly and virtually without interruption for the past 40 years up until the Great Recession.

In our recent article (SSRN), Dave McGowan and I suggest that a law partnership’s ability to function as an internal referral network can reciprocally increase the value of every partner’s human capital, and create positive economic returns to growth.  It takes a well-constructed and well-managed partnership to achieve this, and there are many ways in which this explanation of large-firm growth is imperfect.   But it appears to explain the past 40 years of rapid BigLaw growth better than any other theory proposed to date. 

Insert here the obligatory adolescent joke picking up on the post’s title (perhaps "it's not the meeting, it's the emotion").  Chuckle. 

--Bernie

Does the Economics of Law Practice Matter to Law Schools?

I return to the mysteries of law-firm economics after a hiatus to attend to three speaking engagements and complete the academic term (in other words, as an excuse to interrupt grading my Contracts exams).  A belated shout-out to my colleagues Anne Klinefelter and Andrew Chin, and to the editorial board and staff of the North Carolina Law Review, for an exceptionally well conceived and executed Symposium on Social Media (which was one of those speaking engagements)--watch for the Symposium issue of the NC L. Rev. coming this spring for some refreshingly novel and interesting takes on what is elsewhere becoming an overworked topic.  (You won't see a paper from me in that issue.  My topic at the conference, legal ethics in the social media environment, has already been admirably well explored in print and online by others.)

I want to stress how much these issues of practice economics actually matter to legal educators.  Virtually all of our students attend law school with the general aim of practicing law.  A great many end up in private law firms, large or small, or (usually a bit later in their careers) in corporate law departments.  The demand for lawyers in such positions (that is, for individual and corporate legal services) fundamentally affects our students' prospects for gainful employment. 

A bit more specifically, the overall demand for such services affects the overall availability of legal employment, and the distribution of that demand across different categories of work affects the availability of different kinds of legal jobs.  Thus when, as now, there is a significant contraction in at least one portion of the private sector--and here I'm referring to the large number of BigLaw layoffs in 2009 and 2010, and the contemporaneous and continuing substantial reduction in the rates of new hiring at larger firms--recent graduates with strong conventional qualifications who previously filled those BigLaw positions are now competing, and vigorously, for positions in smaller firms and government for which there was previously less such competition.

Put somewhat differently, there are fewer law jobs for recent graduates, and appreciably fewer such jobs at the higher end of the pay scale.  It's hardly rocket science to suggest that this affects the economic value of a law degree:  From behind the proverbial veil of ignorance, a student's chances of securing a job that supports the cost of three years' tuition, living expenses and forgone income and work experience are substantially less today than they were five years ago. 

This is by no means the whole story, of course.  Some prospective law students have far brighter economic prospects ex ante than others.  And economics is certainly not the only reason why people consider law school (though we have empirical data confirming the common-sense apprehension that a substantial number do weigh it as a substantial factor in their decision). 

But if the economic value of a law degree is falling overall (and I suggest to you that it is irresponsible to imagine otherwise), in a rational market you can expect fewer people to pay the rising cost to obtain it.  It is far too early to say "I told you so," but there have been double-digit decreases in law-school applications across the board this year over last (though we must bear in mind that last year saw record increases in law-school applications and LSAT administrations as college seniors confronted a horrific job market with an effort to settle into a three-year holding pattern). 

This is having some obvious effects on the legal academy.  The ability of law schools to continue to charge high tuitions--and continue to pay their faculties salaries far higher than those typical in the arts and sciences--depends on making the end product (the law degree) worth it.  Since many universities share in their law schools' economic surpluses, the universities care too.  Legal employers have been complaining  about the utility of the education with which their entry-level employees arrive for well over a generation, but for the first time in memory it would be fair to say that many law schools are listening, and questioning their mission.

One thing I am NOT suggesting is that legal employers know exactly what they need, and how we could be supplying it.  I'll try to explore in future posts why things are nowhere near this simple.  But that leaves everything up for grabs:  What questions should we be asking, and how should we be seeking the answers?  This is an obviously difficult inquiry, and I will try to suggest in future posts that it's even harder than it seems.  But make no mistake:  we are near the front end of a period that I believe will prove to be the most fraught with rapid change that the American legal profession has ever seen.

What a great time to be a part of things!

--Bernie

Placement and Accreditation

This is what we know about placement and the ABA standards.  On Sunday, November 6, 2011, Professor Ralph Brill (Chicago-Kent) sent out on LawProf a link to a draft proposal to amend the Interpretations to ABA Standard 301 (quality of program) to add minimum placement benchmarks.  As I reported last week, by the afternoon of November 8, 2011, the draft had been pulled from the ABA server.  As Dan Filler reported, Scott Norberg, the Deputy Consultant on Legal Education explained that

The posting was of a subcommittee draft for an earlier meeting, not December, and the matter was not acted upon by the Council and is now off the table. Once we realized it was mistakenly still on the website, we pulled it off because it could be misleading.

But Norberg did not stop there.  Instead he also said:

The Council is still considering the use of placement data in accreditation reviews. We plan to be more explicit in reviewing placement data for how it may reflect on any aspect of a law school's program, from quality of the academic program to the adequacy of career services. We do not at this stage propose to change any Standards or to establish a benchmark placement rate for schools as a compliance matter. (Emphasis added.)

The old draft may be "off the table," but it seems that the ABA is considering requring something more than better, and more available, reporting of placement data. It may be misleading as to the ABA's current thinking, but it does suggest how the ABA might connect placement data to the Standards.  I have put up a copy of pertinent portions of the September 22, 2011 subcommittee draft. Note that:

• the original file on the ABA site contained suggested changes to other aspects of the Standards;
• I have extracted the portions that related to placement, edited the title, and saved them as a separate file; and
• I leave it to the ABA and its committees to make the other portions available if, as, and when appropriate.

The subcommittee suggested amending Interpretation 301-3 to add placement rates to the list of items to be considered in deciding whether a law school has met Standard 301(a), which provides:

A law school shall maintain an educational program that prepares its students for admission to the bar, and effective and responsible participation in the legal profession. (Emphasis added.)

The subcommittee also suggested adding a new Interpretation 301-7 that would have imposed minimum placement rates.   Here's the executive summary:

• Imputed unemployment rates: Both graduates reported as "unemployed, seeking," and those whose job status is "unknown," are treated as unemployed.
• Relative benchmarks.  The benchmarks for imputed unemployment rates would not be absolute, but rather would be relative to one of two alternatives:
  • no more than one standard deviation below the average for graduates of all ABA law schools (Approach A); or
  • no more than 15 percentage points below the average for all ABA law schools in the two states in which most of a school's graduates took the Bar (Approach B); and
• Alternative compliance method. A law school that does not meet the benchmark can still show that
  • employers find its graduates "adequately prepared for entry-level employment " and
  • the school devotes "satisfactory ongoing efforts" to help its graduates find jobs.

Suggested Interpretation 301-7 raises the question of the purpose of legal education.  Unsurprisingly, it treats law schools as trade schools. After all, the ABA is a trade organization.  Putting greater emphasis on preparing students to be practicing lawyers is perhaps the dominant theme of the changes in the Standards that are being considered by the Standards Review Committee. Broader missions are laudable, but most law students are mortgaging their futures so that they can get jobs as lawyers. It does not matter that the traditional approach to legal education has left practice skills to the profession.  For at least a generation, the profession has been growing increasingly concerned about law-school graduates not being "practice ready."

I doubt that suggested Interpretation 301-7 would satisfy the scam-bloggers, the Senators, and others who sympathize with the emerging "Occupy Law Schools" movement. Among other things, the ABA standards count a graduate as employed, regardless of whether the employment is full-time or part-time, or whether the job requires a JD or an admission to the Bar (update:  or a JD is preferred).  Most graduates with substantial law-school debt will not be pleased to finding themselves tending a bar, rather than practicing before the Bar.

I will discuss the methodology of suggested Interpretation 301-7, and look at some data, in later posts.

The wisdom of regulating lawyers (vox populi edition)

The New York Times recently published an Op-Ed piece from a fellow at the Brookings Institution extolling the various social miracles that would transpire if we eliminated legal education and bar licensing as a condition to the practice of law.  You can see it here (“Are Law Schools and Bar Exams Necessary?”).  Three Letters to the Editor commenting on the Op-Ed are reproduced here.  Each takes a distinct point of view that is as polemic as the original Op-Ed.  Together they comprise a very good and admirably succinct background to a debate on whether law licensure is necessary, what its costs and benefits are, and how well our existing system takes those costs and benefits into account and appropriately balances any tradeoffs.  Those among us who teach Professional Responsibility may find this a valuable resource to ground class discussion on the subject.

While in my own view there is a great deal more, and a great deal less, to each contributor's position than their statements suggest, I offer only one comment on these materials here.  Conspicuously missing from any of the position pieces (except obliquely in the first Letter to the Editor) is any assessment of the significance of what is in my view the single most salient factor influencing this debate--the fact that it is extremely difficult for nonexperts to determine with any accuracy the quality, efficiency or even need for most of the professional services lawyers provide.  Put slightly differently, the eventual result of and the buyer's satisfaction with professional services are exceptionally noisy quality signals.  It is little short of astonishing that the "economist" from Brookings who gave us the original Op-Ed should have assumed this issue away, and instead assumed that crowd-sourced lay assessments would adequately inform the market and police for quality and competence. 

Law is hardly unique in this regard, of course.   Medicine is another obvious example of professional services whose quality and need are very difficult for lay buyers to judge in most instances, both before and after the services are provided.  And this phenomenon is a matter of degree for any service involving skill and expertise--think of the extent to which most of us are forced to rely on the judgment of our auto mechanics, plumbers and electricians.

Which is not to suggest that our current requirements for law licensure, or our policing of licensees, are currently optimal in any particular respect.  But the world rarely makes any issue of importance as simple as we all might wish.

Bernie

Adventures in Staffing II: The End of the Partnership Track?

In my prior post on this topic (here), I suggested that rapid and accelerating changes in the way that legal process work (the gathering and organization of documents and information) is staffed and priced has significantly influenced the extent of the associate layoffs and the reduction in entry-level hiring among larger law firms in the last few years.  The result is that most large law firms have far fewer partnership-track associates today than they did, say, five years ago, and that seems unlikely to change substantially anytime soon, even as the economy recovers.

But another factor is also changing the structure of BigLaw:  Decreasing reliance on “up or out” promotion.  By way of background, from the early 20^thcentury until roughly the 1970s, larger law firms only rarely hired laterally at any level, and grew almost entirely from within.  They did so by hiring an annual class of talented associates right out of school (or brief government service such as judicial clerkships), trained and tested them for a relatively fixed period, and at the end of that period promoted a few to equity partner and let go virtually all others still remaining. This retention model, often referred to as the Cravath System for the firm credited with conceiving it in the 1920s, has long been emulated at virtually every larger law firm in the United States, and still at least in theory comprises the paradigm law-firm retention strategy today.  (The hopelessly insomniac among you can immerse yourselves in the details of this story in my article with Dave McGowan here.)

It has been widely observed—including by any number of BigLaw partners over the years—that many of those who did not make partner were skilled and able, valued by the partners who passed them over, and valuable to the firms that let them go.  Why, then, did larger law firms almost universally adopt a promotion policy that required them to jettison competent and valued workers in whom they had invested substantial time and training, at turnover costs that grew higher and higher as partner-associate leverage increased?  The most plausible theory suggesting some lurking rationality was advanced by Ron Gilson and Bob Mnookin in a 1988 Stanford Law Review article that (oversimplifying here for space and coherence) analyzed “up or out” retention as a means of managing strategic misuse of “firm-specific capital”—that is, investment in skills and knowledge that is appreciably more valuable at the firm where it was created than it would be anywhere else.  (This takes a fair amount of explaining, but the theory is not only cogent, it is consistent with the available empirical data.  Hats off to the authors.)  Examples would be a senior associate’s relationships with client personnel or knowledge of clients’ business operations, information infrastructure, organization and business patterns and preferences.

Generally speaking, a firm’s ability to develop firm-specific capital is associated with the stable, broad-based, long-term client relationships it is able to maintain.  Such relationships between larger law firms and corporate clients were extremely common through the 1960s, and then began to erode fairly rapidly as those clients began to spread their work around to multiple law firms on a project-by-project basis (“hire a lawyer, not a law firm” became the general counsel’s watchword), and to move more of it in-house. 

As the amount of firm-specific capital generated by most firms declined, so did “up or out” retention.  The late 1980s proved the high-water mark for partnership-track associates as a percentage of all lawyer-employees at large firms. From this point, associates continued to increase in number and remained the largest single category of licensed employees, but comprised a falling percentage of firms’ lawyer-employees overall, with the principal percentage gains in the “other” (non-partner, non-associate) ranks.  Partnership-track associates comprised 60% of large-firm lawyers in 1987; 55% in 2001; and 48% in 2010.  The extent of lateral hiring at all levels increased from the 1970s on as well.

In other words, as one (at least theoretical) incentive for “up or out” promotion declined, so did “up or out” promotion.  Two- (or multiple-) tier partnerships proliferated, and the number of non-partner (or non-equity “partner”), non-associate indefinite-term lawyer-employees steadily rose.

What does all this mean for the future of BigLaw?  The two trends discussed above portend a gradual transformation, already well underway, from large numbers of “up or out” partnership-track associates and accompanying high levels of turnover to much more modest numbers of entry-level hires and a partnership “track” of indeterminate length.  Larger numbers of nonpartners who prove themselves sufficiently skilled and hardworking will remain indefinitely (or move laterally to similar indefinite-term positions at other firms), and equity partnership will be reserved for those who actually attract and control substantial paying law business.  It is possible that the partnership “track” as such will vanish altogether, to be replaced by more generalized paths of advancement in responsibility and compensation based on accomplishment, skill, and success in business generation.  Whether or not we see the end of the partnership track at many firms, however, I predict that this trend combined with the evolving staffing model for legal process work discussed in my last post will result in distinctly smaller numbers of highly compensated entry-level hires in BigLaw for many years to come.

To be clear, I don’t view this evolution as “good” or “bad”; it will be good for some and bad for others.  But like it or not, it’s what’s happening in our profession.  I will elaborate on the likely “winners” and “losers," and on how these forces relate to the current controversy between BigLaw and the Academy over training—who should be training whom for what—in subsequent posts.  Stay tuned.

Bernie

The Problem with Reporting Starting Salaries

In a recent post, The Depth and Breadth of  Misleading Employment Numbers by Law Schools (And How to Solve It), Brian Tamanaha (Washington, St. Louis) focused on what statisticians would call the selection bias in salary reporting. For most law schools, graduates who report employment status do not report their starting salaries. In general, students with high starting salaries are more likely to report salaries that students with low starting salaries. As a result, the reported salary ranges are higher than actual salary ranges. 

Prof. Tamanaha also posted a chart that showed that lower-tier law schools tend to have a smaller proportion of reporting graduates that supply salary information. That said, reporting rates vary widely, and the range of variation (variance) increases as law-school rank decreases. By the nature of proportion sampling, the variance is "heterogeneous"--it is not constant across the range of the other variable. As a numbers guy, I'd rather see a chart of proportion reporting by LSAT score of the law school's entering cohort that just graduated, with a logistic fit line.

Prof. Tamanaha suggest that lower-tier schools don't try to get better information, because they don't really want to know what salaries their graduates are actually getting. I don't that that is true.  At least at my own school (South Texas College of Law), the Career Resources office aggressively follows up with graduates who do not report employment status, or who don't give salaries. They even contact employers to try to get salary information.

But Prof. Tamanaha if correct in noting the disconnect. At my own school, South Texas, about 26% of the 2009 and 2010 graduates who reported employment status also reported salary. It would be helpful if schools also published the such proportions. It might also be useful to report the distribution of salary-reporting graduates by employment type.

But why not report the ranges of salaries by employment type? If, as we suspect, the problem is under-reporting by graduates in lower-salary employment types, the number reporting (the "sample") will be much lower-- the "N" would be low--so the reported salaries would be less reliable.

What to do about that? Prof. Tamanaha noted an entry on the Forbes website, Law School Graduates Do Not Make $160,000, that discusses a report that Forbes commissioned (bought) from Payscale on the salaries of graduates of 98 law schools that were in Payscale's database.  The Forbes article includes the median salaries for the 98 schools.

The NALP conducts an annual survey of law firms asking for information about associate base salaries. The annual NALP Associate Salary Surveys are available for purchase from NALP, but most law-school Career Resources office probably have a copy.

According to the 2011 Associate Survey (press release), the national median starting salaries by firm size, and the number of reporting offices, are as follows:

NALP 2011 Associate Salary Survey Median Starting Salaries by Firm Size
Firm Size	Salary ($)	N	%
2-25	073,000	29	07%
26-50	086,000	25	06%
51-100	091,000	48	11%
101-250	110,000	64	15%
251-500	125,000	85	19%
501-700	120,000	119	27%
701 or more	160,000	70	16%
All Firms	115,000	440

 Even the NALP survey show a selection bias, with larger offices making up a disproportionate part of the survey;  62% of the reporting offices are offices with 251 or more lawyers. 

In addition to the national data, the NALP surveys break out salaries by firm size for metropolitan areas with populations in three ranges:  (i) 1.5 million or smaller; (ii) from 1.5 to 5.0;  and above 5.0 million.  That data shows the number of reporting offices for each category.

The NALP survey also gives starting salaries for some 28 cities.  But, the survey only gives overall associate starting salaries for those cities, together with the number of reporting offices, which often are small--for example Baltimore, 2010, 5 offices.

Robert Half Legal also has a free 2012 Legal and Professional Salary Guide. with ranges for starting salaries by size of firm:

Robert Half Legal Starting Salary Range by Firm Size
Firm Size	Salary Range ($)
below 10	47,000-64,000
10-35	56,750-80,250
35-75	66,750-97,750
75-plus	82,500-134,250

The Salary Guide then includes index scores for a number of cities, with 100 being 100% of the national salaries, to let you calculate salary ranges for those cities.

Robert Half Legal Selected City Index Numbers>
City	Index
Chicago	122.7
Houston	104.0
Los Angeles	124.5
New York	141.0

Thus, for Houston (multiplier of 1.04) and New York (multiplier of 1.41), the putative salary ranges for large (75+) law firms would be $85,800 to $139,620 (Houston) and $116,325 to $189, 294 (New York).

What about the ABA? The ABA has decided to start direct electronic reporting of comprehensive placement data for each responding graduate, beginning with the Class of 2011 9-month data in February 2012.  If that information includes both starting salaries and location, the ABA should be able to compile overall salary information by employment type and firm s size, both nationally and by region or by metropolitan area.  Aggregating salary reported for graduates of all law schools will not eliminate selection bias, but it should raise the number reporting salaries by employment type or by size of firm.

Adventures in Staffing: Are Junior Associates an Endangered Species?

The Wall St. Journal and WSJ Law Blog reported Monday that a survey conducted for the Journal by the Association of Corporate Counsel found that over 20% of the in-house law departments surveyed (over 350 of them) flat-out refused to pay for first- and second-year associates at large law firms.  This continues a trend that began several years ago, and accelerated considerably after the abrupt economic downturn in late 2008 as more in-house buyers of BigLaw services responded to sudden budgetary pressures by finally taking a hard look at what they had been paying for.

Above the Law responded to this data uncharacteristically by missing the point.  Elie Mystal, ordinarily a very acute observer of BigLaw, dismissed the in-house refuseniks as “stupid.”  He reasoned that clients’ refusal to pay overpriced junior associates for the “work that a conscientious high school student could perform” that is often their lot would simply force this work up the line to even more expensive midlevel associates.  He concluded:  “It’s entirely possible that 20% of clients don’t understand that having a midlevel do work more suitable for a trained monkey is actually worse than having a first-year do it.”

But of course clients do understand that, and so do the law firms they hire.  Clients who are unwilling to pay first-year associates’ rates for borderline clerical “legal process” work (loosely defined as the gathering, review and organization of documents and information) would certainly refuse to pay significantly higher rates for a fifth-year associate to provide the same services, and large law firms are smart enough not even to offer that as an alternative.  As discussed in detail in an article Prof. David McGowan and I posted in draft on SSRN a year and a half ago, and published in the Columbia Business Law Review last spring (2011 Colum. Bus. L. Rev. 1, available here), the result of clients’ heightening scrutiny of the staffing and pricing of legal process work has resulted in increasing volumes of that work being outsourced to much less expensive third-party services both abroad and domestically, and “downsourced” (a term McGowan and I believe we coined) within BigLaw to non-partnership-track “staff,” “discovery,” and contract attorneys paid much lower salaries or wages and billed out at much lower rates.  And since by 2007 legal process work had become a significant part of many junior associates’ workloads, the rapid reduction of the amount of that work available to associates billing at full freight has been a major factor in BigLaw’s unprecedented reductions in force and falling hiring rates from late 2008 through 2010.

The data are still coming in, but entering associate classes at AmLaw 200/NLJ 250 law firms this fall look like they will typically be 30%-50% smaller than they were in 2005-2007.  While a cyclical (recession-based) overall reduction in demand for high-end legal services explains part of this transformation, I believe that a significant and still growing part of the change is structural, and results from the change in the staffing and pricing of legal process work reflected in the trends discussed above.  What this means is that rates of hiring at larger law firms for highly compensated partnership-track associates are likely to remain much lower than they were in, say, 2007 for quite a long time.  While this is producing some wrenching short-term dislocations in the entry-level job market that are both tragic and widespread, it is at least as important to consider the possible longer-term effects not only on clients and law firms, but on prospective and current law students, law graduates, and law schools.

To keep this and future posts to a manageable length, I will consider these issues in a series of posts in the coming week or two, and dare to share some predictions.  Stay tuned.

Bernie

Reported Salaries by Law School

The September 2011 issue of the National Jurist has an interesting article, Best Law Schools for Standard of Living (pp. 28-34). The deflation of New York City Big Law salaries after taxes and cost of living was impressive.  But what caught my eye was the variation in the median reported private salaries for the Class of 2010--from a low of $42,500 to a high of $160,000.

The chart below shows the distribution of law-school median salaries by $10,000 range, from the 40s to the 160s:

 

Does More Practice Experience Make Better Lawyers? Does It Make Better Law Profs?

Commenting on Roger's recent post on a no-frills law school, Jason Mazzone offered an interesting and provocative claim:

In thinking about what practitioners can and cannot add to legal education, we should also keep in mind the diminishing returns of practical experience. Beyond a quickly-attained point, more experience in practice doesn't correlate with stronger legal skills to impart to students. The reality is that legal practice isn't that hard (and in any event much of what lawyers do is repetitive). There are things to be learned to become a skilled lawyer but there is no great mystery about any of it. Once one has taken one deposition, the second isn't difficult. Law is thus radically different from medicine (the field that is often invoked by those who think that only experienced lawyers should be teaching). If I'm having a surgical procedure there really are good reasons for me to pick the surgeon who has done the procedure 100 times over the surgeon who has done it five times. But a lawyer who has written five wills is perfectly adequate to prepare mine as his sixth. As with anything, more time doing something allows one to capture some additional benefits: better judgment, greater speed, a network of colleagues. But those aren't things that can be taught to law students anyway. The "highly talented experienced practitioners" that the N-F Law School seeks to recruit could thus easily be lawyers with two or three years experience. 

I think that on one level, Jason has a point: law students are learning Stage 1 lawyering skills and a practitioner with a few years of experience can probably impart many of those skills.  But a couple of his comments are worth a little more consideration.

1.  Once one has taken one depostion, the second isn't difficult. 

I suppose that I'm not in a position to judge this.  I was primarily a criminal lawyer and my civil experience included defending one deposition, and second-chairing the taking of another.  But I second-chaired the deposition after very extensive trial experience and watching this experienced practitioner suggested to me that there is a wide degree of quality difference between a poor deposition, a good deposition, and an excellent deposition.  For example, people just learning deposition skills are happy just to get the questions out.   But the taking of depositions is not a mechanical task; different lawyers generate different answers - both to the same questions and the additional (or nuanced) questions that the better lawyer knew to ask.  

2.  If I'm having a surgical procedure there really are good reasons for me to pick the surgeon who has done the procedure 100 times over the surgeon who has done it five times. But a lawyer who has written five wills is perfectly adequate to prepare mine as his sixth. As with anything, more time doing something allows one to capture some additional benefits: better judgment, greater speed, a network of colleagues.

From the point of view of criminal lawyering,  extensive practice absolutely improves quality.  For example, Philadelphia courts use preliminary hearings to establish prima facie cases.  The first job for a new defense attorney is to conduct cross in these hearnings - and it takes  scores of these hearings to substantially improve a lawyer's technical skill set.  But the best preliminary hearings are conducted by lawyers with a lot of trial experience who understand the relationship between initial testimony, case theories, jury instructions, and closing arguments.   And experience is essential for developing strategic skills - both at trial itself and in navigating a case toward trial.  More experienced lawyers get better settlements and better verdicts - not every time, just as not every surgery requires an exprienced surgeon, but often enough that a skittish consumer (with money) would prefer an experienced attorney.  That doesn't mean that all experience lawyers become excellent; it's just that few lawyers become excellent without experience.  

Perhaps transactions, or as Jason suggests, estate law,  is different.  Maybe a person who has written five wills is as good as one who has written a thousand.  But I doubt it.   As Jason notes, judgment is a product of experience - and one that I think most clients would do well to pay for.  But there's more.  For example,  there is that matter of knowing the law.  

It turns out that most lawyers learn law - and particularly, legal pitfalls - through experience.  Wills and divorces slam right into arcane areas of  tax law, evidence law, and civil procedure - but this may not be evident to the junior practitioner.  It's only with the hundredth divorce settlement that some lawyers discover a particuarly vexing part of the federal income tax code, for example.  As anyone who has practiced in the area of secured transactions probably realizes, BARBRI coverage  - might we call that the equivalent of five cases of experience? - does not prepare a business lawyer for a life of practice.   It seems to me that this difference in legal knowledge is relevant to whether a person is an excellent professor.  

And what about the human component of lawyering - understanding and managing clients, colleagues and adversaries?  This is much more than mere judgment.  Experienced lawyers have concrete people skills - borne of multiple failures and successes.  And precisely because this knowledge is learned almost entirely inductively - through repeated experiences - it is extremely difficult to pack into a two year practice arc.

I'm curious whether other readers think that there are dramatic skill differences between lawyers with a couple of years of practice and those with substantially more.  If so, are those differences best understood as being about judgment, speed and a network of colleagues - or something more? Are law students far enough along to benefit from distinctions between the more and less experienced lawyer?  And finally, do adjunct faculty fulfill the needs of students in this respect -or is there added value in having highly experienced lawyers on the full-time faculty?

Google Scholar Is 3rd Most Popular Legal Database

In an admittedly unscientific ABA Journal poll, readers voted on the question: what do you use for legal research?  Westlaw was 1st, Lexis 2nd, Other 3rd (presumably including a variety of sources), Google Scholar 4th, and Bloomberg Law 5th.  (I'd never even heard of Bloomberg Law until a day ago.)

I'm not shocked by the power of Google Scholar - however poorly it may serve the purposes of legal research.  Not only does information want to be free; people want it to be free as well!

H/T Law Librarian Blog

ABA, NALP and Transparency on Jobs

The ABA Section on Legal Education and Admission to the Bar has been taking  shots across the bow from scam bloggers, the New York Times and two U.S. Senators about a lack of transparency in law-school reporting of information about the jobs graduates were getting.  While it may have seemed that the Section Council could not even buy a vowel, the Questionnaire Committee has been working behind the scenes (see May 28, 2011, Report on Reporting of Law School Placement Data).

In a Memorandum, Reporting Placement Data on Annual Questionnaire, dated July 27, 2011, the ABA announced changes to this Fall's law-school Annual Questionnaire. An August 6, 2011 press release, ABA Section of Legal Education to Collect Additional Lawyer Job Placement Data, summarizes the changes to this Fall's Annual Questionnaire:

Beginning next month, the annual law school questionnaire will require schools to report more specific information than ever before, including employment status, types and locations.  The questionnaire will ask these questions, among others:

• Is the graduate employed or unemployed?
• Is the graduate’s employment long-term or short-term?
• Is the job funded by the law school or university?
• Does the graduate work for a law firm, a business or in government?

The Questionnaire will even ask for a break-down of law-firm employment by firm size.

That's the good news.  The bad news is that law-firm employment includes

[a]ny job in a law firm, including associate, lawclerk, law firm librarian, paralegal, and clerical position .... (Memorandum, Reporting Placement Data on Annual Questionnaire)

That's not exactly the level of detail that Law School Transparency has been asking for.  After borrowing a substantial chunk of change, students and grads might be wondering "Did I Shave My Legs for This (a job as a paralegal or clerk)?

But there's more!

Beginning in mid-February, 2012, the ABA will ask for 9-month data on 2011 graduates, and will be asking for additional information on each graduate. But don't look for school-level data on salaries:

As to salary data, rather than provide school-specific salary data, the Official Guide will provide the 25th , median, and 75th percentile salaries of jobs obtained in the various types in each state and region. The salary information will be based on jobs obtained by graduates from all law schools and will not be limited to those graduates from any particular school. This format will avoid the over-reporting of salary information that tends to occur for any particular school because not all of a school’s graduates report salary information to the school. In particular, since the graduates who report salary information tend to be those with higher salaries, a school’s 25th , median, and 75th salary percentiles tend to be over stated. Rather than provide school-specific data, the Official Guide will provide salary information for each employment type for graduates of all law schools who obtain a position in each state. A prospective student can consult the state data for those states at which the school sends it greatest number of graduates to determine salary levels that might be expected after graduation.

Memorandum, Reporting Placement Data on annual Questionnaire (emphasis added). 

Whether those willing to piece things together can construct a  possible salary profile of a law school depends on what gets into the Official Guide.  Looking at the chart attached to the Memorandum, law schools will report the distribution of graduates by firm-size separately from the distribution of graduates by state.  That means that you will not know the distribution  by employment type/firm size for each state, by law school.

Still, it's a step in the right direction.  And more is better, even if even more would be even better.

And as for the widely reported rift with NALP, according to the August 6 press release, "[t]he section and NALP have agreed to collaborate going forward."

Parental Leave?

This past February, Keith Hirokawa at Albany organized the excellent 2011 Northeast Regional Scholarship and Teaching Development Workshop. After dinner on the first night, there was a discussion/panel entitled "Women as Teachers and Scholars." One of the topics of discussion about access to information didn't hit home for me until recently. The heart of the discussion centered around the fact that many women were not sure what the maternity/paternity leave policies were at their school. Additionally, there was a lack of information about what other schools did. (FWIW -- besides the FMLA, we get a course release (3 units) to be taken within a year after the child's birth here at Buffalo).

I was surprised that people didn't know this because we are often well versed in other leave policies. For example, I would be shocked if a room full of junior scholars couldn't tell you their school policies for research leave, junior (or productive scholar) course relief, or sabbaticals. Yet, the lack of information and understanding about family leave policies seems widespread. My general sense from talking to friends (and some are teaching in departments other than law) is that each person's leave is individually negotiated based on the timing of the leave and that person's perceived worth to the institution.

The reasons for this lack of information is probably unsurprising (but perhaps no less disheartening). We tend to be afriad to ask. When we ask about research leaves available to junior faculty during an interview, we send a signal that we are serious scholars looking for time to write. When we ask about maternity leave, we worry that we are sending out the opposite signal. During my interviews, I think I only asked one or two schools about maternity leave -- and only when I felt very comfortable with the person I was talking to or they brought it up. We know that this is a touchy topic legally. Obviously, the prospective employer can't ask you if you are planning to have kids.(but that shouldn't stop them from just generally outlining all leave policies)

The lack of questioning about such policies may also contribute to the ad hoc nature of parental leave. If there is not a large junior faculty or many people questioning such policies, there may not be the motivation to put things in writing. While individuals here and there may benefit from an unwritten policy giving them room to negotiate, I think there is a good reason to have clear parental leave policies. Additonally, making those leaves public will help people at other schools improve their policies. Arguably, this is why many big law firms have such good maternity leave policies -- because everyone knows what the competition is doing.

FCPA

My friend Mike Koehler has a "new and improved" website for his blog devoted to the Foreign Corrupt Practices Act.  Here's the link.

Beyond the Death of Big Law

In his article, The Death of Big Law (2010 Wis. L. Rev.) (SSRN), Larry Ribstein (Illinois) predicted the collapse of "Big Law" and the reorganization of the market for legal services.  At next Friday's (07/22/2011) meeting of the Los Angeles Lawyers chapter of The Federalist Society, Ribstein will lead a panel on Grading the Bar:  A Debate on Compulsory Licensing for Lawyers.  In his blog-post,  Next Friday:  Debating Lawyer Licensing in L.A., on Truth on the Market, Ribstein summarizes his view:

The current system of compulsory licensing for the practice of law is doomed.  The question is not whether it will end, but when and how.

If state licensing, and state licensing (Bar) exams, go the way of the dodo.  What does that do to law schools?  In most states, only graduates of ABA-approved law schools are qualified to take the Bar exam.  With no Bar exam, what happens to the demand for ABA-approved legal education, or to the demand for ABA accreditation? 

At that point, formal legal education would be, at best, a matter of branding, of distinguishing a lawyer from mere providers of "servicios notarios."  So, too, would accreditation become a way of branding, with the ABA only one of several law-school accreditors. But would the ABA retain its power if it no longer controlled the gates to the profession?

Tamanaha, Bainbridge On Too Many Lawyers

Thoughts from Brian Tamanaha and Steve Bainbridge on what “The Lawyer Surplus” means for law schools

Update: And Ribstein

 

 

Follow @KimKrawiec

Where Are All These Bar Candidates Coming From?

The New York Times has an article, The Lawyer Surplus, State by State,about a recent post on the Economic Modeling Specialists, Inc. (emsi) blog, Data Spotlight: New Lawyers Glutting the Market, that shows that, for calendar year 2009, the number of persons who passed the Bar in each State, as well as nationwide, far outstripped the Bureau of Labor Statistics estimates of annual openings for lawyers for 2010 through 2015. Nationwide the number of passers is more than twice the number of openings (26,329 openings vs. 53,508 passers).

Two things struck me about the emsi data. First, it looked at Bar passers, as opposed to Bar takers. According to the 2009 Bar statistics from the National Conference of Bar Examiners (which emsi said they used), excluding Bar candidates in U.S. possessions, a total of 53,508 persons passed a Bar in some state, but 77,377 persons took a Bar in some jurisdiction, or almost three times the number of openings.

Second, the emsi data also shows 44,159 "completers"(persons getting a J.D.?) for 2009. Assuming that all "completers" took a Bar examination in 2009, where did the other 33,218 takers come from? According to the NCBE's 2009 statistics:

• 19, 349 were repeaters (see First-Time Exam Takers and Repeaters in 2009)
• 5,723 did not study law in the U.S (see "Persons Taking and Passing the 2009 Bar Examination by Source of Legal Education") and
• 58 "read" the law (same).

That leaves 8,088 takers not accounted for. Some might have been prior-year completers, but some of the 2009 completers did not take a 2009 exam. Call that a wash. My own guess is that these are lawyers who already admitted to the Bar in some US jurisdiction, but who had not practiced long enough to be admitted on motion (without taking a Bar exam)--in most states, at least five years. Comprehensive Guide to Bar Admission Requirements, Chart 10.

Note, even comparing openings to completers, the numbers are not good. Nationally, there were openings for only 59% of the completers. Sounds like a lot of solo practitioners and a lot of others looking for a more steady paycheck, even if not in a law "opening". Only ten states had more openings than completers: Alaska (which has no law school); Arizona; Colorado; Idaho; Nevada; New Jersey; New Mexico; North Carolina; and Utah. North Carolina had the most unfilled openings.

Hat tip to Paul Caron.

Update: A couple of commenters have suggested that contiguous states often schedule Bar exams so that candidates can take the Bar in each state in the same "administration," particularly the Summer exams.

New Law Dean at Western Ontario

Our sister school in Canada, the University of Western Ontario School of Law, has just announced the appointment of its new dean, W. Iain Scott.  Press release here.  Our best wishes to Dean Scott and to the school.  And all the best to outgoing dean Ian Holloway who has ably served the school in this capacity for two consecutive five year terms. 

Law Firm Hiring: There's an App for That!

The Benesch law firm has just released an app for iPhones and iPads to notify recent law grads and lawyers potentially interested in lateraling to the firm of upcoming job opportunities.  It will be interesting to see if this mode of recruitment takes off.  And, if it does, will recent grads be downloading multiple apps from multiple firms or will some entrepreneurial aggregator come along and offer a service of aggregating all available law firm jobs and making them available in an app format that notifies potentially interested applicants of job availability?  Is this the future of legal recruiting?

More Bad News for Law Grads

Soon after I began working for a large Los Angeles law firm in 1989, I was assigned to work on discovery in the Exxon Valdez oil spill case, which occupied me and dozens of other attorneys for a couple of years.  According to an article in the New York Times today, technology may soon replace attorneys in the arena of document review.   Although many attorneys felt they were making poor use of their law degrees when working for months on end on document production, discovery in large cases was certainly good for job seekers.  E-discovery software may well be another trend about which law schools need to worry.

For Everyone Who Didn't Go to Harvard Law School, It's Not Too Late

For those who didn't go to Harvard Law School, all is not lost.  A senior partner at Milbank Tweed announced via email this afternoon:

Milbank and Harvard Law School are proud to announce a new multi-year training program for Milbank associates to be known as Milbank@Harvard.  To provide Milbank associates with the best and most practical commercial training, Milbank and Harvard Law School have committed to create and deliver an innovative professional development program.  Through this program, associates will develop the multifaceted expertise and skills that clients expect their valued legal advisors to possess.  For the first time, a law firm will collaborate with Harvard Law School to provide executive education over the course of an associate's career, on-site at Harvard, focusing on business, finance and law, utilizing Harvard Law School and Harvard Business School faculty. * * *  

Starting at the end of their third year and continuing through their seventh year, every Milbank associate (inside and outside the United States) will participate in an annual stepped program taught at Harvard.  Each associate will undergo an eight-day training program on a yearly basis, taught by Harvard Business and Law faculty with the assistance of Milbank partners, and covering topics in business, finance, law, management skills, client relations and personal professional development.  Associates will complete the fourth module of the program in their seventh year.

The firm's press release is here.

Two disclaimers:  (1) I did not go to Harvard.  (2) Milbank, Tweed, Hadley & McCloy LLP was my professional home for almost seven years, and I received great training there.  

I'll be curious to learn more. How exactly will the program will "utilize" Harvard faculty?  Aren't practicing lawyers always criticizing law profs for their lack of practice experience?  Will other firms and schools follow suit?  

I can see the marketing now:  

"All of our attorneys went to Harvard"

vs.

"Our attorneys went to Harvard the first time."