Sunday, November 24, 2013
That is the title of a panel at the Annual Georgetown Advanced E-Discovery Institute conference. In an article in Law Technology News, Monica Bay does a wonderful job summarizing what appears to have been a lively, thought-provoking discussion. I can't do better than Monica, but I so want to highlight some of quotes that really caught my eye:
[DC Federal Magistrate Judge] Facciola served as moderator, and threw the first question at Butterfield [partner at Hausfeld], who dove right into a discussion of the explosion of data creation, citing a laundry list of impressive facts, including that "every minute of every day Google receives two million queries ... 571 websites are created every minute ... and more than 200 million emails are sent every minute. We are communicating in ways that didn't exist 20 years ago," he said. ...
Facciola asked Butterfield if he was troubled by the outsourcing of e-discovery to nonlawyers and/or machines. "I do see the tension because lawyers must certify the work," Butterfield acknowledged. ...
Facciola then turned to [SDNY District Court Judge Shria] Scheindlin, who shifted the focus to the courts. "All cases are now e-discovery cases," she asserted. "Even the littlest cases have e-discovery, everyone has to know how to do it," she said. ...
Scheindlin said we are entering an era of a divide between the "technology haves and technology have-nots," and noted that small firms may not be able to afford the start-up costs that e-discovery requires. She reminded the audience that not every litigant can afford a lawyer. "Twenty-five percent of my cases are pro se," she said. ...
Facciola then posed the question of whether lawyers as a group welcome technology and change.
"I think the reality is that most lawyers are not innovators and are afraid of technology," offered Redgrave. "There is a reality that to have continued value, lawyers need to understand technology. ... "
Asked Facciola: "Is this 'Star Trek'?" Scheindlin jumped in: "Of course trials will change—the question is, will we have trials anymore?" Scheindlin noted that routine technology, such as GPS, cellphones, Facebook and other location tools are changing our daily reality to the point where it's increasingly easy to prove facts. "There are no conversations any more, it's emails and texts. We will know where folks are," she said. ... Technology is making it so we always know where people are; thus no need for alibi witnesses." ...
Finally, lawyers need to abandon the "gladiator" role that is imprinted in law school, the panelists asserted, taking strong pokes at the current status of law schools.
"Do I think legal education is keeping up [with technology and cooperation]? Absolutely not....
Scheindlin warned academia that they need to get with the reality. "I think the notion of a two-year law school is coming, with the third year clerking." But, she qualified, "I wouldn't be surprised if law schools turn around. The younger generation is more tech savvy than we are. Many lawyers are technophobic, but the next generation is growing up with technology."
That was quite a provocative exchange, and not by legal futurists, but judges and practicing lawyers presiding over cases in federal court.
- How Do Law Professors Learn About the Intersection of Law and Technology?, LWB, Dec. 29, 2012.
Sunday, November 17, 2013
Two years ago, when all other large law firms were slashing expenses to prop up partner profits, Milbank Tweed went in the opposite direction and invested heavily in an executive education program for midlevel associates. The program, called Milbank@Harvard, required all 4th, 5th, 6th, and 7th year associates to spend one week per year at Harvard University taking course work from HLS and HBS professors along with Milbank partners. At the time, I wrote an in-depth analysis for the Am Law Daily. See Milbank's Big Bet, May 11, 2011.
In the video below, Bloomberg Law provides an update on the program via an interview with David Wolfson, the Milbank partner who oversees the firm's professional development programs. Here are three takeaways from Lee Pacchia's interview with Wolfson:
- Two years in and its a big success. Law firms are innovating these days, but they don't always advertise what they are doing lest their failures become public or their successes get copied. Why is Milbank talking about this very expensive program? My best guess is that the firm's bet is paying off. Thus, the firm is in an ideal position to use the program to differentiate itself in the minds of clients and prospective recruits, including laterals. In short, this is the branding component of a longer term strategy. To get his payoff, Milbank started three years ago and invested--back of the envelope calculation--$20 million, which amounts to $150,000 to $200,000 of forgone profits per equity partner.
- The skills gaps are primarily in business and leadership. Wilson criticizes law schools for not doing more in this area, particularly in the collaboration and leadership areas. But he also acknowledges that the biggest part of hard skills gap, financial literacy and acumen, requires learning in context. At year four, the associates know what they don't know. The original Cravath System was a lawyer development machine. So is Milbank@Harvard, albeit the specifications have been updated.
- The idea for Milbank@Harvard came from a German partner. One of the many fruits of globalization is getting an outsider perspective on old problems. Perhaps U.S. law firm partners are too embedded in the year-to-year AmLaw league tables to see and appreciate the power of a longer-term strategy based on aligning the needs of clients, partners, and associates. That said, the American brain trust at Milbank was smart enough to listen their German partner.
In this book, Tomorrow's Lawyers, Richard Susskind predicts that the market for high-end bespoke legal services will consolidate to "20 global elites." That said, 50 to 100 US and UK firms are hoping to make that cut. This gradual winnowing process is what is causing all the groaning these days from millionaire BigLaw partners.
Milbank is one of the few firms, however, that is pursuing a unique, public strategy: (a) attract, develop, and retain mid-level associates who know they need business training, (b) impress clients through improved value in the mid-level ranks, and (c) as I noted in the original Milbank's Big Bet essay, make Milbank the preferred recruitng grounds for in-house legal talent.
To my mind, that is a compelling and likely winning strategy.
Sunday, November 10, 2013
I think the answer is yes. For the last several years, I have been an avid watcher of Axiom's growth, but this article in Friday's Houston Business Journal finally convinced me that the top-end of the legal industry is changing and that Axiom is setting the standard for disruption.
On a surface level, many of the facts in the HBJ article are unremarkable. Axiom opened its Houston office back in May 2012. Since then, it has grown to 30 lawyers and expects to add another 15 over the next 12 months. Yet, during this same period, the boom in the energy sector has caused several national and international law firms to also open offices in Houston, including Reed Smith, Dentons, Katten Muchin, and K&L Gates,
Axiom and large law firms are definitely targeting and servicing the same clientele -- Fortune 100 legal departments. The substance of their work is also very similar -- sophisticated, complex legal work related to disputes, transactions, and compliance. But in many cases, the solutions offered by Axiom are radically different.
Okay, now a reasonable expectation of any reader is likely to be, "Now explain that difference." Back in 2010, Axiom's CEO Mark Harris told Law Practice magazine that Axiom was "trying to invent a whole new category of law firm. When you’re doing that there is no vocabulary [to describe your business model]."
In my experience, the opaqueness of Axiom's business model actually works to its advantage. Specifically, it encourages Axiom's primary competitors (large law firms) to put Axiom in a box based on an outdated caricature. That, in turn, gives Axiom more running room to fully implement the "whole new model." Let me start with the caricature; then I will do my best to explain what the company actually does.
The Inaccurate Axiom Caricature
In its early years, Axiom was described by many as a high-end "temp" service for legal departments. See, e.g., Peter Lattman, Axiom: A Different Kind of Legal Practice? WSJ Law Blog, Nov. 27, 2007 (describing Axiom as having developed "a niche as a provider of high-end temp services to blue-chip corporate clients").
The simplified version runs like this. Lawyers working in large law firms trade-in their partner status, or shot at partnership, for more autonomy and a better work-life balance. By brokering relationships between legal departments and skilled but disaffected lawyers, Axiom ditches the "class A" overhead and reduces the allocation of legal fees that would otherwise support record law firm profits.
Under this caricatured model, all parties are made better off -- the client (who gets the same quality work, but cheaper), the lawyers (who get off the billable hour trend mill and are able take vacations again), and Axiom (which collects a fee). The caricatured model also enables large law firms to dismiss the Axiom model on the belief that only a small tranche of legal work is at risk of being siphoned away. And that work is lower margin and price sensitive -- so-called "commodity" legal work. Finally, the lawyers leaving for Axiom are not the heavy-hitter equity partners who control client relationships. Hence, the analysis is complete: Axiom represents zero threat to the BigLaw model.
Yet, if brokering lawyer services was originally the core of Axiom's business, they have subsequently expanded their offerings. Back in 2007, Axiom was #73 on Inc magazine's list of fastest growing companies, with revenues of $17 million per year and 1000%-plus growth over three years. Since then, its revenues have grown another ten-fold. Earlier this year, Axiom took $28 million in outside investment, which it plans to invest in technology. See Mark Harris of Axiom Answers Hard Questions, Legal Whiteboard, Sept. 25, 2013.
With this kind of growth, and the backing of very serious venture capital funds, perhaps its time to check the assumptions surrounding the Axiom caricature.
The "Managed Services" Business Model
Based on my own discussions with Axiom management and several articles on the topic, see, e.g., Adam Smith, ABA Journal, Strategic Legal Technology Blog, the fastest growing part of Axiom's business is its "Managed Services" practice.
Part of the managed services practice is analyzing and redesigning workflows so that in-house lawyers have the cost and quality information needed to make better sourcing decisions. Because Axiom is helping to redesign the workflows, including the specifications for sourcing decisions, it is well-positioned to do much of the resulting work -- indeed, unless it can manage both the design and execution of the work flow, Axiom can't warranty the results.
What is the goal of the workflow redesigns? To reduce legal risk and legal cost at the same time, primarily through process, measurement, and feedback loops. Virtually the entire law firm and law school universe is stuck in a mental frame that believes that better, faster, and cheaper are in permanent tension with each other. This is because our mental frame of reference is based on artisan-trained lawyers working in a traditional office environment with Word, email, and a searchable bank of forms and briefs.
Yet, when systems engineers, information technologists, and project managers because equal members of the team, "better, faster, cheaper" becomes a straightforward problem that can be solved through a four-part continuous process: design, execute, measure, repeat.
Much of the key design and execution work at Axiom is done by nonlawyers who formerly worked for global consulting businesses. See, e.g., this opening in Axiom (Chicago) for Project Management Director of Managed Contracts.
Indeed, the head of Axiom's Houston office is Brian Bayne, a business development professional with an MBA from the University of Dallas. Before joining Axiom, Bayne worked for IBM. Here is how Bayne described Axiom to the HBJ:
"The heart of what motivates us as a company is to be seen as an agent of change ... . We want to be a leading voice for transition in the industry. It really is a new way of doing business and offers a completely different value proposition that most law firms are not in a position to do."
Is Axiom a Law Firm?
Over at the E-Lawyering Blog back in April, Richard Granat did a very careful job trying to answer this question, and concluded that the answer was "no." In fact, Axiom is a Delaware C-Corp with nonlawyer investors as equity shareholders.
So, how is Axiom getting around the Rule 5.4 ban on fee-splitting with nonlawyers? The answer to this question has a lot to do with the nature of outsourcing and managed services within legal departments. A general counsel for a corporation controls the legal functions of the company. Because he or she can't do all the work themselves, they hire in-house legal staff and outside counsel. In recent years, legal departments have also contracted directly with LPOs, particularly on matters related to e-discovery and M&A due diligence. When it comes to non-law firm options, such as LPOs, the general counsel and his or her staff are "supervising" the work within the meaning of the legal ethics rules.
When a general counsel of a corporation uses a managed service provider, such a Axiom, they are diverting a tranche of work they control. The value of the managed service provider is process expertise plus economies of scale and scope. Axiom, through a contract with the legal department, manages some of that legal workflow that supports in-house lawyers in their counseling and compliance roles. Yet, the buyer of the managed services is himself a lawyer, and that lawyer is ultimately responsible for advising the corporation on legal risk.
On one level, Axiom is a niche business. As Granat notes, "If you don't have an in-house counsel, then you can't use Axiom's services. Not being a law firm, Axiom cannot provide services to the public (individuals or organizations) directly." Yet, this niche accounts for a huge proportion of the entire legal services market. In this American Lawyer article, one of Axiom's venture capital investors, opined "With a worldwide legal market that is a trillion dollars each year, there is plenty of running room to build a successful business."
Ultimately, the value proposition very simple. As an in-house lawyer, you can educate yourself on the Axiom managed services approach and be comfortable that, through process and measurement, you have a solid handle on this tranche of the company's legal work, likely within budget. Or you can have the CYA coverage of a brand name law firm and continue to do battle with your CFO over rising legal fees. If you were an investor, which approach you would bet on?
So Axiom can't help you with your divorce, will, or personal injury case. Don't worry, Jacoby & Meyers, Legal Zoom, Legal Rocket, and others are trying to tap into that market. See Legal Futures, Nov 8, 2013. In the meantime, Axiom may be gunning to be a service provider to your large corporate employer.
The Last Days of a Bloodless Revolution
I am sure that a state bar regulator, taking a very formalistic approach, can take issue with Axiom's construction of Rule 5.4, which prohibits profit-sharing between lawyers and nonlawyers from income generated from the practice of law. But the purpose behind Rule 5.4 is to preserve lawyer independence so that the quality of the underlying legal advice won't be compromised by the nonlawyer's pursuit of profit.
In the case of Axiom, however, the person making the buying decision is a highly sophisticated lawyer who is struggling to manage his or her organization's legal needs within a budget. Stated bluntly, the GC of a multinational corporation does not want the kind of consumer protection that a formalistic construction of Rule 5.4 would provide.
A betting person, such as a nonlawyer Axiom investor, would likely conclude that the bar regulators are not going to pick a fight with the largest corporations headquartered in their jurisdiction. Why would they? The subtext of economic protectionism would set them up for ridicule in the legal and mainstream press--who, exactly, is being harmed besides the law firms who are losing market share? And is there a principled basis to distinguish LPOs from managed services?
Expect to read more about state regulators in the "risk factors" section of Axiom's S-1 registration statement if and when Axiom decides go public. I think these risks will likely remain hypothetical, but as my friend Ed Reeser is known to say, "That is just my opinion. I could be wrong."
Truth be told, the nonlawyer revolution in U.S. legal services is occurring right now. And there is a good possibility that the whole revolution will take place without a single shot ever being fired.
Back to Houston
The HBJ reporter asked a local Houston legal recruiter about the future prospects for Axiom. The recruiter commented that he was "[n]ot sure how well they will do in Texas, given the conservative nature of the legal business here."
In my own experience, general counsel in Texas are among the most innovative and entrepreneurial in the country. The General Counsel Forum was originally founded in Texas as a state-level organization, and it is now rivalling the Association of Corporate Counsel (ACC) in terms of eduational programming for in-house lawyers and sharing best practices and benchmarking.
Lawyers as a group may be conservative, but within that distribution there is a small cadre of innovators and early adopters. Although most people don't change their behavior in response to abstract ideas, innovators and early adopters are at least drawn to the possibility. Not every idea will be successful -- indeed, the trial and error of the innovators is often a basis for dismssing them as fringe players. Yet, when an innovation produces a significant leap forward, the resulting success eventually sets off a widespread diffusion among the broader population.
There is a rich sociological literature on this topic, which was pioneered by Everett Rogers in his 1962 book, Diffusion of Innovation. It turns out that self-interest is often inadequate to overcome inertia and prejudice, at least in the short- to medium-term. The classic example is hybrid seeds, which have a host of advantages for producing more bountiful, disease-free crops. Yet, that innovation took decades to take hold among farmers.
Looking for another example? In the early 1980s, Bill James was publicizing the benefits of his stats-driven approach to baseball. The advertised benefits were clear -- "you can win more baseball games." Isn't that what every baseball team wants? But what's the cost? "Well, you'll have to change the way your evaluate talent." For nearly twenty years, the implicit answer of the baseball establishment was "no, that price is too high." Within the last decade, however, the stats-driven appoach has become commonplace in baseball and in other sports as well. The innovation has become diffuse.
I suspect that Axiom's senior management fully understands these dyanmics. Looking at the distribution model from Everett Roger's book, if you are trying to sell your unproven innovation, you are literally wasting your time trying to sell to your wares to 85% of the market. Indeed, if you are in the very early stages of innovation, 98% of the potential buyers are likely to be resistant to your pitch.
The problem here is not economics -- its human nature. This may be hard for many lawyers to believe, but lawyers, including general counsel, are human beings. And human beings are prone to a series of predictable reactions when presented with various stimuli, such as new ways to perform their work. Rather than process the merits of the idea, many human beings, including lawyers, will instead gauge the reactions of the market leaders. If the market leaders react with approbation, the early and late majority become willing to actually engage with the idea.
What this means is that the merits of a good idea are not enough to ensure its success, at least immediately. This is a key practical insight that the reformer/innovator class seldom grasps. Without understanding Roger's Diffusion of Innovation curve, an innovator's success becomes a function of timing and luck -- that is the story of Bill James.
But if you understand the diffusion process, it is possible to construct a filter that locates the innovator/early adopter class. And if you study their beliefs and problems, you can more effectively tailor your pitch. This approach saves time and money and holds the team together in the belief that they will ultimately be successful.
So, where is Axiom on the Rogers Diffusion Curve?
My best guess is the "early adopters" stage, as Axiom has relationships with roughly half of the Fortune 100 and is working hard to widen those relationships with more ambitious projects. Their goal, as best as I can tell, is to generate a clear proof-of-concept that they have solutions to the risk/cost conundrum that plagues so many legal departments and causes them to blow their budgets. With sufficient market testimonials, and as in-house lawyers with exposure to Axiom migrate to other legal departments, the broader legal market will begin to tip.
I find the Axiom story refreshing, primarily because the legal market has fallen under the spell of the fast follower strategy. In my travels, I often encounter the attitude "Let someone else prove that it can be done differently and better and then we will follow." When virtually the entire market adopts this worldview, incumbent institutions begin to relish the false starts of others and a general sense of complacency begins to set in. Frankly, I find this whole dynamic unprofessional is the classical sense of that word -- i.e., at variance with professional standards and conduct.
Axiom, in contrast, is on the brink of demonstrating the benefits of the first mover advantage in law. This is bound to have the beneficial, balancing effect on the rest of us.
- "LPOs Stealing Deal Work from Law Firms", Feb 6, 2013.
- Mark Harris of Axiom Answers Hard Questions, Sept 25, 2013.
November 10, 2013 in Blog posts worth reading, Current events, Data on the profession, Innovations in law, Law Firms, Legal Departments, New and Noteworthy, Structural change | Permalink | Comments (0)
Friday, November 8, 2013
Clayton Christensen is the Harvard Business School professor who wrote The Innovator's Dilemma, the seminal book on why successful businesses so rarely stay on top over the long term. Although focused on the tech industry -- where product cycles are very short -- Christensen's framework has a much wider application, including legacy industrial enterprises and countries. In 2011, Christensen published a book called The Innovative University, which applied the Innovator's Dilemma framework to higher education.
Below is a YouTube video of Christensen explaining his thesis to a conference in Dallas organized around the future of public universities. His talk is very long by online video standards (80 minutes) but worth the time of anyone who wants to understand the Christensen framework and its application to higher ed. At approximately minute 45, Christensen specifically mentions law schools. Below the video is some additional context on Christensen.
Remember that near presidential coup at University of Virginia, which was reported in the New York Times Magazine last fall (link)? Well, Christensen's ideas had begun to propagate within the university trustee community, thanks in part to a letter than Christensen and Henry Eyring had recently written to the American Council of Trustees and Alumni (ACTA).
As discussed in the New York Times article, the coalition that was animated by Christensen's ideas was ultimately defeated by the palace guards. But that was the first attempted coup at a major research university, not the last. As Christensen points out in the video, universities are feeling pressure from innovative models that "compete against nonconsumption." In other words, lots of people would like the knowledge taught in the great universities, but that demand goes unsatisfied because of selective admissions requirements, tuition, and geography.
MOACs are the first volley in figuring out this untapped market. Those that dismiss MOACs as irrelevant are missing the bigger picture of what early stage disruption looks like.
Specifically, according to Christensen, here is the recurring dynamic: the new entrants siphon off work from the bottom-end -- work that the high-end says it does not want anyway. The cycle repeats itself a few times until, much to the incumbents' surprise, the bottom-end becomes more economically relevant and powerful. Why does top-end let this happen? Because the incumbents have come to view success as elite status and high margins, which is an unrealistically high long-term bar unless you are continuously innovating. Eventually, the so-called high-margin niche becomes insufficient to sustain the enterprise, and giants fall -- see the automotive industry, steel, computer hardware, televisions, consumer electronics, etc.
That said, does the university model of education have a life cycle, or is it above these coarse market considerations? I think it probably does.
In the year 2013, lots of knowledge is free or incredibly cheap. Next year, even more, and so on for the foreseeable future. As a result, many people are able to become astonishingly knowledgable and skilled because of the sheer joy of learning and becoming more competent. It turns out that university credentials are a pretty noisy signal for knowledge and competence -- a small positive correlation, yes, but not much more. This is an information gap problem.
In terms of sheer productitivity, most employers would prefer the folks who are driven to learn and continuously improve. Google has already figured this out, as a substantial portion of their high-end workforce has never completed college. Google employs them for their abilities, not their degrees.
When opportunity is unbundled from university credentials -- i.e., the information gap problem described above becomes cost-effective to solve -- the demand for university education as it currently exists (expensive and in limited supply) will go down. From a social perspective, this is a good thing. But it means that universities will have to innovate in the years to come in order to justify our tuition and fees.
Sunday, October 27, 2013
There is an interesting article in The Times of India business section that says, essentially, large Indian corporations are realizing that legal strategy and compliance are too important to not elevate these functions to the C-Suite. As a result, the pay, influence, and prestige of in-house positions in India are now very much on the rise.
This is the same evolution that has occured in the U.S. over the last two to three decades, albeit the evolution appears to be occuring in India at a much faster pace. So any temporal gap in structure is unlikely to be permanent.
This dynamic reminds me of my visit to India in 2009, when Marc Galanter and I spend time with several law firm leaders. One of the most striking features we noticed is that all the name partners were alive and very much in their prime. (In the U.S., the equivalant year would have been roughly 1940.) These lawyers very much enjoyed being engaged on the future of India. And unlike the U.S. or U.K., where the market is now defined by league tables, the topic of money never came up -- granted these Indian lawyers were all making plenty of it.
One of the things most on the minds of the Indian law firm leaders was how they could create a vital, useful organization that would survive them. So, much to our surprise, the India law firm leaders discussed things like Kaplan Balanced Scorecard for determining partner compensation (based on the work HBS Professor Robert Kaplan). Another leading law firm, Nishith Desai, constructed its entire firm based on the best practices of professional services firms worldwide. This was the result of a 20-year reflection on this topic by the firm's founder, who is also still in his prime. See Nishith Desai, Management by Trust in a Democratic Enterprise: A Law Firm Shapes Organizational Behavior to Create Competitive Advantage, Wiley Journal of Global Business and Organizational Excellence, Sept/Oct 2009.
It was almost as if the Indian bar was skipping 100 years of evolution and instead decided to converge immediately on the state of the art. Well, the same may be happening in India legal departments.
Wondering what a Kaplan Balanced Scorecard looks like? Here is a good sample.
Tuesday, October 22, 2013
My colleague and collaborator, Chris Zorn, is teaching a course at Penn State called "Big Data & the the Law." It draws upon several disciplines, including the law. See BDSS. He has been telling me about the crazy creative projects that are taking root in this class, which includes aspiring statisticians, geographers, political scientists, sociologists, public health professionals, and information science folks (alas, no law students, though the course was open to them).
Data visualization is one of the lynchpins of big data interpretation. Below is a very good example. It was generated by Josh Stevens, a grad student at Penn State who is enrolled in the class. I am told this specific work flowed out of the GDELT hackathon hosted by BDSS a few weeks ago. Kind of useful for allocating scarce resources to reduce violent conflict. Uses both time and space. For the full context, see this post.
Sunday, October 20, 2013
I would. The best example of ODR I have come across is Modria, who's tagline is "Any issue, resolved."
Before dismissing Modria as a trivial Internet parlor game, consider this: The technology and process at work here got its start at Paypal and Ebay. Why did Paypal and Ebay become so good at dispute resolution? Because their goal of becoming mega-volume businesses depended on it. If you have millions of transactions daily, a huge volume of low-stakes complaints is inevitable. If dissatisfied customers stay dissatisfied, they don't come back. Worse, they'll talk to their friends.
Now watch is video. Note that the target audience is businesses who (a) feel disputes are a drain on their time and energy, and (b) want happy, loyal customers who vouch for them to friends and family. A prompt, fair resolution to a dispute actually deepens the trust relationship. That's not speculation. That's science. And Modria, and it investors, know that.
In this book, Tommorrow's Lawyers, Richard Susskind talks about ODR as a highly disruptive innovation that will fundamentally alter the legal landscape. It is hard to fully appreciate that claim without seeing concrete example, like the Modria business model, up and running. Many businesses could be drawn to Modria, but so could/would many smaller governmental units. Indeed, several (progressive) county governments have become clients (e.g., on property assessment appeals).
Modria is disruptive because so many forums for resolving disputes, such as courts, repeat-player arbitrations, and various government boards, are not perceived as prompt, fair, and/or just, often times because costs of dispute resolution are so high. So even if the dispute is resolved correctly on the merits--for the subset who can pay the cost--there remains a large residue of dissatisfaction.
This is fundamentally a problem of institutional design. (The ReInvent Law folks understanding this.) The goal, or ought to be, a speedy, low-cost, resolution that is maximizes on the uumber of user who perceived the outcome as fair. Does any state or federal court think this way? In Tomorrow's Lawyers, Susskind asks whether "court is a service or a place" (p. 99). Alas, this is a staggeringly very large market.
Check out the management team of Modia. These folks come primarily from the dispute resolution programs in business and public policy schools. It is worth noting, however, that Modria's Board and its big-time investors include several lawyers, including Jason Mendelsohn, a former lawyer at Cooley who now works as a venture capitalist. Jason has invested in other businesses in the emerging legal vendor space.
Times are changing. And the pace of that change is picking up.
October 20, 2013 in Cross industry comparisons, Current events, Data on the profession, Important research, Innovations in law, New and Noteworthy, Structural change, Video interviews | Permalink | Comments (4)
Tuesday, October 15, 2013
Below is job posting for a new type of job called a "legal solutions architect."
The job post just appeared on the website of Seyfarth Shaw, a large law firm based in Chicago. Seyfarth was one of the first to embrace the movement toward technology and process. See Six Sigma at Seyfarth Shaw, Legal Professions Blog, April 14, 2010.
Before getting to the text of the ad, a few of observations for what this posting is telling us about legal education and the emerging legal job market:
- This is a pure JD advantaged job. "Juris Doctor or MBA with legal industry experience strongly preferred job" (emphasis in original). It is full-time, long-term job in downtown Chicago. it is not reviewing documents. This is a good professional job doing very sophisticated and challenging work.
- The job is not partner-track. But it terms of economic potential and job security, does that matter? In the years to come, folks that understand the overlay between law, technology, and process are going to be great demand and have a lot of options.
- Undergraduate education matters, but the majors are far from typical among traditional law students: finance, business administration, computer science, or "other technical discipline."
- It is easier to get this job if an applicant has familiarity with "extranets, intranets, document assembly, enterprise search, relational databases and workflow." Also, it is "a plus" to have "familiarity with Agile and Scrum [two software development tools]." We don't teach any of this stuff in law school. Perhaps we should.
- The required skills are an blend of technical skills and knowledge plus higher order professional abilities that, frankly, are not explicitly taught in law school. Law schools need to take notice, as this an order any decent professional school should be able to fill.
Now the actual job posting:
Legal Solutions Architect
Seyfarth Shaw is one of the most progressive, forward-thinking law firms in the world. Seyfarth’s commitment to delivering legal services in a new way through its SeyfarthLean program - with an emphasis on value and continuous improvement - has been praised by the Association of Corporate Counsel (ACC) as being “five years ahead of every other AmLaw 200 firm.”
Legal Solutions Architects anticipate, identify, sell and drive innovative business solutions. Through an understanding of technology, knowledge management, business analysis, process improvement and project management, this role provides solutions that enhance the client experience. These multidisciplinary resources are aligned with Firm strategy and play an important role in driving the Firm’s innovative approach to the practice of law and the delivery of legal services.
This position will report to the Director of the Legal Technology Innovations Office. Seyfarth Shaw recently received awards for 2013 Innovative Law Firm of the Year and Innovative Project of the Year, and the efforts of the Legal Technology Innovations Office played a significant role in earning those recognitions.
- Partner with clients, Seyfarth legal teams and legal project managers to enhance the delivery and effectiveness of services provided within legal engagements
- Translate stated and inferred needs of clients and attorneys into specific technologies and methods
- Synthesize the needs of multiple engagements and create requirements for systematic solutions that underpin Seyfarth’s varied legal practices
- Team with the Application Development Group to design and plan for custom solutions and oversee the construction and implementation of these systems
- Manage multiple projects concurrently, juggling priorities, deadlines and essential duties for each project
- Collaborate with other Firm departments, including Legal Project Management Office, Practice Management, Finance, Marketing and Professional Development to provide comprehensive solutions
- Act as an effective change manager – keeping client and Firm culture, group behavior and individual habits in mind in order to best circumnavigate roadblocks and pitfalls for solution adoption
- Provide presentations to individuals, small groups and large audiences of clients and Seyfarth attorneys in a persuasive and encouraging manner
- Contribute to continuous improvement, promote the use of technology solutions and help improve the awareness of the impact of the solutions on the business
- Perform vendor due diligence and serve as a point of contact for third-party technologies leveraged by the Firm
- Conduct market, external and internal research and convey results to forward assigned projects and to aid projects lead by teammates, other groups and other departments
- Proactively research and maintain knowledge of emerging technologies and service delivery models and possible applications to the business
- Highly motivated self-starter with an entrepreneurial bent
- Uses intelligence, creativity and persistence to solve varied, non-routine problems
- Possesses an understanding of knowledge management, process improvement and legal project management and an appreciation of the benefits to law firms employing these approaches
- Passion for legal technology, including technical platforms, specific technical applications and their impact on the practice of law
- Keen grasp of project management, flexible in project execution and able to meet aggressive deadlines
- Strong business analysis approach
- Visualizes how raw data can be converted into useful information for client and Firm decision-makers
- Pays attention to detail but still maintains focus on the bigger picture
- Comfortable working both independently and in diverse teams
- Excellent written and verbal communicator that is able to distill complex concepts into simple messages
- Familiar with the software development cycle
- Capable of managing and motivating up, down and across the organization
- Appreciation for user interface and user experience design
- Embraces change and seeks to create order from chaos
- Bachelor’s degree, preferably in finance, business administration, computer science or other technical discipline
- Juris Doctor or MBA with legal industry experience strongly
- Experience working within a large law firm preferred but not required
- Familiarity with extranets, intranets, document assembly, enterprise search, relational databases and workflow preferred
- Familiarity with Agile and Scrum a plus
Seyfarth Shaw is committed to working with and providing reasonable accommodation to individuals with disabilities. If, because of a medical condition or disability, you need a reasonable accommodation for any part of the employment process, please call (312) 460-6545 and let us know the nature of your request and your contact information. We offer an outstanding benefit package which includes: medical/dental, 401k with employer contribution; life insurance; transportation fringe benefit program; generous paid time off policy; and long-term and short-term disability policies. Equal Opportunity Employer M/F/D/V
Sunday, October 13, 2013
General counsel from large legal departments are becoming increasingly skeptical of the value provided by leading brand-name law firms, such as the AmLaw 20 or the Magic Circle. That is the conclusion of some compelling research just posted on the HBR Blog Network, the online idea forum run by Harvard Business Review.
The research was conducted by AdvanceLaw, which is a company that vets law firms and lawyers on an as-requested basis on behalf of legal departments. Some of AdvanceLaw's clients include Google, Nike, Sherwin-Williams, Lenovo, Towers Watson, Mastercard, Panasonic, eBay, Mastercard, Deutsche Bank, McDonald's, Molson Coors, Nestle, Heinz, Clorox, Unilever, CSS, Starwood Hotels, etc.
AdvanceLaw is a good example of what Richard Susskind calls a "closed legal community." See Tomorrow's Lawyers, chapter 5. Some essential background on AdvanceLaw is discussed below. But I am sure readers want to see the data first. The reported research was based on responses from 88 general counsel, who answered two questions:
- How does law firm pedigree affect their buy decision for a high-stakes matter?
- Is law firm pedigree associated with more or less client responsiveness?
Below are the results posted on the HBR Blog Network:
Readers are probably wondering, "Who is AdvanceLaw and why are they asking these types of questions?" I have some intel on this topic.
AdvanceLaw was formed four years ago by Firoz Dattu, a Harvard-trained lawyer who spent time in BigLaw (Paul Weiss). Firoz eventually found his way to the Corporate Executive Board, which a publicly traded company (NYSE: CEB) that specializes in subscription-based research organized by industry and function. CEB uses the aggregated research for value-add services such as benchmarking and best practices.
Because they specialize in factgathering for strategy and management, CEB has a long history of employees leaving to start niche businesses. That is what happened here. Firoz helped launch, and ultimately ran, the General Counsel Roundtable (GCR), which is a CEB functional group that cuts across industries. I have been to a GCR meeting (it is invitation-only for outsiders). Suffice to say that a persistent theme of conversation was controlling legal costs without compromising quality. A seemingly tall order, right?
Firoz started AdvanceLaw because of perceptions by general counsel that they were being overcharged and underserved by large firms in the major markets. Any GC who has reviewed data from TyMetrix would quickly draw the same conclusion, as a large firm lawyer with 20-years experience in, say, Minneapolis often has a lower billing rate than a second-year at a mega-firm in NYC. AdvanceLaw has positioned itself as a trusted advisor that can provide reliable guidance in shopping for value outside the big brand-name firms.
So how does this service work? As noted earlier, AdvanceLaw is an example of a closed legal community. To get into the AdvanceLaw network, prospective law firms are run through a rigorous RFP process that evaluates things like expertise, innovation, quality, compensation systems, and track record on diversity.
If a firm makes the AdvanceLaw cut, they start getting assignments from participating legal departments. But here is the enormous differientator. Feedback is collected by AdvanceLaw and shared with the law firm and other AdvanceLaw legal departments. What is the effect?
- For law firms, changing their behavior to (a) protect their reputations, and (b) get more work.
- For legal departments, to the extent they are getting value, migration of their legal work out of pedigreed law firms in the major markets to lower cost yet high quality regional and super-regional firms. The savings are roughly 30-40% with no loss in quality and better responsiveness. Some of the winners in the AdvanceLaw tournament are listed here.
AdvanceLaw also has a globalization overlay, which has been created with GC assistance. For instance, in Argentina and India, AdvanceLaw works with quite prominent firms who also exhibit efficiency. In the UK and Canada, the firms are substantial players, but are slightly less pedigreed than the Magic Circle and Seven Sisters, respectively.
So let's boil down AdvanceLaw's business model into its simplest terms: It gathers information so they legal departments don't pay excessive prices for the CYA (cover-your-ass) benefits of hiring high-prestige Big Law.
CYA still matters, of course. But through AdvanceLaw, pedigree is being given a more accurate valuation. A likely large second-order effect of AdvanceLaw is the acceleration of AFAs through AdvanceLaw firms, as feedback (on quality) and publicity (to drive volume) is what is needed to make that transition.
Susskind is right. Closed legal communities are going to be major disruptors in the legal marketplace.
Wednesday, October 2, 2013
Because the U.S. News & World Report ranking era has been associated with so much turmoil and bad behavior, many of us in legal education tend to think of the magazine as the source of woes. In fact, the evidence compiled in an new paper on SSRN, "Enduring Hierarchies in American Legal Education," suggest that our desire (or propensity) to establish a legal education pecking order predates the U.S. News rankings by century or so. Vanity of vanities, all is vanity -- at least that is what the data seem to suggest.
My brilliant and industrious colleagues, Funmi Arewa and Andy Morriss, led the charge on this. For many, a major contribution of this research will be the detailed 40+ tables compiled at the end of the article. Now that all that fact-gathering work is done, others can use it. Below is the paper's abstract:
Although much attention has been paid to U.S. News & World Report’s rankings of U.S. law schools, the hierarchy it describes is a long-standing one rather than a recent innovation. In this Article, we show the presence of a consistent hierarchy of U.S. law schools from the 1930s to the present, provide a categorization of law schools for use in research on trends in legal education, and examine the impact of U.S. News’s introduction of a national, ordinal ranking on this established hierarchy. The Article examines the impact of such hierarchies for a range of decision-making in law school contexts, including the role of hierarchies in promotion, tenure, publication, and admissions, for employers in hiring, and for prospective law students in choosing a law school. This Article concludes with suggestions for ways the legal academy can move beyond existing hierarchies and at the same time address issues of pressing concern in the legal education sector. Finally, the Article provides a categorization of law schools across time that can serve as a basis for future empirical work on trends in legal education and scholarship.
Posted by Bill Henderson
Tuesday, October 1, 2013
The Legal Whiteboard was created to focus on "facts, trends, and ideas on law and legal education." Well, nothing is more salient these days than the rise of the legal tech sector which -- trust me here -- is growing rapidly and will soon hit a tipping point. What happens at the tipping point? The tastes of clients and highly talented workers shift, leaving old institutions very vulnerable.
If you are interested in this topic and want a time-efficient primer, check out this ABA Journal podcast, which went live yesterday. It is 15 minutes long and can be downloaded. Thanks to good questions from ABA editor Reg Davis, and some editing magic, the interview is a pretty good starting place for the uninitiated -- the only downside is that you have to listen to me, as interview keys off the "Who's Eating Law Firms' Lunch" story (Oct ABA Journal).
Our conversation is also transcribed.
Monday, September 23, 2013
A few years ago I had the good fortune of teaming up with Rachel Zahorsky for a series of feature stories in the ABA Journal, including "Paradigm Shift" (July 2011), "The Law School Bubble" (Jan 2012), and "The Pedigree Problem" (July 2012). The fourth article, "Who's Eating Law Firms Lunch," is now online; and without a doubt it is my favorite.
Why? Because of the final vignette in the story, which features Dan Katz of ReInvent Law fame. We were sitting at the bar at the January 2013 AALS Conference in New Orleans when Dan told me this story. My jaw just dropped. Dan has faith in his students, just like Bellotti had faith in him. Dan believes, so Dan just does. No fear. No bullshit. It was, suffice to say, quite refreshing.
I am reposting the whole vignette in the hope that a few more academics, lawyers, and law students will read it. The title of the post is the last line in the story. To my mind, that Dan Katz line sums up the next ten years of innovation in legal education. Please keep reading until you get to that final line. The insight is worth the effort.
For the past two years, MSU’s Katz was the only full-time law professor who spoke at the LegalTech conference. Katz and Knake are creating a curriculum relevant to the emerging law and technology sector, albeit primarily for companies like Novus Law and Recommind, whose competitive advantage is rooted in process and technology.
Within the legal academy, Katz is an anomaly. Aside from his JD, he has a PhD in political science and public policy from the University of Michigan. However, he focused almost all of his graduate study on complex systems. It’s a relatively new scientific field that uses mathematical modeling to understand how a multitude of human and nonhuman factors interact and influence one another. Human society and the human brain are two examples of complex systems. Neither can be effectively modeled by conventional math or statistics.
The late Larry Ribstein at the University of Illinois was one of Katz’s early mentors. When he went into teaching a few years ago, Katz says, Ribstein told him: “I bet you must feel like an alien. I greatly admire your work. You are definitely on the right track. But the rest of the legal academy is just not ready for you.”
In June 2011, Katz joined the faculty at MSU Law. Michigan State partnered with the Detroit College of Law in 1995 and moved the law college into a building in East Lansing two years later. Though the school’s rebranding efforts did raise its profile, to most of the profession, MSU Law remains a nonprestigious regional law school located in the heart of the Rust Belt.
None of this dissuades Katz from his sincere belief that it is possible to turn any institution into the preferred recruiting grounds for the nation’s emerging law-and-tech industry.
“When I was 18 years old,” explains Katz, “I had the privilege of joining a transformative organization”— as a kicker for the University of Oregon football team, the Ducks. “We were in the Pac-10, but it’s in Eugene, Ore., where it is often cloudy and raining. We had no shot at all with the top recruits from Southern California. So coach Mike Bellotti had to figure out ways to stretch and optimize what some might call second-tier talent.
“Oregon is now a national powerhouse, but the seeds of that success were sown much earlier. It was difficult to be bigger or faster than USC or UCLA. So Coach Bellotti decided we would be better on the details of the game. We would be better conditioned and we would pay significant attention to special teams. Our emphasis on special teams got us better field position. And by the third or fourth quarters, our opponents would have their hands on their burning legs. But because of our conditioning regimen, we had more stamina. Our success became contagious. Over time, we were able to get prized recruits. It was a culture of innovation.”
During Bellotti’s tenure at Oregon, from 1995 to 2008, the Ducks had only one losing season, blotting out decades of mediocre performance. The year that Katz graduated, the Ducks were co-champions of the Pac-10, a feat that makes him beam with pride.
Katz’s “secret sauce” for ReInvent Law is arguably much more important than a degree in complex systems. He looks at the 25 students entering the ReInvent Law Laboratory as raw human potential. Katz also actively recruits potential law school applicants to his program, though he declines to discuss his strategy.
Katz understands that the most attractive candidates for the law and technology sector are those with special skills that are often obtained through prelaw work experience. “But there is no reason why some of those key skills and experiences cannot be learned and obtained right here,” Katz says of the MSU program.
He notes that virtually all law students have high cognitive ability. He feels the key to their future success is mastery of domain-specific knowledge—often in areas that are complementary to law—and the ability to collaborate across disciplines. This requires engagement and an immense amount of time spent on the task. So how does one develop the educational program that will prepare the law student for legal-tech jobs—some that may not yet exist?
“This,” Katz says, “is just an education design problem."
Perhaps the key insight is that "data by itself is useless. To extract value from it, you need the ‘three Ts’: talent, technique and transformation.
- Talent. "When you start out, you don’t need the top experts to start making sense of your data. You may just need people with curiosity, good statistical skills and a desire to learn. These are the kind of people who will quickly see how data can be managed and packaged to solve problems. And once they do, they will want to get better at it."
- Technique. "Big Data needn’t mean Big Complexity. ... [A]nalytical techniques can be sophisticated, but it’s also possible to keep it simple – especially at the start of the journey. Get the basics right first, and then you can become more advanced as you get better at it."
- Transformation. "Becoming a data-driven legal team – law firm or corporate – is a journey. Change is slow, so don’t expect an overnight transformation. The best approach is to bring the whole organisation with you - if everyone from the partners and CEOs to the interns buy into your data strategy, it will start delivering returns faster."
So who will be the big winners when it comes to Big Data? Definitely some start-ups become they they don't have to transform -- it's a clean sheet operation from the very beginning; they also have more patience and tolerance for trial and error. Yet, BigLaw is sitting on top of a lot of the essential data, so there will be some winners there too. To my mind, it will turn on the ability of some BigLaw shops to leverage talent and technique into some early victories that will aid the tranformation project. If it works, it will be a case study in strategic leadership and effective change management.
By the way, Wolters Kluwer Corporate Legal Services is a sophisticated place. They own TyMetrix, which is the perhaps the best current example of BigData operating in the BigLaw ecosystem. TyMetrix's Real Rate Report is being used to agressively control lawyer billing rates.
Sunday, September 22, 2013
Disruption in the legal industry appears to be crossing an important milestone -- the emergence of the revolving door among the first generation innovators. Evidence comes from this press release published on the Wall Street Journal website.
In 2010, a BigLaw partner leaves BigLaw (DLA Piper) to take a high-level job at Axiom, the most well-known disruptor in the legal industry. Then, 2.5 years later, he leaves to run the Discovery Services practice at Huron Consulting Group. Huron Consulting, by the way, is a publicly traded company (NASDAQ: HURN) with $626 million in revenues in 2012. Legal is one of Huron's core industries. It currently has 1,500 "seats" for conducting 24/7 document review services in the U.S., Europe, and India.
Let's summarize: BigLaw to legal start-up to publicly held company trying to expand its wedge in the legal industry. Granted, career moves are motivated by a wide range of factors, not just a string of successes that create better oppportunities. Outsiders can only speculate why someone changes jobs. That said, in a start-up environment where the market opportunity is large but the know-how to tap into it has to be developed through trial and error, false starts are just part of the learning curve -- the building block of future success. Indeed, there are books and articles on this topic.
What is revealed by the emergence of the revolving door among legal innovators is that there is tremendous opportunity to make traditional legal services better, faster, and cheaper. Talented people are persisting and betting their careers on it. The biggest unknown is timing -- it is risky to get there too early, and disastrous to get there too late. Alas, it is better to wrestle directly with the issue of timing than to deny that the change is real.
Tuesday, September 17, 2013
Monday, September 16, 2013
The trend toward outsourcing of legal work to India may be giving way to "onshoring." What is the attraction of moving legal jobs back to the US? The wage gap between India and the US is closing, but more importantly, innovation and continuous improvement are significantly aided by proximity.
I heard this perspective from a friend of mine who was part of the management team of a successful LPO that was sold (at a substantial profit) to a much larger legal conglomerate. Indeed, he contemplated getting back into the business, but this time running an onshoring operation.
This identical perspective is on display in a recent Minneapolis StarTribune story on Black Hills IP, a 2.0 legal process outsourcer that provides various types of managed services for all things related to intellectual property. According to its website, Black Hills IP is a "US-based IP paralegal service that is faster, more accurate and more cost-effective than in house departments and off-shore providers." The company appears to be growing, as it did a PR-blitz to commemorate its 100th client. The company was originally started in Rapids City, South Dakota but has since expanded to Minneapolis.
What make this story especially interesting is that many of the folks who started Black Hills IP were sophisticated Minneapolis corporate lawyers who created a company in the early 2000s called Intellevate, a 1.0 LPO that was sending legal work to India. In 2006, Intellevate became part of CPA Global, a much larger LPO. In other words, the folks at Black Hills IP are industry players with much better information than the rest of us who are making bets with their own money.
Unlike traditional law firms, these types of legal vendors are growing rapidly. Their secret sauce appears to be combining high-quality processes with capable, motivated paraprofessional talent.
The challenge for law schools and many practicing lawyers is getting our heads around the fact that, from a pure market perspective, bright legal minds may be less valuable than well-designed and well-executed legal processes and systems. This state of affairs is just as much an opportunity as it is a threat.
One last interesting note suggesting that companies like Black Hills IP are part of the same ecosystem as traditional law firms and law schools: The CEO of Black Hills IP is Ann McCrackin, a former professor of law at Franklin Pierce (now University of New Hampshire School of Law), where she was director of the Patent Prosecution and Procedure Program. Prior to that, McCrackin was a shareholder in Schwegman, Lundberg & Woessner, a large patent law firm based in Minneapolis that specializes in high technology.
posted by Bill Henderson
Monday, August 5, 2013
Two constituencies are really worried about their futures. The first is law students and recent law graduates -- they are worried about jobs. The second are state and local bar associations -- they are worried about being relevant to the next generation of lawyers.
So here is my idea. The new guard and the old guard should be talking to each other. It does not take a rocket scientist to see the real opportunity for synergy. If all of us are willing to step outside our comfort zone -- just a little -- we can create new types of bar association events where young lawyers come to have fun, contribute to the community and profession, and develop relationships that put their careers on a clear upward track.
Toward that end, this week's ABA Annual Meeting in San Francisco provides us with a golden opportunity. On Friday, August 9 at 8 a.m. at the Hilton SF Union Square, Michael Bossone (co-creator of LawWithoutWalls) and I will be facilitating a plenary session entitled, "A New Age for the Legal Profession Requires a New Age for Bar Associations."
Well, we could not preside over a session where panels of white guys, 50 and older (my own demographic), sit at a head table and opine on the likes and needs of millennial lawyers. So we have invited a large cadre of law students and recent law grads to take part in a more interactive session. The session is big -- nearly 300 bar association presidents and executives from around the country. And we need 1 to 2 students or recent grads per table -- perhaps for the first time, you are the subject matter experts. Michael and I are looking for a few more qualified volunteers. Interested?
If you are proximate to SF and looking to meet some well-connected lawyers from around the nation who are genuinely interested in listening to your (constructive) point of view, please send me an email with #NewAgeBar (our Twitter hashtag) in the subject line. We have a few slots left -- RSVPs are mandated for this event, as space is limited and name tags are required.
If you are a law student or recent law grad and you think going to a bar association event early on a Friday morning is a grand waste of time, I suggest that you read Mark Granovetter's classic book, Getting a Job. This book is a vivid empirical demonstration of Granovetter's seminal 1973 article, "The Strength of Weak Ties," which is one of the most cited social science articles of all time (23,000+ citations and counting).
An example of a strong tie is you and your sorority or faternity friends. Not too good for getting a job. An example of a weak tie might be an acquaintance in the same profession but part of a different generation or living in a different part of the country. As Granovetter shows, these "weak" ties act as bridges and are profoundly influential in opening doors for people. Believe it or not, academic knowledge can accelerate your career. Get out of your comfort zone and give it try.
[posted by Bill Henderson]
Wednesday, July 3, 2013
As a result of the ABA’s revisions to Standard 509, Consumer Information, there is now a much greater universe of publicly available information about law school scholarship programs, specifically conditional scholarship programs and scholarship retention. Based on a review of law school websites conducted between March 19 and May 29, 2013, I have compiled a complete list of schools with conditional scholarship programs, with only one-year scholarships, with good standing (or guaranteed) scholarships and with only need-based scholarships.
The availability of this data now gives each admitted scholarship recipient some meaningful basis for assessing the likelihood that any given scholarship will be renewed. (That said, within a given cohort of conditional scholarship recipients at a given school, those at the top end of the entering class profile likely retain their scholarships at a higher percentage than reflected in the law school's overall data while those further down the class profile likely retain their scholarships at a lower percentage than reflected in the law school's overall data.)
What do we know about the conditional scholarship programs in place for students entering law school in 2011-12? There were 140 schools with conditional scholarship programs. The average retention rate across all law schools was 69%. In total, 12,735 students who entered law school in the fall of 2011 and continued into their second year of law school at the same school entered with conditional scholarships and 4,387 students lost those scholarships, a retention rate across individual students of 66%. Across the 194 law schools on which I compiled data, the Fall 2011 entering first-year class totaled 46,233, so roughly 27.5% of the students in the Fall 2011 entering first-year class were on conditional scholarships and roughly 9.5% of the students in the Fall 2011 entering first-year class failed to retain their conditional scholarship as they moved into the second year of law school.
The distribution of scholarship retention rates by deciles across all 140 schools reporting conditional scholarship programs is set forth in Table 1. Table 1 shows the largest number of law schools grouped around the overall average retention rate, with 30 law schools in the 60-69% range and 24 law schools in the 70-79% range; nearly 40 percent of law schools with conditional scholarships fall in these two ranges. Interestingly, the decile range of 90% or better is the second largest decile range, with 26 law schools (nearly half of which are ranked 50 or better in the USNEWS ranking). Notably, 23 law schools had scholarship retention rates of less than 50%.
Table 1: Number of Law Schools Reporting Retention Rates by Decile Range
Less than 40%
Four of the eight were law schools ranked alphabetically
Eight of the 15 were law schools ranked between 50 and 99
16 of the 20 were law schools ranked 100 or lower, while only two were in the top 50
23 of the 30 were law schools ranked 100 or lower, while only one was in the top 50
13 of the 24 were law schools ranked in the top 100, but only three of those were in the top 50
12 of the 17 were law schools ranked between 50 and 145
90% or better
12 of the 26 were law schools ranked in the top 50
As shown in Table 2, law schools ranked in the top-50 in the U.S.News 2012 Rankings had the smallest percentage of law schools with conditional scholarship programs, with only 20 law schools – 40% -- having conditional scholarship programs, directly impacting only 1,674 students who had conditional scholarships (12.8% of the 13,109 first-year students at these law schools) and only 192 who failed to retain their scholarships (11.5% of the 1674 conditional scholarship recipients and only 1.5% of the 13,109 first year students). By contrast, across the balance of law schools, over 80% of the law schools had conditional scholarships with 11,061 of the 33,124 first-year students (33.4%) having conditional scholarships and 4,195 (37.9% of those on scholarship and 12.7% of first-years at the balance of law schools) losing their scholarships after their first-year of law school.
Table 2: Number and Percentage of First-Year Students in 2011 Having Conditional Scholarships and Losing Conditional Scholarships by US News Rankings Categories
Top 50 Law Schools
Law Schools Ranked 51-100
Law Schools Ranked 101-146
Law Schools Ranked Alphabetically
Total Number of Law Schools
Number (%) of Law Schools with Conditional Scholarship Programs
Total First-Years at These Law Schools
Number (%) of First-Years with Conditional Scholarships
1,674 (12.8% of all first-year students in top-50 schools)
4,176 (36% of all first-year students in schools 51-100)
2,754 (29.6% of all first-year students in schools 101-145)
4,131 (33.6% of all first-year students at alphabetically-ranked schools)
Number (%) of Conditional Scholarship Recipients NOT Retaining Scholarships
192 (11.5% of conditional scholarship recipients and 1.5% of first-years)
1,454 (34.8% of conditional scholarship recipients and 12.5% of first-years)
1,044 (37.9% of conditional scholarship recipients and 11.2% of first-years)
1,697 (41% of conditional scholarship recipients and 13.7% of first-years)
A number of law schools switched to non-conditional scholarship programs for 2012-13 or will be switching to non-conditional scholarship programs for the 2013-14 academic year. As a result, for the 2013-14 academic year, there will be 131 law schools with conditional scholarship programs, five law schools with non-renewable one-year scholarships, four that only offer need-based scholarships, and 54 law schools with good standing (or guaranteed) scholarships. Of the 194 schools on which I was gathering information, therefore, as of the 2013-14 academic year, 70% will have conditional or one-year scholarship programs (136/194), while nearly 28% will have good standing (or guaranteed) scholarships (54/194), with 2% (4/194) having only need based scholarship assistance. (Note that some law schools with conditional scholarship programs also offer some scholarships on a non-conditional basis and/or offer some need-based assistance.)
Those who might be interested in a more detailed analysis of conditional scholarship programs, may want to look at the draft article I have posted on SSRN – Better Understanding the Scope of Conditional Scholarship Programs in American Law Schools.
[posted by Jerry Organ]
Sunday, June 30, 2013
As noted in Part I of this post, the competitive dynamics among law schools are about to change due to a combination of two factors: (1) the ABA's collection and publication more granular data on school-level employment outcomes, and (2) the decision by U.S. News to make JD Bar Passage Required and JD Advantaged the primary measures for the employed-at-9-months input to its rankngs formula.
The histogram below reveals a near perfect bell curve for this revamped US News
input [click on to enlarge]. This is a huge change from prior years
when schools were all bunched at the 95% level because employment of any
kind was all that mattered. Under the old methodology, any law school that
limited itself to full-time, professional law-related jobs would have
plummeted in the rankings 10 to 50 spots.
Because spring 2013 was the first year with the new methodology, the impact of the change is not well understood. The most stark fact of the new environment is that the full-time, professional law-related jobs are in short supply. Among the class of 2011 (the stats used for the 2013 rankings), this desirable outcome was achieved by only 63.0% of graduates. When we subtract out full-time, long-term law-related professional jobs funded by law schools -- a luxury that only a small number of mostly first-tier law schools can afford -- the total drops to 61.9%.
Digging deeper, some other significant patterns emerge.
The vast majority of law schools feed into the regional labor markets where they are located. In places like California, those markets are saturated.
Among the ABA-accredited law schools in California, 46.5% of the class of 2011 obtained full-time JD Bar Passage Required jobs. The comparable figure for the remaining ABA-accredited law schools was 56.0%. Likewise, there is also a disparity for JD Advantage jobs: 6.2% in California versus 8.3% for schools in all other states. In fact, among the 19 ranked California law schools, only four -- Stanford, UC Berkeley, USC, UCLA -- are above the 63.0% average for full-time, professional law-related jobs.
Based on these data, it should come as no suprise that no law school located in California went up in the 2013 U.S. News rankings. Stanford, USC, and Santa Clara hung onto their ranking, but 11 California law schools dropped, with an average decline of 11 spots. Five other Calfornia schools remained in the unranked fourth-tier category.
In contrast, some of the biggest winners in the methodology change were flagship public law schools that are relatively big fish in smaller regional markets. Students at these schools tend to stay in-state and get JD Bar Passage Required jobs at rates far higher than the 54.9% average for the class of 2011 average.
Below are the top 15 non-national public law schools based on the proportion of FT Bar Passage Required jobs.
Between 2012 and 2013, the average rankings gain for the above schools was +9 spots. Among this group, the only school to go down in the rankings was ASU Law (-3). And that decline was largely due to the fact that ASU reported a 98% employed-at-nine-months figure for the class of 2010--a figure that drew suggestions of aggressive gaming. See Brian Tamanaha, When True Numbers Mislead, Balkanization, April 2, 2012.
The heavier weighting for JD Bar Passage Required jobs also benefits a handful of lower-ranked private law schools that are practice-oriented and tend to feed smaller firms within their regional areas.
- Campbell (71.4% FT bar passage jobs) went from unranked to #126.
- South Texas (64.4% FT bar passage jobs) went from unranked to #144
- St. Mary's (78.3% FT bar passage jobs) went from unranked to #140.
Part-Time Law Schools Dominate JD Advantaged Jobs
JD Advantaged Jobs count the same as JD Bar Passage Required Jobs. But what, exactly, is included in this category? According to the ABA,
A position in this category is one for which the employer sought an individual with a J.D., and perhaps even required a J.D., or for which the J.D. provided a demonstrable advantage in obtaining or performing the job, but which does not itself require bar passage or an active law license or involve practicing law.
See ABA Class of 2012 (definitions). Many professionals enroll in law school on a part-time basis to improve their career prospects. It should be no surprise, then, that schools with part-time programs tend to be the largest producers of graduates with full-time JD Advantage jobs. In many cases, it is the full-time job that the student held during law school -- and presumably retains upon graduation -- that confers the advantage.
Of the top 10 schools based on the percentage of JD Advantage law school jobs, eight had part-time programs and the other two were located in a state capital, which tends to increase the number of opportunities related to government and public policy.
The schools listed above gained an average of 3.5 spots in the rankings, albeit the average is pulled down by the inclusion of Southwestern, which had to weather the brutal California legal market.
It is worth noting that the percentage of JD Advantage jobs is negatively correlated with the percentage of JD Bar Passage Required Jobs (-.33) .The table below summarizes the differences between schools with Part-time versus Full-Time only programs.
The higher percentage of JD Advantage jobs (10.1% versus 6.9%) for schools with part-time programs is unlikely the results of chance, as the differences in means are statistically signficant at p < .001. But what does this inverse relationship mean?
programs tend to be affiliated with lower ranked law schools, which in turn would produce a lower average percentage of JD Bar
Passage Required jobs. Yet, part-time programs are also in larger,
urban locations. Thus, in addition to the continued employment of
part-time students with their current employers, the sheer proximity to
large, specialized regional economies probably increases the proportion
of JD Advantage jobs. Indeed, any school in an large metro area would
be foolish to ignore the human capital needs of non-legal employers, as
knowledge of the law is very helpful in navigating through an ever more
complex, regulated, and interconnected world.
What is the Best Strategy for Maximizing Full-Time, Professional Law-Related Jobs?
Largely through happenstance, the ABA and U.S. News have created an environment where law schools have to ask this basic but very important question. Part-time jobs will no longer cut it. And few law schools have the cash to hire their own grads full-time for a year past graduation -- and if they do, there are probably better uses for the millions of dollars needed annually to prop up a school's ranking.
The new gold standard employment outcome is full-time, long-term professional law-related jobs. The issue of how to maximize this outcome is so pressing and intricate that it may warrant trade-offs in the admissions process, favoring students will lower credentials but more rock-solid employment prospects on the backend at graduation. This is the topic I will take up in Part III.
[posted by Bill Henderson]
Friday, June 28, 2013
NALP recently released the employment outcome data for the class of 2012. The good news is that the absolute number of JD Bar Passage Required jobs went up from the prior year. The bad news is that a significantly larger class of entry-level lawyers were competing for those jobs. The class of 2011 totaled 41,623, versus 44,339 in 2012 (+2,716, or +6.5%). And note, the class of 2013 is likely to be even bigger -- roughly +1.6% based on the size of the entering 1L classes in the fall of 2010 (see ABA enrollment data).
Setting aside the year-over-year flucuations, the trendlines suggest a relatively large and persistent shortfall in the number of full-time, professional law-related jobs. I assembled the graph below from NALP data [click on to enlarge].
[Methodological notes: NALP used the JD-Preferred category until the class of 2011, when NALP and the ABA collaborated on the creation of the JD Advantage category. According to NALP, the jobs in the two categories are "largely the same." See NALP, Detailed Analysis of JD Advantage Jobs (April 2013). The figures for 2012 are estimates of full-time employment calculated from (a) NALP's just released figures for 2012 class size and the percentage breakdowns by job category, and (b) the percentage breakdowns of full-time versus part-time from the prior year, which also relied on the new JD Advantage definition. In short, basic algebra.]
A reasonable expectation of a 3-year, $100,000+ financial commitment is that nine months after graduation, the entry-level lawyer has secured a full-time professional job. See Legal Whiteboard, June 26, 2007. Those outcomes are reflected in the blue-red-green bars above. Since 2007 (the first year that NALP collected data on full-time versus part-time employment), the percentage of jobs fitting these criteria has fallen from 85.0% to 73.9%. So the overall size of the purple bar -- part-time jobs, nonprofessional, unemployment, etc. -- has grown from 15% to 26.1%.
Unfortunately, the pain does not end there. With a limited pool of full-time professional jobs and the number of graduates trending upward, the law of supply and demand kicks in. Consider this arc of median entry-level salaries of employed graduates: $65,748 for class of 2007, $72,000 for 2008, $72,000 for 2009, $63,000 for 2010, $60,000 for 2011, $61,245 for $2008. So, in short, the odds of landing a full-time professional job have gone down, and so has the starting pay. Yet, tuition and student debt continue to edge up. These unsustainable trends have made law schools fair game for criticism by the media and law student bloggers.
That said, a market correction is clearly underway. A considerable number of prospective law students are deciding (rationally) not to apply to law school -- from 98,700 when the class of 2007 enrolled in the fall of 2004 to an estimated 58,424 for the fall of 2013. Likewise, law schools, to the extent they can afford it, are enrolling fewer students. From the high water mark in the fall of 2010 (49,700), law schools only enrolled 41,400 1Ls in the fall of 2012, and the numbers are sure to be even lower this fall. See Jerry Organ's estimates, Legal Whiteboard, May 20, 2013. To weather this storm, law schools are running significant deficits or drawing down their endowments.
So, can we conclude that the market correction will be complete when the relatively small class of 2017 enters the job market four years from now? I certainly think the smaller number of graduates will help. But I would argue that two things have fundamentally changed:
1. Revenues versus credentials. Law schools are struggling with the need to balance their desire to hang onto respectable LSAT/UGPA medians with a need to generate sufficient revenue to cover their operating costs. If a law school favors revenues this year, its US News rankings could drop, affecting its applicant pool in future years. On the other hand, the combination of shrinking 1L classes and lavish scholarships -- a strategy being pursued by dozens of law schools -- is unsustainable over the medium to long term. A decision to enroll fewer students this year is a three-year commitment to lower revenue. If the smaller entering class is repeated next fall, the budget pain doubles. Do it three years running, and the revenue shortfall triples. Many law schools are not trying to outrun the bear; they are trying to outrun other law schools in their regional market. Some law schools may not make it out of this trough.
2. Competition over full-time, professional law-related jobs. If there is one silver lining that has emerged from this troubled period in U.S. legal education, it is the willingness of the ABA to collect and publish more granular employment outcome data at the law school level. In turn, U.S. News has incorporated these data into its rankings formula. Instead of propping up our rankings by hiring our own students or benefiting when they got jobs nine months out working as a retail manager or a cab driver, under the new 2013 U.S. News rankings formula, only full-time, long-term jobs that are JD Bar Passage Required or JD Advantaged are given "full weight."
It is this second point that is going to push change in how law schools do business--we now have an employment outcome in which the ranking payoff is now fully in allignment with what law students want--full-time, professional law-related jobs.
Specifically, the employed-at-nine-months input to the U.S. News rankings formula is currently given 14% weight. According to the U.S. News law school rankings methodology, the magazine is weighting 22 of the 35 employment outcomes collected and published by the ABA. Among these 22 factors, we don't know the internal weighting. What we do know based on the "full weight" given to JD Bar Passage Required and JD Advantage jobs, is that the highest employed-at-nine-month scores will go to law schools with the highest percentages in these two categories. This is a completely new world for law schools -- one that incentivizes what law students care about when they make the decision to enroll.
Part II to follow ...
[Posted by Bill Henderson]