Tuesday, May 29, 2012

More Complex Than Greed

Amlawdaily_mastheadThat is the title of an essay I just published at The Am Law Daily.  It is on the demise of Dewey & LeBoeuf, which officially filed for bankruptcy yesterday.  I wrote the essay because I think the lessons drawn from the Dewey collapse are all-too-likely to follow the "lawyers are greedy" storyline.  This problem is bigger than our collective flaws as lawyers and as people.  Below are the first two graphs:

Dewey & LeBoeuf, an amalgam of two storied New York City law firms that merged in 2007, has died.  Understandably, this has prompted a lot of soul-searching among lawyers.  One storyline that will attract many followers is that large law firm lawyers, long viewed as the profession's elite class, have lost their way, betraying their professional ideals in the pursuit of money and glory. This narrative reinforces that lawyer-joke mentality that lawyers just need to be become better people.

And that narrative is wrong. Yes, we all need to become better people, but that still won't begin to cure the larger structural problem affecting large U.S. law firms. At its core, Dewey's collapse has less to do with individual moral failings than with aging organizational structures that worked remarkably well for over a century yet, but for a variety of reasons, now inhibit law firms' ability to adapt to a changing legal marketplace. 

Full story here ...

[Posted by Bill Henderson]

May 29, 2012 in Current events, Law Firms, New and Noteworthy, Structural change | Permalink | Comments (3)

Friday, May 25, 2012

Mild Epiphanies While Re-Reading The Reflective Practitioner

Posted by Jeff Lipshaw

ImagesI've started working on an essay for a symposium on the future of legal education (there are a lot of those either held recently or about to be held).  I decided to re-read a work I have cited in the past, Donald A. Schön's The Reflective Practitioner.  

It's hard to be very original in referring to Schön (left); I just did a search of [Schön /p reflective] in the JLR database of Westlaw and came up with 310 citations, the first 100 or so of which I actually scrolled through.  He passed away in 1997, but this is a nice summary of his influential body of work.*

 We're well beyond "blank sheet of paper" solutions to the apparent mismatch between what law schools produce and what the market needs.  I agree with Bill Images-1 that the market is going to drive the restructuring of legal education, and the process is going to be more ad hoc than systematic and more organic than organized.  

Having said that, when change comes, it seems to come in a rush, doesn't it?  And a lot of assumptions about the inability to have "blank sheet" solutions seem to crumble.  Witness, in a serious vein, the collapse of the Soviet empire and the reunification of Germany, or in a trivial vein, the collapse of the present college football BCS system.

Here's the mild epiphany, however.   It's only mild because I have addressed the issue of the relationship between legal scholarship and teaching in my deaning dalliances.  The short version of my previous shtick is that what Nancy Rapoport calls modal schools don't have the luxury of having professors who can't teach, but unless there is a law school crash and restructuring, students and alumni are going to need to understand what drives a legal academic's career path.  We may not like it very much, but for the time being it's our equivalent of doing politics in post-WWII Europe or trying to win a football national championship.  You have to play the game that is presented to you.

What Schön does so well is to describe the current game, although he only touches on law and he wrote it in 1983. He describes (persuasively) the rise of what he calls Technical Rationality within disciplines in the university setting.  It would "be the business of university-based scientists and scholars to create the fundamental theory which professionals and technicians would apply to practice."  To turn that theory into practice, practitioners become skilled in problem-setting, which is not a technical problem.  (I think it's because hypothesis generation, the fruit of abductive reasoning, is not reductive.)  So, according to Schön, when practitioners "describe their methods of inquiry, they speak of experience, trial and error, intuition, and muddling through."

All professions, in Schön's view, demonstrate this tension between rigor (of research in technical disciplines) and relevance (of the application of knowledge to practice).  

I'm leery of bright line distinctions, but I do think there is a continuum.  At one end, we've had some  IMG_2044medical procedures in our house in the last several weeks, undertaken by sophisticated practitioners but informed by cutting edge research (dental Photo on 11-16-11 at 6.29 PMimplants and laparoscopic surgery).   At the other end, take men's barbering.  Maybe there is technical research going on, but for me, getting my hair cut has actually regressed to something more basic.  Whereas the hair you see at left (circa 1977) needed the most sophisticated of salon practitioners, the current version at right can be addressed by what is universally signaled in the words "Number 2 buzz." (That is me engaged in "academic pear review.")

The role of legal academy scholarship in practice falls somewhere in between the role of research in laporscopic surgical practice and the role of research in barbering practice.  I will leave others to speculate on precisely where it falls.  But in terms of how much pure or applied university-based research we actually need, I have a feeling our profession is closer to barbers than surgeons.  (And I say that as somebody who just had an article cited in a case decided by the Supreme Court of Delaware.  I believe most of what I've published is indeed a reflection on my practice experience, although I'd be the first to admit it would be deep background to practice, and not directly relevant to specific actions.)

Nevertheless, demonizing law professors in modal schools (the vast majority of which take seriously their obligation to train lawyers for non-academic careers) is like demonizing bankers or CEOs.  It scratches an atavistic urge to attribute misfortunate to the gods (as I've suggested elsewhere about the financial crisis.)     I don't particularly care for the U.S. tort system and its effect on product and medical costs, but attributing the crisis of legal education to current law professors because they get paid well or write theoretical "law and ..." articles is like attributing defensive medicine to the plaintiffs' medical malpractice bar because of the standard one-third contingent fee.  People naturally do what they get measured on and paid well for.  And it's perfectly legal to boot.

In short, blaming law faculty for responding precisely to the incentives the system creates is understandable but unreflective in its own way.  Rather, the current problem is institutional and structural, as Brian Tamanaha, the late Larry Ribstein, Bill Henderson, and others have observed. Because of regulatory and accreditation restraints, almost all schools are similarly modal, so almost every law school, even well down in the lower rankings, consists of faculty with the same career drivers and motivations.  

If one's school can't support and doesn't need a Department of Jurisprudence alongside the history, sociology, economics, and philosophy departments, maybe it shouldn't have one.  Going that route would take some real cojones, and no doubt create more human candidates for status as gods or demons.

* HT to Bill Berman on the Suffolk faculty for first directing me to Schön's work a couple years ago.

May 25, 2012 | Permalink | Comments (4)

Wednesday, May 23, 2012

What is the Answer to High Student Debt?

HigheredThis question is coming up a lot these days, but the nation's best minds are swinging and missing.

  • The New York Times asked it today, and suggested that "full disclosure" is the answer.  That is just crazy -- students are going to college or graduate school so they have the skills and knowledge to do complex things like conduct a reliable cost-benefit analysis. 
  • In the column in The New Yorker titled "The Cost of College," Nichlas Lehman, Dean of the Columbia School of Journalism, wonders whether higher education is suffering from a pricing bubble. Then, remarkably, he goes on declare that "higher education is actually underpriced .... in the top-tier schools" because "price is determined by what people are willing to pay." [Yes, and the highest bid will be accepted right before the bubble bursts.]  Regardless, Lehman is pleased that both Obama and Romney will try to keep interest rates low on undergraduate Stafford loans -- which just kicks the can down the road without imposing any pricing pressure on colleges or universities. 
  • In contrast to Lehman's conclusion that top-tier schools are a bargain, in the Washington Post, Jennifer Rubin consults with two policy wonks from conservative think tanks who argue that institutions like Harvard are gouging students due to misguided federal subsidies and tax policies that shelter massive multi-billion dollar endowments.  This analysis is long on blame but short on solutions.
  • As noted in my prior post, entrepenuer Peter Thiel is offering $100K fellowships for students to "stop" their formal education to pursue ideas that may contribute to viable new businesses.  Love the idea, but it is a tiny niche solution. 

My own belief is that educational quality is the next great frontier. If we can put a man on the moon in the 1960s, surely with four years and $120K we can turn a reasonably able and motivated 22 year old into a critical thinker who can reliably communicate, collaborate, gather facts, assess data, lead, follow, and approach problems with both empathy and objectivity.  Further, improving quality changes the debate from "how much does higher education cost?" to "how much is higher education worth?"  And if the worth is sufficiently high, both public and private employers would be willing to subsidize it in exchange for preferred access to graduates.  

The only barrier is institutional focus.  To make this happen, a university has to take an "Apollo Project" approach that focuses purely on education.  After figuring out the "how high" and "how fast" possibilities, an institution could then focus on controlling costs through process improvements and building modules.  First quality (worth), then cost.  This is not trade school education; this is about fully exploring human potential.

The first university to break into this space will have a profoundly disruptive effect the rest of higher education. The future of higher education is education. 

[posted by Bill Henderson]

May 23, 2012 in Blog posts worth reading, Current events, Fun and Learning in the classroom, Innovations in legal education, New and Noteworthy | Permalink | Comments (12)

Sunday, May 20, 2012

$100,000 Scholarships to "Stop" College

Entrepreneur Peter Thiel (Stanford Law '92) is financing twenty $100,000 scholarships for young people who agree to "stop" their formal education for two years to pursue or join a real world project broadly related to some aspect of business, innovation or technology. See Thiel Foundation's "The 20 Under 20 Fellowships."

Thiel is a former federal judicial clerk turned  securities trader turned entrepreneur (founded PayPal) turned hedge fund manager/venture capitalist (he bet big on Facebook and won).  Thiel believes  that the key skills for innovation are not taught very well in universities.  Further, because Thiel believes we are in the midst of a serious higher education bubble, he argues that the debt incurred by students only hobbles their ability to pursue activities that would redound to the benefit of the U.S. economy.  Thus, as a nation, we are stuck in a very unhealthy spot.

Thiel shares his unorthodox views with Morley Safer on tonight's 60 minutes.  In the meantime, below is a preview of Thiel's views on higher education courtesy of the The Big Think.

May 20, 2012 in Cross industry comparisons, Current events, New and Noteworthy, Structural change, Video interviews | Permalink | Comments (0)

Saturday, May 19, 2012

"Graduates Shun Legal Profession"

ShunprofessionThat's the headline of a story in the Sunday edition of The Age, one of Australia's leading daily newspapers.  Here is the nut:

ALMOST two-thirds of Australia's law graduates are not working as lawyers four months after they have completed their degrees, according to a study.

The Graduate Careers Australia survey of 1313 recent graduates from all over the country found that 64 per cent were not practising law between 2010 and 2011.

There was ''no way'' law firms could accommodate all the graduates from Australia's 31 law schools, La Trobe University's director of undergraduate studies, Heather King, said. ''It's a well-acknowledged fact that 40-50 per cent will not end up in a traditional law practice.''

These statistics may seem even bleaker than those that describe the U.S. legal market.  Yet, for two key reasons, these Australian students are far better off. First, the Australias follow the LLB model, which has some substantial advantages.  According to my Australian colleagues, a law undergraduate degree is often combined with a major in another field or discipline, such as business, accounting, sociology, or literature.  So a student's commitment to law as career is often tentative and, in many cases, hedged by another career interest.  Second, higher education in Australia enjoys a large national subsidy.  So law graduates typically graduate with little or no debt.

Ironically, as the story reports, some Australian universities are moving toward the J.D. model, essentially concluding the law is best taught to more mature students as a graduate discipline.

I agree that students ought to have a cost-effective way to opt out of law.  I also agree that law is best taught as a graduate discipline to students with some substantial life experience.  I don't, however, see an easy way to cost-effectively achieve both. The fact that the solution is not easy will, conversely, make the solution quite valuable.

[posted by Bill Henderson]

May 19, 2012 in Cross industry comparisons, Data on legal education, Data on the profession, New and Noteworthy, Structural change | Permalink | Comments (0)

Monday, May 14, 2012

Review of Failing Law Schools, by Brian Tamanaha (Part I)

Failinglawschools[Update: I edited the review below to remove three paragraphs from my analysis.  It was a metaphor that was not key to my review of Brian's book yet could be fairly viewed as insulting to readers I both respect and hoped to persuade.  I am sorry about that. It was a substantial change, so I am acknowledging it here. wdh.]

Many legal academics are going to dismiss Brian Tamanaha's book, Failing Law Schools, without ever reading a page.  A larger number may simply ignore it.  That is ironic, because this is the response one would expect if Tamanaha's account of a corrupt, self-indulgence academic culture were true. 

I have lived inside this culture since I joined the academy in 2002. And I can attest that very few people inside the academy believe that we are living the high life on the backs of our students. But in the year 2012, that perception does not matter very much.  Rather, the perception that matters is the one from the outside looking in. 

Over the last eighteen months or so, The New York Times, The Wall Street Journal, The Washington Post, The Atlantic, the legal press and countless blogs (many written by unhappy students) have relentlessly hammered away at law schools.

The  lay public, including most practicing lawyers, are looking for a definitive account that can explain the legal education's maelstrom.  Tamanaha's account is a veritable Brandeis Brief on what went wrong, chocked full of facts and history and persuasive analysis. 

It begins with a deal between the ABA and AALS to join forces to persuade the state bars to restrict entry to ABA accredited law schools (the ABA's goal) and thereby to elevate the stature of the legal professoriate (the AALS's goal).  Once this deal was struck -- in the early 20th century -- pretty much every change accrued to the benefit of the law faculties: higher salaries, lower teaching loads, the advent of administrators to lighten the burden of governance, and more freedom to pursue scholarly interests.  When U.S. News & World Report ranking appear in the early 1990s, the law schools are forced to make choices.  And our collective behavior suggests that vanity and prestige are all-too-likely to trump important principles like student diversity or honesty in reporting data.

For us law professors, here is our conundrum. From the outside looking in, things look bad, even corrupt.  Yet we don't feel we have done anything wrong.  We are certain that we lack the intent to cheat or defraud.  But that, unfortunately, is error #1.  As we all know, establishing intent is always a matter of circumstantial evidence.  So let's review that evidence from the perspective of the neutral fact finder.

Life is objectively good for us:  We have high salaries, social prestige, lots of travel, job security, and near absolute freedom to organize our time outside the three to six hours a week we teach, 30 weeks a years.  Against this backdrop, there is consensus among legal employers that we are not very good at practical training including, in the eyes of many, basic legal writing.  Moreover, the overproduction of lawyers creates problems for the legal profession as a whole.  Similarly, our students  are saddled with enormous debt and nothing we are doing curricularly seems geared to solving their burgeoning unemployment  or underemployment problem.  The federal government finances this "system."  And through Income-Based Repayment programs, the U.S. taxpayers are backstopping our high costs.

Because law faculty seems to be getting the long end of the bargain here, our subjective feelings of honesty and rectitude are unlikely to be viewed by many students, practicing lawyers, or the broader public as credible.  In fact, they may be viewed as insincere or out of touch.  How did things get so badly out of kilter? 

But for Tamanaha, some pesky journalists, angry students, and the ticking time-bomb of law students debt, I am confident that we law professors could coast along on our present track for another several decades.  As an insider, I can honestly testify that we believe--sincerely beheve--that we care about our students, the quality of their education, their debt loads, and their future job prospects.  But  looking at the same set of facts, history will draw its own conclusions. And Tamanaha, akin to a lawyer building a case, offers up a very compelling narrative that the dispassionate observer is likely to find convincing. 

Other bloggers and news outlets have commented on Tamanaha's book, often drawing very different conclusions. Compare Brian Leiter's Law School Updates and Orin Kerr at Volokh Conspiracy (Tamanaha's argument has merit, particularly when he suggests that lower ranked law schools should consider changing their models), with Scott Greenfield at Simple Justice (here and here) (Tamanaha describes an insular, out-of-touch professoriate from the top down that distains the input of practicing lawyers) and the Chronicle of Higher Education (subscription req'd)  (describing Tamanaha's thesis, "Law schools are bloated with too many underworked, overpaid professors whose salaries are supported by tuition increases that are making law school a losing bet for many students").

What are the proper inferences to draw? 

In late 2011, I reviewed a copy of Tamanaha's book as part of the peer-review process for University of Chicago Press.  My primary advice to Brian, communicated directly to him as well as his editors, was "to condemn the sin, not the sinner."  Legal academics may seem culpable for privileging their interests ahead of students, I said, but these are the same folks who need to be relied upon to fix the problem. (The alternative is that nearly all of U.S. legal education will collapse under the weight of high costs and fewer entry level legal jobs; and on many days, I think the latter is just as likely as the former.)  

Frankly, I don't know if my "condemn the sin, not the sinner" recommendation was good advice.  In order to change, the legal academy may need more pressure brought to bear from outside forces. This may happen if the legal academy is painted as more selfish, insular, elitist and out of touch than we already look now.  Congress and the Department of Education hold the ultimate trump card, and Tamanaha's book provides the essential supporting evidence for radical action.  If and when this happens, law faculties will be forced to pick sides.  

History is now playing out right before our eyes.  I believe there is a good chance that Brian Tamanaha's book will be viewed--by history at least--as a great act of courage.  The implication, of course, is that the rest of us will look foolish.

Brian discusses the bleak employment prospects of law schools, but (through no fault of his own) understates the nature of the structural change that is occuring in the U.S. and global market for legal services.  In Part II, I will write about some logical next steps for law schools looking to get ahead of the coming tsunami. 

[posted by Bill Henderson]

May 14, 2012 in Current events, Data on legal education, Data on the profession, Scholarship on legal education, Structural change | Permalink | Comments (6)

Saturday, May 12, 2012

LegalZoom Files for IPO

LegalzoomLegalZoom plans to go public.  According to the company's Form S-1 registration statement, which was just filed with the SEC, the company had $156M in revenues in 2011, with profits of $12 million. Here is the first line of the prospectus: 

We believe that everyone deserves access to quality legal services so they can benefit from the full protection of the law. Our mission is to be the trusted destination where small businesses and consumers address their important legal needs and to be our customers' legal partner for life.

Well, LegalZoom seems to be making progress. 

We have served approximately two million customers over the last 10 years. In 2011, nine out of ten of our surveyed customers said they would recommend LegalZoom to their friends and family, our customers placed approximately 490,000 orders and more than 20 percent of new California limited liability companies were formed using our online legal platform. We believe the volume of transactions processed through our online legal platform creates a scale advantage that deepens our knowledge and enables us to improve the quality and depth of the services we provide to our customers.

RomeI recently rented a car on a business trip.  The radio was tuned to the Jim Rome Show, a national sports radio talk show that is carried by more then 200 stations nationwide.  During my two hour drive, I heard at least four LegalZoom radio commercials.

What is LegalZoom's long term play?  Based on the S-1, it is to use its trusted brand to build a network of "legal subscribers" who obtain legal advice from licensed attorneys.  As LegalZoom says,

We are not a law firm, and we do not provide legal advice. We provide self-help legal documents at our customers' specific direction and teneral information on legal issues generally encountered. Independent, licensed attorneys participate in our attorney network to provide services to our customers through our legal plans.

LegalZoom is seeking $120M for general corporate purposes.  Sheppard Mullin and Latham & Watkins are listed on the S-1 registration statement.  Think LegalZoom is no big deal?  If so, I would encourage you to read my previous post.

[posted by Bill Henderson]

May 12, 2012 in Current events, Innovations in law, New and Noteworthy, Structural change | Permalink | Comments (1)

Lots of Jobs for Law Graduates -- just not Grads in the U.S.

This story is fresh off the newswire: "Law firms are no more the preferred destination for fresh law graduates looking for jobs.  With outsourcing catching up even in this industry, legal process outsourcing (LPO) companies are now bagging a large number of graduates."  A law professor opines, “There is a rising trend of students opting for LPOs. The nature of work is changing and these places offer good packages and work culture. ... [P]romotions also come faster in LPOs.”

Wonderful news.  But the story was written for the Hindu Business Line.  The law graduates went to school in India.  Why are the LPOs become more attractive jobs for Indian law grads?  Probably because (a) LPOs are increasingly focusing on process and technology, engineering out the drudgery work, and (b) process and technology are creating a sustainable competitive advantage within a global industry -- and that can support higher salaries.

MindcrestIn the same story, Rohan Dalal, the Managing Director of Mindcrest, a U.S.-based LPO with headquarters in Chicago, pegged the annual growth at 30% per year [remember that number]. 

Dalal explains his hiring philosophy: "There are very few lawyers available in India who are experts in the laws of the US or the UK, which constitute a bulk of our clients. In general, therefore, we prefer to hire younger legal talent, whether fresh or a few years out of Indian law schools." (Historical note: Paul Cravath explicitly focused on new law school graduates in building his firm.  Why?  He did not want to undo the bad habits and fixed ideas of other (inferior) employers -- he too had a process.)

The president of Mindcrest is a former partner at McGuireWoods, an AmLaw 200 law firm.  According to its website, Mindcrest now has 600 employees.  How many are in the U.S.?  We have no idea -- but we can triangulate data from other sources in order grasp the magnitude of changes occurring as a result of companies like Mindcrest..

So consider the following, which I believe signals a true structural shift.

Chart 1 below is generated from County Business Patterns data.  It summarizes U.S. Law Firm employment according to the North America Industry Classification System (NAICS), which is how the U.S. Census Bureau groups and categorizes economic activity.  The NAICS went into effect in 1998, replacing the Standard Industrial Classification (SIC) system, which reflected an industrial economy rather than one driven by information and services.  The advantage of County Business Patterns (CBP) is that it is not a sample -- it is "universe" data.  CBP covers everyone working in the U.S. who received a W-2.  Law firms, as shown below, comprise a 1.1 million employee sector.  [click on to enlarge]

The key takeway?  Law office jobs peaked in 2004 -- four years before the collapse of Lehman Brothers.  Total employment in law offices (NAICS 54111) totaled 1,123,000 jobs, which was 92.2% of the larger legal services sector (NAICS 5411).  Since the high water mark in 2004, the sector shrank by 26,100 jobs (at least through 2009).

County Business Patterns, however, has another catch-all category called "all other legal services" (NAICS 541199).  Mindcrest's employment (just the domestic) is almost certainly included in this catch-all.  Chart 2 below compares change in total employment from base year 1998 for "Law offices" and  "All other legal services." [click on to enlarge]

The takeaway from Chart 2 is that "All other legal services" is growing very quickly, albeit from a much smaller base.  When Law offices were shedding 26,100 jobs after the 2004 high water mark, the "All other legal services" category added 5,800 new employees.  It is worth noting that the average 2009 salary in All other legal services are 40% lower than in law firms ($46,800 versus $78,500).  [more after fold]

Continue reading

May 12, 2012 in Current events, Data on the profession, Important research, Innovations in law, Law Firms, Legal Departments, New and Noteworthy, Structural change | Permalink | Comments (2)

Thursday, May 10, 2012

What Do Dewey & LeBoeuf Partners Owe Their Staff?

A story in the Am Law Daily has a chilling quote from a soon-to-be ex-Dewey & LeBoeuf employee. "I've been here 14 years," she said. "They never apologized. They never explained what was going on to us. It's very disrespectful to the staff. It's always about the lawyers. It's never about the staff."

DeweytombstoneWhat do Dewey & LeBoeuf partners (and recent ex-partners) owe their staff?  I’m not talking about technical calculations based on the federal WARN law.  I am talking basic principles of human decency that have to be followed in order to look one's self in the mirror each morning—what our non-professional parents or grandparents would tell us to do. 

I suspect that 95% of people (and lawyers, who are people too) would sign on to this list:

  • Guarantee the timely distribution of all paychecks and corresponding 401K contributions
  • Guarantee the eventual payment of unused vacation and personal time
  • Explain the status of health insurance and prevent any interruption in coverage
  • Say “I am sorry this is happening to you.  We wish we could rewind the clock and do things differently so we could have avoided these problems for you and your families."

The reality, however, is near the opposite.  No apology. No explanations.  And an eventual bankruptcy filing that will convert hundreds of longtime Dewey & LeBoeuf staffers into unsecured bankruptcy creditors who will likely have to hire a lawyer to get a percentage of what they are actually owed. 

If (rich) Dewey & LeBoeuf partners seem to be falling short, it is all-too-easy to chock up this behavior to greed and moral failure--and I am sure this behavior will be amply recounted in the final Dewey & LeBoeuf post-mortem.  Yet, moral fortitude is no match the sheer size and geographic dispersion of the Dewey & LeBoeuf partnership.  As a simple matter of logistics, it is near impossible for the firm's most well-meaning partners to coordinate an effective plan for treating all the staff fairly.

A story in the New York Times (here) reports on an ex-partner who is starting a fund to assist staffers, apparently seeding it with $10,000.  His moral impulse is spot on.  But the task of fully delivering on the impulse is pretty staggering. Some questions:

  1. Are all the partners kicking in, or some?  Many Dewey & LeBoeuf partners have probably never met each other—what a task!  
  2. If I am a partner, how much is this going to cost me?  Well, it depends upon who steps up and on what terms. 
  3. Are the partner contributions pro rata or proportional to income and status in the firm?  Apparently, the true incomes of Dewey & LeBoeuf partners was a deep mystery, though the differential reportedly approached 20 to 1.  What is fair is at odds with what is workable.
  4. Every Dewey & LeBoeuf staffer, not just the ones who worked with me?  Dewey & LeBoeuf had 1,000 non-lawyer employees. The needs, obligations and liabilities could run into the tens of millions.
  5. Who has all the information on employee benefits, and who is going to pay that person to calculate all the payouts and communicate with staffers?

Somewhere between question 1 and question 4, most of us would conclude that were embarking on a fool’s errand—we, and our families, would drown in the task of helping others.  So we would put our heads down and focus our own situation.  And despite a pounding conscience, the less advantaged are left holding the bag on a mess that, objectively, the lawyers created.

Spring99hirschmanIronically, this disgraceful state is a byproduct of several decades of prosperity and growth. And its unraveling perfectly parallels the voice, exit and loyalty framework articulated by the famed economist Albert O. Hirschman in his 1970 book, Voice, Exit and Loyalty.  The framework runs  roughly as follows.

In relatively small organizations or communities, problems and disagreements can be resolved through voicing one’s concerns to fellow stakeholders.  Further, if exit is expensive or impracticable, voice is the only option. Ideally, dialogue and cooperation ensue, thus benefiting all parties and producing a reservoir of loyalty. 

In larger organizations, however, a governance structure based on voice can be too messy and time consuming, so decisions are delegated to smaller group.  Unwise or imprudent decisions are curtailed by the exit or the threat of exit by key stakeholders.  So exit can produce quite stable and healthy organizations.  Yet, when leadership fails to take corrective action in response to exit, the organization can slowly, or quickly, self-destruct.

Today, virtually every firm in the Am Law 200 operates on exit principles as expressed in the market for lateral partners. In the case of Dewey & LeBoeuf, the most significant shock to the system was the realization within the partnership that the firm’s leadership had failed to level with them regarding the financial health of the organization.  The firm was long past the point where an out-of-use voice could serve as a corrective (26 offices, 10 countries!).  Further, the reservoir of loyalty had run dry.  So the partners rushed for the exits.

Ironically, many Dewey & LeBoeuf staffers probably took solace in working for an old-line prestigious law firm with international offices; they inferred they were safe.  Now they are collateral damage, treated with less respect than the staff of Big Box store closing in an aging suburb.

What happened at Dewey & LeBoeuf could happen at any Am Law 200 law firm, albeit some have deeper reservoirs of loyalty than others. I worry that the so-called “elite bar” has given up on voice, or is woefully out-of-practice in speaking openly and frankly to those with power.  Further, I worry that too many Am Law managers only listen to the views of rainmakers. That is especially pernicious if the rainmakers are overpaid, as they appeared to be at Dewey & LeBoeuf, because the exit of the rank-and-file lawyers can also destroy a firm.  

Regardless, all of us lawyers need to take note of the deplorable treatment of the nonlawyers in the building--hundreds of people who kept the enterprise running and contributed to the professional treatment of clients.  The treatment of the Dewey & LeBoeuf staff (or Howrey a year earlier, or Brobeck or Heller) is utterly incompatible with self-image of an elite, prestigious law firm.  Increasingly, we are confusing profitability with estimable conduct.  The evidence is indisputable that this error in judgment destroys firms and destroys lives.

[posted by Bill Henderson]

May 10, 2012 in Current events, Law Firms, Structural change | Permalink | Comments (3)

Monday, May 7, 2012

Cassidy on Legal Education Reform

CassidymfR. Michael Cassidy (Boston College) has posted Beyond Practical Skills: Nine Steps for Improving Legal Education Now on SSRN.  Here's the abstract:

It has been five years since the Carnegie Report “Educating Lawyers” called upon law schools to adopt an integrated approach to professional education that teaches practical skills and professionalism across the curriculum. Yet so far, very few schools have responded to this clarion call for wholesale curricular reform. Considering the inertial effect of traditional law school pedagogy and the institutional impediments to change, this delay is not surprising. A fully integrated approach to teaching professional skills (such as the medical school model) would require major resource reallocations, realignment of teaching responsibilities, redesign of courses, and a change to graduation requirements. While I fully support such comprehensive reform, the pragmatist in me knows that it will take years to accomplish.
My goal in this essay is to offer a “self-help” remedy for faculty members and administrators interested in responding to the Carnegie Report’s call for greater emphasis on experiential education, but uninterested in waiting for the committee deliberations, reports, faculty votes, and tough resource trade-offs that lie ahead. We drag our heels at our own perils, and to the serious disadvantage of our current students. What follows is a description of nine changes that individual faculty members and deans can make now to improve the professional education of law students. While each initiative when viewed in isolation may seem modest, collectively they could have a huge impact on our programs.

May 7, 2012 | Permalink | Comments (0)

Speculation on Sensitivities in the Law Profession Employment Data

Posted by Jeff Lipshaw

Images-3I like to think of myself as a sophisticated theorist, not a fantasy writer.  So when I was asked a few days ago to participate in an upcoming law review symposium about the future of legal education, and not wanting to embarrass myself (a driving factor for most of my life), I started digging into the empirical and interpretive work developed over the last couple years on the future of the profession.

Gallons of ink have been spilled, myriad symposia convened, and quadrillions of pixels manipulated in speculation, condemnation, excoriation, bloviation, justification, rationalization, perspication, and horribilization.  Nevertheless, I feel data deprived.

Something Frank Bowman (Missouri, right) said in a thoughtful post yesterday over at Concurring Bowman-f Opinions gave me pause, because it highlights what my empirical guru Bill Henderson tells me is a glaring gap in the data.  If I can paraphrase, one of Frank's points is that there is a group of elite schools at the top of the food chain that, by reason of money, brand, and intellectual capacity of their students, are going to come out of all of this relatively unscathed.  "But this model cannot work for the rest of us."  

I know for a fact that Big Law is changing rapidly.  I only have to read the newspapers and look at the data Bill has sent me about a disappearing breed:  the home-grown Big Law partner.  That's not where the data gap lies.

What we don't seem to know much about through data rather than speculation (my own included) is how the profession is shrinking or changing (or not) when we get below that level.  That is, I would really like to see more precise sensitivities in the data, because my intuition is this is not "one size fits all."  Frank counts 20 to 30 schools as "at liberty to change or stand pat, as it suits them."  I don't know where the line between "them" and "the rest of us" gets drawn, but the data would tell us generally where to find the largest marginal impact on the effect of Big Law shrinkage.  My guess is that it would be in those schools that are wannabes for elite national school status.  

But I am still really foggy about what is happening farther down the food chain, and Bill tells me I have reason to be.   What is happening to the profession outside of Big Law, and what is happening to the schools that primarily feed that segment of the profession?  Let's take Big State University Law School (Quaint College Town Campus) with say, 250 students in each graduating class, and posit that it is the flagship school in the state, relatively remote from any major competitive elite public or private law school, able to offer instate tuition to its residents, but still only ranked somewhere between 50 and 100 in USNWR.  No doubt it feeds a small number of its grads, even now, to Big Law, and some to medium sized sophisticated firms in Big State City, down the road.  

But what is happening to the rest of BSUSL's grads, and how has that changed over the last ten years (i.e. comparing pre-financial crisis)?

I overlapped for a short time in 2005 at Big State (Urban Campus) Law School with Frank (when he was a real professor and I was just a superannuated general counsel-practitioner-adjunct prof with academic aspirations).  Even in 2005, before the crunch, I was asking questions about BS(UC)LS, which graduated 400 lawyers a year in its day and evening programs.  Even then, I bet that no more than 5-10% (tops!) got either Big Law or even the Big State City version of Big Law jobs (i.e., solid regional firms).  I remember asking the deans at BS(UC)LS in 2005 - what happens to the bottom half of your class of 400 lawyers?  Or the bottom 25%?  

There is an entire industry of law schools not even trying to place students in Big Law - for them, at best if they get a few in it is a victory.  That seems to me to suggest a likely different impact as a result of the financial crisis.

If we were to look at the top students in those schools longitudinally (say over the last seven years), how have they been affected?  Then if we look at the bottom 60-75% of the class, how about them?  Are graduates at that level significantly impacted?  Where are they going?  Has the world changed much for them?

That's the data gap about which I'm inordinately curious.  Feel free to fill me in if you have answers.

May 7, 2012 | Permalink | Comments (0)

Friday, May 4, 2012

Data About Women in Business . . . And Data in the Eye of the Beholder

Posted by Jeff Lipshaw

Images-1The inimitable Jack Welch, business strategy guru, and generally regarded as one of the great business leaders of the 20th century, has given me a chance to round off a little trilogy of women's issues here at The Legal Whiteboard.  (This is courtesy of John Bussey's "The Business" column in the Wall Street Journal this morning, which my wife, sporting a mischievous grin, shoved in front of me at the breakfast table.)  

Bussey starts his column, which reports Welch's less-than-well-received performance Wednesday before a group of high-powered women executives in New York,  by asking if the former chairman and CEO of General Electric is "a timeless seer or an out-of-touch warhorse."

I find this amusing, because I am a veteran of the leadership and management styles spawned by Welch at GE (see earlier biographical statement), and I am pretty sure the answer is "both."   

What I want to discuss here is not the merits of the issue that seems to have tripped up Welch (i.e., his stubborn refusal to acknowledge that indeed advancement in the business world is different for women than for men), but the source of potential judgment errors that arise from the subjective eye of the beholder.   It's the subject of my summer writing project, and blogging gives me a chance to say it in a different way in a different forum.

The possibility of judgment errors affects everybody, even timeless seers.    The usual suspects (i.e., well-documented heuristics and biases) of behavioral economics, the go-to discipline for explanations of irrationality in the legal academy, don't do the trick here.   Coming to terms with (never curing) the errors is a therapeutic exercise from the inside out, not from the outside in.    

My goal here is (a) to describe briefly what was reported as the clash between the women and Welch at this conference, (b) to talk about the timeless part of the GE philosophy, developed by Welch himself, that was hugely meaningful in my coming to terms with and moderating my lawyerly instincts, and (c) to suggest how even a seer can sound like (or be) an out-of-touch warhorse.

First, what happened?  Jack and Suzy Welch (right) appeared at the "Women in the Economy" Images-2 Forum sponsored by the Wall Street Journal.  If the quotations are correct, Jack articulated the "hero" approach that was typical of the GE culture I knew, and dissed the whole idea that women had to overcome cultural bias.  (My additions in the brackets, but I am positive they are in the correct spirit.)"Over-deliver [on your promises]."  "Performance is it! [and everything else is whining BS]."  "The best women would come to me and say. . .'I'm a star. I want to be compared with the best of your best'" ["i.e., I'm a hero and tough, and control my own destiny, and don't engage in whining BS."]  

Apparently, a number of women in the audience, tough and accomplished nuts themselves (among them, a State Street Bank EVP, a Fortune 500 board member, and Dee Dee Myers, Bill Clinton's former press secretary) begged to differ.  (My wife wondered what Suzy Welch, no shrinking violet herself, was thinking at the time.)

Second, what about Welch's own philosophy at GE was timeless?  As I have recounted before, I got my de facto M.B.A. working as a general counsel and business executive for the better part of twelve years in two different companies led by long-time General Electric veterans who were thoroughly schooled in the General Electric values, systems, methodologies, and culture.  This is going to sound really weird, but I had an epistemological reason for leaving a big law firm partnership and going to work as a corporate general counsel.  

When I was getting recruited by AlliedSignal, which had just hired GE Vice-Chairman Larry Bossidy, I read his message to shareholders in the first annual report issued under his aegis.  I paraphrase, but it said something like, "we'll always need leaders who make the final decisions, but the tyrant in the corner office, the guy who has all the answers, need not apply here."  To somebody who had been a lawyer for thirteen plus years, who knew in his heart that there were so many times he didn't know the answers, but who was trained nevertheless to act like he knew the answers, this was mind-boggling.

And, indeed, I was not disappointed to find that the GE culture, at least in its idealistic articulations, was about the continuous process of learning, of getting better, of facing and not backing down from reality, of having the courage to do so, and to live the paradox of getting the results by focusing on the process.  Those are timeless insights, and if you doubt they come from Jack Welch, go read Control Your Destiny.

Third, how did it come to this?  I've come to think that nobody is self-deceived quite like the person who is positive that he is the person who is undauntingly facing reality.  The timelessness in the GE vision was that it incorporated both epistemic courage (do what you know is right) and epistemic humility (always learn from what is real, not what you think is real).  The challenge is in executing on the inherent paradox of that vision.  Jack has the epistemic courage to stick to his guns about performance, but not the epistemic humility to understand that just maybe all those smart and tough women have a point.   What is the objective reality, the objective data, and what is in the eye of the beholder?

May 4, 2012 | Permalink | Comments (0)