The Legal Whiteboard

What is the Significance of Major Combinations between Canadian and U.S. Law Firms?

Law firm consolidations are in the air.  Over the last couple of weeks, two major Canadian law firms have entered into combination agreements with U.S./UK counterparts. 

1. Norton Rose (a British firm with a major Canadian presence) is merging with Fulbright & Jaworski, creating a firm with 55 offices and 3,800 lawyers.  Details here.
2. Fraser Milner Casgrain is combining with SNR Denton (US-UK firm that swallowed up the legacy Sonnenschein law firm in 2010) and Salans, which is a European law firm original formed in France. The resulting firm will have 2500 lawyers in 79 offices and 52 countries worldwide.   Details here. 

In the video interview below, Jordan Furlong, a Canadian lawyer, journalist and consultant (Law21), views these developments as the beginning of a major sea change.

To my mind, the consolidations we are witnessing have a lot to do with flat worldwide revenues. Law firms become uncomfortable places when they are not growing. Yet, really big law firms seldom fail because failure requires that a large number of partners vote their feet. A 30-partner defection can be a lethal blow to a 500-lawyer firm, but not so much for a 2,500-lawyer firm. The larger number of lawyers provides managers with more time and latitude to figure out a longer term strategy. Big feels safer.  Further, once the consolidation is complete, the firm managers can thin the ranks of weaker partners, producing a stronger overall firm.  (That is the theory, anyway.)

[Posted by Bill Henderson]

Replacing the "E" in Entrepreneur with "I"

There has been a lot of press over the past few years about entrepreneurism and the law and indeed  ventures like LawWithoutWalls and clinics in law and entrepreneurship have been created by many law schools in order to hone entrepreneurship (along with other skills) in future lawyers.

Some people believe that we shouldn’t be training our future lawyers to be entrepreneurs or that it isn’t necessary or perhaps even desirable.  These people see lawyers and entrepreneurs as “strange bedfellows”.  These people smirk at Richard Susskind’s book, the End of Lawyers?.  They smirk  – not because they don’t see the question mark – but instead, because the question itself is a non sequitur – “The End of Lawyers (That’ll Be The The Day)”.  They know that it is not the end of lawyers nor will there ever be an end of lawyers.  They know that the legal rebels and law disruptors and the big-bad-non-lawyers are NOT going to take over the law market. They know that law firms and law partners and law schools and law deans and law professors will survive. 

And they are likely right.

But what they may not foresee is that the ones left standing (the lawyers, and the law firms and the lawschools and the law deans and law professors that will be left standing) will be those that no longer use the capital “I” that resides in “me, myself, and I” that has so long plagued our profession and that is based on  Individual lawyers and Individual clients and Individual law school education that inhibits collaboration with nonlawyers. and that is at the heart of how most law firms and law faculties have organized themselves  (see SlideShow making these points).

Instead, those left standing will be those that move the capital “I” from a place that has historically kept the legal profession in a closed environment, to a place where there is “Interaction” with non-lawyers, “Interdisciplinary” collaboration “Inter-department” education, and, above all, “Innovation.”  Those left standing may not all be legal entrepreneurs but they most certainly will be Intrapreneurs.  

“Smart organizations will seek out individuals who like to invent, innovate and want to be on the front lines of change. These individuals can work independently but even more important can work seamlessly as part of an integrated team structure and also effectively embrace and embody the culture of the intrapreneur’s host organization.”

So although it is true that these new entreprenurial focused law ventures are made up of many legal rebels and law disrupters and legal entrepreneurs, and that they attempt to instill an entrepreneurial spirit in all that participate.  More than that, they represent a community of lawyers that believe in the Intrapreneur in us all, the ability to exapt ideas from other places in order to affect change (see Article on the need for exaptation in the law market).  They believe in those that use the capital "I" to replace the E in Entrepreneur. They believe that it is not just the Entrepreneurs but also the Intrepreneurs in law that will be left standing. 

Those that continue to use the capital "I" as in "me myself and I" (and refuse to change) will be those that, like the cheese, stand alone.

 

[Michele DeStefano]

An Open Letter to India's Graduating Classes

From far away, knowledge workers in India appear to be a formidable and growing threat to American college graduates.  But according to Mohit Chandra's essay, "An Open Letter to India's Graduating Classes," which appeared in the India Ink section of the NY Time/International Herald Tribune, the current generation of Indian university and professional school graduates is hindered by a serious skills and values gap.   Indeed, the author, a partner at KPMG in Delhi, chastises the newly minted 2012 graduates for being spoiled and behaving unprofessionally. 

There are two crosscurrents at work here that are quite difficult to untangle: (1) the process of globalization, which is linking together the economies--and thus the cultures--of India and the U.S.; and (2) workplace generational frictions, which apparently are just as vexing in India as they are in the U.S.  As a mid-career Indian professional with an MBA from Ohio State and a work history that includes KPMG, Capital One, McKinsey & Company, and Ernst & Young, Chandra sits on top of both of these faultlines. 

I think Americans might be surprised by both the content and tone of Chandra's letter, which cannot be judged by western standards.  The letter reveals as much about the U.S., and humanity, as it does about India.  Quite a read.

Dear Graduates and Post-Graduates,

This is your new employer. We are an Indian company, a bank, a consulting firm, a multinational corporation, a public sector utility and everything in between. We are the givers of your paycheck, of the brand name you covet, of the references you will rely on for years to come and of the training that will shape your professional path.

Millions of you have recently graduated or will graduate over the next few weeks. Many of you are probably feeling quite proud – you’ve landed your first job, discussions around salaries and job titles are over, and you’re ready to contribute.

Life is good – except that it’s not. Not for us, your employers, at least. Most of your contributions will be substandard and lack ambition, frustrating and of limited productivity. We are gearing ourselves up for broken promises and unmet expectations. Sorry to be the messenger of bad news.

Today, we regret to inform you that you are spoiled. You are spoiled by the “India growth story”; by an illusion that the Indian education system is capable of producing the talent that we, your companies, most crave; by the imbalance of demand and supply for real talent; by the deceleration of economic growth in the mature West; and by the law of large numbers in India, which creates pockets of highly skilled people who are justly feted but ultimately make up less than 10 percent of all of you.

So why this letter, and why should you read on? Well, because based on collective experience of hiring and developing young people like you over the years, some truths have become apparent. ...

There are five key attributes employers typically seek and, in fact, will value more and more in the future. Unfortunately, these are often lacking in you and your colleagues.

1.You speak and write English fluently: We know this is rarely the case. Even graduates from better-known institutions can be hard to understand.

Exhibit No. 1: Below is an actual excerpt from a résumé we received from a “highly qualified and educated” person. This is the applicant’s “objective statement:”

“To be a part of an organization wherein I could cherish my erudite dexterity to learn the nitigrities of consulting”

Huh? Anyone know what that means? We certainly don’t.

And in spoken English, the outcomes are no better. Whether it is a strong mother tongue influence, or a belief (mistakenly) that the faster one speaks the more mastery one has, there is much room for improvement. Well over half of the pre-screened résumés lack the English ability to effectively communicate in business. ...

2. You are good at problem solving, thinking outside the box, seeking new ways of doing things: Hard to find. Too often, there is a tendency to simply wait for detailed instructions and then execute the tasks – not come up with creative suggestions or alternatives.

Exhibit No. 2: I was speaking with a colleague of mine who is a chartered accountant from Britain and a senior professional. I asked him why the pass percentage in the Indian chartered accountant exam was so low and why it was perceived as such a difficult exam.

Interestingly (and he hires dozens of Indian chartered accountants each year), his take is as follows: the Indian exam is no harder than the British exam. Both focus on the application of concepts, but since the Indian education system is so rote-memorization oriented, Indian students have a much more difficult time passing it than their British counterparts. ...

3. You ask questions, engage deeply and question hierarchy: How we wish!

Exhibit No. 3: Consistently, managers say that newly graduated hires are too passive, that they are order-takers and that they are too hesitant to ask questions. “Why can’t they pick up the phone and call when they do not understand something?” is a commonly asked question.
You are also unduly impressed by titles and perceived hierarchy. While there is a strong cultural bias of deference and subservience to titles in India, it is as much your responsibility as it is ours to challenge this view.

4. You take responsibility for your career and for your learning and invest in new skills: Many of you feel that once you have got the requisite degree, you can go into cruise control. The desire to learn new tools and techniques and new sector knowledge disappears. And we are talking about you 25- to 30-year-olds – typically the age when inquisitiveness and hunger for knowledge in the workplace is at its peak.

Exhibit No. 4: Recently, our new hires were clamoring for training. Much effort went into creating a learning path, outlining specific courses (online, self-study) for each team. With much fanfare, an e-mail was sent to the entire team outlining the courses.

How many took the trainings? Less than 15 percent. How many actually read the e-mail? Less than 20 percent.

The desire to be spoon-fed, to be directed down a straight and narrow path with each career step neatly laid out, is leading you toward extinction, just like the dinosaurs. Your career starts and ends with you. Our role, as your employer, is to ensure you have the tools, resources and opportunities you need to be successful. The rest is up to you.

5. You are professional and ethical: Everyone loves to be considered a professional. But when you exhibit behavior like job hopping every year, demanding double-digit pay increases for no increase in ability, accepting job offers and not appearing on the first day, taking one company’s offer letter to shop around to another company for more money — well, don’t expect to be treated like a professional. ...

My message is a call to action: Be aware of these five attributes, don’t expect the gravy train to run forever, and don’t assume your education will take care of you. Rather, invest in yourself – in language skills, in thirst for knowledge, in true professionalism and, finally, in thinking creatively and non-hierarchically. This will hold you in good stead in our knowledge economy and help lay a strong foundation for the next productive generation that follows you.

Together, I hope we, your employer, and you, the employee, can forge an enduring partnership.

The author is a partner with KPMG, and these are his personal views.

How to Increase Your Law School's Academic Reputation

Law schools care deeply about their academic reputation.  If this were not true, my Indiana Law mailbox would not be stuffed full with glossy brochures sharing the news of faculty publications, impressive new hires, areas of concentration, and sundry distinguished speaker series, etc. 

Because of the timing of these mailings – I got nearly 100 in Sept and October—I am guessing that the senders hoped to influence the annual U.S. News & World Report Academic Reputation survey.  Cf. Michael Sauder & Wendy Espeland, Fear of Falling: The Effects of U.S. News & World Report Rankings on U.S. Law Schools 1 (Oct 2007) (reporting "increases in marketing expenditures aimed toward raising reputation scores in the USN survey"). But does it work?  A recent study by Larry Cunningham (St. Johns Law) suggests that the effect is, at best, decimal dust.  

Glossy brochures may not reliably affect Academic Reputation, but I have uncovered four factors that are associated with statistically significant increases and decreases of USN Academic Reputation.  To illustrate, consider the scatterplot below, which plots the 1993 ordinal rank of USN Academic Reputation against the 2012 ordinal rank [click on to enlarge].

Four sets of dot (Red, Blue, Orange, and Green), each representing distinctive shared features of law schools, tend to be above or below the regression line.  These patterns suggest that changes in USN Academic Reputation over time are probably not the result of random chance. But we will get to the significance of the Red, Blue, Orange, and Green dots soon enough.  

The primary takeaway from the above scatterplot is that 2012 USN Academic Reputation is overwhelmingly a function of 1993 USN Academic Reputation.   Over 88% of the variation is explained by a school's starting point 20 years earlier.  Part of this lock-in effect may be lateral mobility.  That is, there are perks at higher ranked schools: they tend to pay more; the teaching loads are lighter; and the prestige is greater, etc. So school-level reputations rarely change, just the work addresses of the most productive scholars.  This is, perhaps, the most charitable way to explain the enormous stickiness of USN Academic Reputation.

That said, the scatterplot does not show a perfect correlation; slightly less than 12% of the variation is still in play to be explained by influences other than starting position.  A small handful of schools have made progress over these 20 years (these are the schools above the regression line), and a handful have fallen backwards (those below the line).

The Red circles, Blue rectangles, Orange diamonds, and Green circles represent four law school-level attributes.  The Reds have been big gainers in reputation, and so have the Blues. In contrast, the Oranges have all experienced big declines; and as as a group, so have the Greens.  When the attributes of the Red, Blue, Orange, and Green Schools are factored into the regression, all four are statistically signficant (Red, p =.000; Blue, p = .001; Orange, p = .012; Green, p = .000) and the explained variation increases 4% to 92.3%.  As far as linear models goes, this is quite an impressive result. 

Before you look below the fold for answers, any guesses on what is driving the Red and Blue successes and Orange and Green setbacks?

Changed the Law School Name (average gain: +39.0)

Red circles are the five law schools that, over the last 20 years, have changed university affiliations and thereby changed their names.  These include:

• Michigan State University.  In 2004, the Detroit College of Law became Michigan State University College of Law.  DCL was ranked 155 in Academic Reputation in 1993;  in 2012, MSU Law was ranked 96, reflecting a 59 point jump, which is the largest in the dataset.

• Quinnipiac Law.  In the mid-1990s, the University of Bridgeport Law School became Quinnipiac University School of Law.  This switch in university affiliations came about as the result of law faculty and students wanting to distance themselves from the financial support given to Bridgeport from the Reverend Sun Myung Moon.  Since 1993, Quinnipiac's academic reputation has climbed from 166 to 123 (+43 spots).

• Seattle University.  In 1994, the University of Puget Sound transferred the sponsorship of its law school to Seattle University, leading to the renaming and relocation of the law school.  The reincarnated law school has fared well in USN Academic Reputation, increasing from 113 to 71 (+42).

• University of New Hampshire.  In the spring of 2010, Franklin Pierce Law Center signed an affiliation agreement with the University of New Hampshire, the state's flagship public university, and in turn changed its name.  UNH Law has fared well in the USN Academic Reputation survey, climbing from 151 to 123 (+28).

• Penn State Law.  In 2000, the independent Dickinson School of Law, one of the oldest law schools in the nation, merged with Big 10 powerhouse Penn State University.  The merger has been good for USN Academic Reputation, which has increased from 107 in 1993 to 84 in 2012 (+23).

So, USN Academic Reputation is likely influenced by the halo of a stronger university brand.  But this strategy is only open to a handful of independent law schools and those affiliated with a weak, financially struggling central universities.  So it is not generalizable as a strategy for increasing Academic Reputation.  Sorry to get your hopes up.

Well, what about the Blue retangles?

Conservatives Welcome (average gain: +28.3)

This one is a little counterintuitive.  I identifed three research-oriented law schools where, compared to the rest of the legal academy, conservatives have fared well during faculty hiring: George Mason, San Diego, and Pepperdine. Why these three? (If there are other law schools that have tried to build a strong conservative faculty brand, they have escaped my attention.)

1. George Mason's Law & Economics emphasis.
2. San Diego Law is a conservative Catholic law school that hosts The Right Coast blog.
3. Pepperdine Law is a Christian-centered law school that hired Kenneth Starr to serve as dean as dean after he rapped up this tenure as Independent Counsel of the Clinton Whitewater investigation.

As show in the scatterplot above, all three law schools have fared very well in Academic Reputation:  GMU (#76 to #51, +25), San Diego (#69 to #51, +18), and Pepperdine (#107 to #65, +42). 

But wait, fellow academics vote in the USN Academic Reputation survey, and supposedly we are an overwhelmingly liberal.  So why did these three conservative school fare so well?  This could be combination of three factors:

• Discounts on productive scholars.  Because GMU and San Diego are not put off by conservative credentials, they have gotten highly productive scholars at a discount.  Among law schools on SSRN, GMU Law ranks #18 in all-time downloads and San Diego ranks #21 -- both are significantly higher than these schools' USN Academic Reputation and overall USN rank. But this does not explain Pepperdine, which ranks #117.

• USN "echo chamber" effect.  My colleague, Jeff Stake, has documented that a school's USN Academic Reputation is influenced by changes in its overall USN ranking.  So, if a school manages to increase its overall rank, USN Academic Reputation then rises.  See Stake, The Interplay between Law School Rankings, Reputations, and Resource Allocation, 81 Ind. L. J. 229 (2006).  A strong conservative brand probably helps a law school attract more than its share of highly credentialed conservative students.  Until 2001, GMU Law was perennially a T2 law school; but in 2012, it was ranked #39.  Likewise, until 2004, Pepperdine was perennially a T3/T4 (note their used to be five USN tiers); but in 2012, it was ranked #49.  In contrast, USD Law (ranked #69 in the USN Overall in 2012) has increased its Academic Reputation significantly but moved sideways in the rankings (query: did USD understand the optimal tradeoffs between LSAT and UGPA?)

• USN Voters.  The Survey voters are supposedly deans, associates deans, and newly tenured faculty.  It is at least conceivable that administrators are, as a group, less liberal than their faculty.  After all, they have to balance the law school budget each year.  Similarly, law school administrators, who are accountable to central universities, and younger faculty, who just cleared the tenure gauntlet, are probably quite in tune with law schools comprised of highly productive scholars.  And San Diego and GMU Law excel on that metric.  This might be a non-factor.  It is hard to tell.

If moving on USN Academic Reputation is really important to a faculty, the lesson here is, "make a hard, high-profile right turn, and wait a decade."  That said, there are probably not enough spoils to go around for more than a handful of conservative law schools to use this strategy.

Name changes and conversativism are the factors associated with an increases in USN Academic Reputation.  What are negative factors?

Scandals and negative NY Times coverage (average drop: -24.3)

The three orange triangles are three schools that gained unprecedented notoriety based on either a rankings scandal or extensive negative treatment in the New York Times.

• Scandals.  Illinois and Villanova both voluntarily disclosed that they submitted false admissions credentials to both the ABA and U.S. News.  And both have taken a huge hit:  within the incredibly stickly Tier 1, Illinois's Academic Reputation rank was #22 in 1993, #22 in 2011, and then #39 in 2012 (-17); similarly, Villanova's went from #69 in 1993, to #62 in 2011, to #106 in 2012 (-37).  Quite a severe pummeling by USN voters!

• New York Times coverage.  In his year long focus on law schools, David Segal of the New York Times signaled out New York Law School as a particularly egregious example of the excesses of law school.  See Segal, Law School Economics: Ka-Ching!, N.Y. Times, July 16, 2011.  If you were teaching in legal education in 2011, you read that article.  New York Law School's Academic Reputation went from #95 in 1993, to #94 in 2011, to #114 in 2012 (-19).  Ironically, New York Law School was embarking on real innovation in the years prior to the story, but negative press in the NY Times, regardless of accuracy or fairness, is a bell that can't be unrung.

The last factor is perhaps the most troubling. 

Schools in the Rust Belt (average drop: -13.0)

There are 31 schools in the so-called Rust Belt, which I define as western PA and NY, Ohio, Michigan, Indiana, Illinois and Wisconsin. These 31 law schools experienced an average USN Academic Reputation decline of 13 spots.  And note, this includes the MSU Law +59 miracle jump and several elite law schools such as Northwestern (-2), Chicago (-3), and Michigan (-3) that are in the highly sticky T14 range.  So, to get a -13 average, we need some really big negative numbers from many law schools.  

Here, I will not name names.  Instead, let me share the ten biggest drops by Rust Belt schools: -17, -20, -27, -30, -34, -34, -42, -43, -46, -49.  Eight of the ten biggest 20-year drops were Rust Belt schools (and one of the remaining two was Villanova, which earned its spot through scandal).

Why is this happening?  Well, the economic center of gravity of the US economy has been moving to the south and west for several decades now.  Although this affects the Northeast just like it does the Midwest, the Northeast has become an agglomeration of "advanced producer services", which includes bankers, consultants, accountants, and lawyers.  See Henderson & Alderson, The Changing Economic Geography of Law U.S. Law Firms (2008) (documenting a large increase in corporate law lawyers in the Northeastern Mid-Atlantic region and the relative hollowing out of corporate lawyers in the Rust Belt, with the exception of Chicago). 

The implication is that regional law schools in the Rust Belt are more likely to be serving a stagnant regional economy.  This is not particularly attractive to prospective law students.  See Henderson & Morriss, Student Quality as Measures by LSAT Scores: Migration Patterns in the U.S. News Rankings Era, 81 Ind. L. J. 163 (2006) (documenting that students will trade down in USN ranking to attend a school in large and growing corporate legal market).  So this is likely the "echo chamber" effect playing itself out in conformity with larger systemic trends affecting the legal market.  See Stake, supra.

Some might argue that the declines are the result of academic snobbery against the flyover states.  If so, this prejudice must have arisen with avengence during the last 20 years.  Or, less plausibly, some might argue that these schools have had a harder time recruiting or retaining sufficiently talented, productive faculty.  Remember, this is the same survey that boosted Detroit College of Law a record +59 jump when it made the 90-mile move to East Lansing ... which is very much in the Rust Belt.  That +59 point jump probably had a lot more to do with a Big Ten brand than the production of high quality faculty scholarship.  

After we consider starting position, the Jeff Stake "echo chamber" effect, scandals, name changes, conservative branding, and basic measure error inherent in any survey work, how much unexplained variation can we really assign to the true changes in the academic quality of law schools?  To my mind, virtually nothing.   

Below is a scatterplot that places Predicted 2012 Academic Reputation (based on starting position, name changes, conservativism, scandals, and Rust Belt status) against Actual 2012 Academic Reputation. [click on to enlarge.]  

The top three outperformers in the new model are Alabama, Georgia State and Stetson.  Was their secret sauce a better faculty, or the echo chamber aided by sunny weather, a growing southern economy, and/or cheap in-state tuition in an era of rising costs?  Regardless, congrats!

Conclusion

Here is a very big puzzle.  Law faculty are comprised of very smart people, yet we organize virtually all of our hiring, strategic plans, and marketing efforts in an effort to make gains in a reputational game that cannot be won.  Why?  That is a very big topic and, alas, the basis for a future post.

[posted by Bill Henderson]