Sunday, March 30, 2014

Review of The Lawyer Bubble and Tomorrow's Lawyers

Harper_SusskindReaders might enjoy my forthcoming essay, Letting Go of Old Ideas, 112 Mich L Rev _ (2014), which reviews two important new books on the legal profession, Steven Harper's The Lawyer Bubble and Richard Susskind's Tomorrow's Lawyers. If you want to know why the legal profession circa 2014 is such a rich topic for study, here is a useful clue: Harper and Susskind both critically examine this topic yet come to dramatically different conclusions that neither overlap nor conflict with one another. The complexities run that deep.

Thanks to his prolific commentary in the legal press, Harper's critique is familar to many readers. He is angry with the elite legal establishment -- large law firms and the legal professoriate -- for succumbing to "a culture of short-termism" that focuses obsessively on the AmLaw and US News league tables.  As someone in the target group, I confess that I don't remember making a conscious decision to sell out.   Yet, here is the problem.  When all the facts in the public domain are arrayed by a skilled trial lawyer, the question can be asked, "why didn't you stand up to this nonsense?"  This is a classic example of diffusion of responsibility. When we are all equally responsible for upholding good behavior, no one is responsible.  Collective denial sets it, and the profession gets a black eye.  

Yet, to my mind, there is an avenue for at least partial redemption -- reading Richard Susskind's slender 165 page book.  In my Counterpoint essay, I lay out the mounting evidence that the legal industry is in the early stages of a sea change.  The best theoretical treatment of this sea change is Susskind's Tomorrow's Lawyers.  Yet, I am amazed at how many lawyers and law professors know essentially nothing about Susskind's work.  Tomorrow's Lawyers was written for law students.  It is a short, accessible book.  After reading the first two paragraphs, I doubt anyone with a long-term time horizon in the legal industry will put it down without finishing it:

This book is a short introduction to the future for young and aspiring lawyers.

Tomorrow’s legal world, as predicted and described here, bears little resemblance to that of the past. Legal Institutions and lawyers are at a crossroads, I claim, and are poised to change more radically over the next two decades than they have over the last two centuries. If you are a young lawyer, this revolution will happen on your watch. (p. xiii).

If you have not read Tomorrow's Lawyers, you may be setting yourself for a Kodak moment. 

March 30, 2014 in Blog posts worth reading, Current events, Important research, New and Noteworthy, Scholarship on legal education, Scholarship on the legal profession, Structural change | Permalink | Comments (2)

Monday, March 17, 2014

A Counterpoint to "The most robust legal market that ever existed in this country"

There is a line in Professor Reich-Graefe's recent essay, Keep Calm and Carry On, 27 Geo. J. Legal Ethics 55 (2014), that is attracting a lot of interest among lawyers, law students, and legal academics: 

[R]ecent law school graduates and current and future law students are standing at the threshold of the most robust legal market that ever existed in this country—a legal market which will grow, exist for, and coincide with, their entire professional career.

This hopeful prediction is based on various trendlines, such as impending lawyer retirements, a massive intergenerational transfer of wealth that will take place over the coming decades, continued population growth, and the growing complexity of law and legal regulation.

Although I am bullish on future growth and dynamism in the legal industry, and I don't dispute the accuracy or relevance of any of the trendlines cited by Reich-Graefe, I think his primary prescriptive advice -- in essence, our problems will be cured with the passage of time -- is naive and potentially dangerous to those who follow it.

The Artisan Lawyer Cannot Keep Up

The primary defect in Reich-Graefe's analysis is that it is a one-sided argument that stacks up all impending positive trendlines without taking into account the substantial evidence that the artisan model of lawyering -- one-to-one consultative legal services that are tailored to the needs of individual clients -- is breaking down as a viable service delivery model.  

Lawyers serve two principal constituencies--individuals and organizations.  This is the Heinz-Laumann "Two-Hemisphere" theory that emerged from the Chicago Lawyers I and II studies.  See Heinz et al, Urban Lawyers (2005). The breakdown in the artisan model can be observed in both hemispheres.

  1. People.  Public defenders are understaffed, legal aid is overwhelmed, and courts are glutted with pro se litigants.  Remarkably, at the same time, record numbers of law school graduates are either unemployed or underemployed.  Why?  Because most poor and middle-class Americans cannot afford to buy several hours of a lawyer's time to solve their legal problems.  
  2. Organizations.  The most affluent organizations, multinational corporations, are also balking at the price of legal services.  As a result, foreign labor, technology, process, or some combination thereof has become a replacement for relatively expensive and unskilled junior lawyers.

The primary driver of this structural shift is the relentless growth in legal complexity.  This increase in complexity arises from many sources, including globalization, technology, digitally stored information, and the sheer size and scope of multinational companies. 

But here is a crucial point:  the complexity itself is not new, only its relative magnitude.  A century ago, as the modern industrial and administrative state was beginning to take shape, lawyers responded by organizing themselves into law firms.  The advent of law firms enabled lawyers to specialize and thus more cost-effectively tackle the more complex legal problems. Further, the diffusion of the partner-associate training model (sometimes referred to as the Cravath system) enabled firms to create more specialized human capital, which put them in an ideal position to benefit from the massive surge in demand for legal services that occurred throughout the 20th century.  See Henderson, Three Generations of Lawyers: Generalists, Specialists, Project Managers, 70 Maryland L Rev 373 (2011). 

The legal industry is at the point where it is no longer cost effective to deal with this growing complexity with ever larger armies of artisan-trained lawyers.  The key phrase here is cost effective.  Law firms are ready and willing to do the work.  But increasingly, clients are looking for credible substitutes on both the cost and quality fronts. Think car versus carriage, furnace versus chimney sweep, municipal water system versus a well.  A similar paradigm shift is now gaining momentum in law.

The New Legal Economy

I have generated the graph below as a way to show the relationship between economic growth, which is the engine of U.S. and world economies, and the legal complexity that accompanies it.

Complexity
This chart can be broken down into three phases.

1. Rise of the law firm. From the early twentieth century to the early 1980s, the increasing complexity of law could be capability handled by additional law firm growth and specialization. Hire more junior lawyers, promote the best ones partner, lease more office space, repeat.  The complexity line has a clear bend it in.  But for most lawyers, the change is/was very gradual and feels/felt like a simple linear progression.  Hence, there was little urgency about the need for new methods of production.

2. Higher law firm profits. Over the last few decades, the complexity of law outpaced overall economic growth.  However, because the change was gradual, law firms, particularly those with brand names, enjoyed enough market power to perennially increase billing rates without significantly improving service offerings.  Corporate clients paid because the economic benefits of the legal work outweighed the higher costs.  Lower and middle class individuals, in contrast, bought fewer legal services because they could not afford them. But as a profession, we barely noticed, primarily because the corporate market was booming. See Henderson, Letting Go of Old Ideas, 114 Mich L Rev 101 (2014).

3. Search for substitutes.  Laws firms are feeling discomfort these days because the old formula -- hire, promote, lease more space, increase rates, repeat -- is no longer working.  This is because clients are increasingly open to alternative methods of solving legal problems, and the higher profits of the last few decades have attracted new entrants.  These alternatives are some combination of better, faster, and cheaper.   But what they all share in common is a greater reliance on technology, process, and data, which are all modes of problemsolving that are not within the training or tradition of lawyers or legal educators.  So the way forward is profoundly interdisciplinary, requiring collaboration with information technologists, systems engineers, project managers, data analysts, and experts in marketing and finance.

Why is this framework potentially difficult for many lawyers, law firms, and legal educators to accept?  Probably because it requires us to cope with uncertainties related to income and status.  This reluctance to accept an unpleasant message creates an appetite for analyses that say "keep calm and carry on."  This is arguably good advice to the British citizenry headed into war (the origin of the saying) but bad advice to members of a legal guild who need to adapt to changing economic conditions.

There is a tremendous silver lining in this analysis.  Law is a profoundly critical component of the globalized, interconnected, and highly regulated world we are entering.  Lawyers, law firms, and legal educators who adapt to these changing conditions are going to be in high demand and will likely prosper economically.  Further, at an institutional level, there is also the potential for new hierarchies to emerge that will rival and eventually supplant the old guard.

Examples

Logo-kcuraOne of the virtues of lawyers is that we demand examples before we believe something to be true.  This skepticism has benefited many a client.  A good example of the emerging legal economy is the Available Positions webpage for kCura, which is a software company that focuses exclusively on the legal industry. 

The current legal job market is terrible, right?  Perhaps for entry-level artisan-trained lawyers.  But at kCura, business is booming. Founded in 2001, the company now employs over 370+ workers and has openings for over 40 full-time professional positions, the majority of which are in Chicago at the company's LaSalle Street headquarters.  Very few of these jobs require a law degree -- yet the output of the company enables lawyers to do their work faster and more accurately.  

What are the jobs?

  • API Technical Writer [API = Application Programming Interface]
  • Big Data Architect - Software Engineering
  • Business Analyst
  • Enterprise Account Manager
  • Group Product Manager
  • Litigation Support Advice Analyst
  • Manager - Software Engineering
  • Marketing Associate
  • Marketing Specialist -- Communications
  • Marketing Specialist -- Corporate Communications and Social Media
  • Product Manager -- Software and Applications Development
  • QA Software Engineer -- Performance [QA = Quality Assurance]
  • Scrum Team Coordinator [Scrum is a team-based software development methodology]
  • Senior SalesForce Administrator 
  • Software Engineer (one in Chicago, another in Portland)
  • Software Engineer (Front-End Developer) [Front-End = what the client sees]
  • Software Engineer in Test [Test = finds and fixes software bugs]
  • Technical Architect
  • Technical Architect - Security
  • VP of Product Development and Engineering

kCura operates exclusively within the legal industry, yet it has all the hallmarks of a great technology company. In the last few years it has racked up numerous awards based on the quality of its products, its stellar growth rate, and the workplace quality of life enjoyed by its employees.

KCuraawards

That is just what is happening at kCura.  There are many other companies positioning themselves to take advantage of the growth opportunities in legal, albeit none of them bear any resemblance to traditional law firms or legal employers.

LexRedux-Eventbrite-headerIn early February, I attended a meeting in New York City of LexRedux, which is comprised of entrepreneurs working in the legal start-up space.  In a 2008 essay entitled "Legal Barriers to Innovation," Professor Gillian Hadfield queried, "Where are the 'garage guys' in law?"  Well, we now know they exist.  At LexRedux, roughly 100 people working in the legal tech start-up space were jammed into a large open room in SoHo as a small group of angel investors and venture capitalists fielded questions on a wide range of topics related to operations, sales, and venture funding.

According to Angel's List, there are as of this writing 434 companies identified as legal start-ups that have received outside capital.  According to LexRedux founder Josh Kubicki, the legal sector took in $458M in start-up funding in 2013, up from essentially zero in 2008.  See Kubicki, 2013 was a Big Year for Legal Startups; 2014 Could Be Bigger, Tech Cocktail, Feb 14, 2014.

The legal tech sector is starting to take shape.  Why?  Because the imperfections and inefficiencies inherent in the artisan model create a tremendous economic opportunity for new entrants.  For a long period of time, many commentators believed that this type of entrepreneurial ferment would be impossible so long as Rule 5.4 was in place.  But in recent years, it has become crystal clear that when it comes to organizational clients where the decisionmaker for the buyer is a licensed lawyer (likely accounting for over half of the U.S. legal economy) everything up until the courthouse door or the client counseling moment can be disaggregated into a legal input or legal product that can be provided by entities owned and controlled by nonlawyers. See Henderson, Is Axiom the Bellwether of Legal Disruption in the Legal Industry? Legal Whiteboard, Nov 13, 2013.

The Legal Ecosystem of the Future

Book-tomorrows-lawyersIn his most recent book, Tomorrow's Lawyers, Richard Susskind describes a dynamic legal economy that bares little resemblance to the legal economy of the past 200 years.  In years past, it was easier to be skeptical of Susskind because his predictions seemed so, well, futuristic and abstract.  But anyone paying close attention can see evidence of a new legal ecosystem beginning to take shape that very much fits the Susskind model.

Susskind's core framework is the movement of legal work along a five-part continuum, from bespoke to standardized to systematized to productized to commoditized.  Lawyers are most confortable in the bespoke realm because it reflects our training and makes us indispensible to a resolution.  Yet, the basic forces of capitalism pull the legal industry toward the commoditized end of the spectrum because the bespoke method of production is incapable of keeping up with the needs of a complex, interconnected, and highly regulated global economy. 

According to Susskind, the sweet spot on the continuum is between systematized and productized, as this enables the legal solution provider to "make money while you sleep."  The cost of remaining in this position (that is, to avoid commoditization) is continuous innovation.  Suffice it to say, lawyers are unlikely to make the cut if they choose to hunker down in the artisan guild and eschew collaboration with other disciplines.

Below is a chart I have generated that attempts to summarize and describe the new legal ecosystem that is now taking shape [click-on to enlarge].  The y-axis is the Heinz-Laumann two-hemisphere framework.  The x-axis is Susskind's five-part change continuum. 

Ecosystem
Those of us who are trained as lawyers and have worked in law firms will have mental frames of reference that are on the left side of the green zone.  We tend to see things from the perspective of the artisan lawyer.  That is our training and socialization, and many of us have prospered as members of the artisan guild.

Conversely, at the commoditized end of the continuum, businesses organized and financed by nonlawyers have entered the legal industry in order to tap into portion of the market that can no longer be cost-effectively serviced by licensed U.S. lawyers.  Yet, like most businesses, they are seeking ways to climb the value chain and grow into higher margin work.  For example, United Lex is one of the leading legal process outsourcers (LPOs).  Although United Lex maintains a substantial workforce in India, they are investing heavily in process, data analytics, and U.S. onshore facilities.  Why?  Because they want to differientiate the company based on quality and overall value-add to clients, thus staving off competition from law firms or other LPOs.

In the green zone are several new clusters of companies:

  • NewLaw.  These are non-law firm legal service organizations that provide high-end services to highly sophisticated corporations.  They also rely heavily on process, technology, and data.  Their offerings are sometimes called "managed services." Novus Law, Axiom, Elevate, and Radiant Law are some of the leading companies in this space. 
  • TechLaw.  These companies would not be confused with law firms. They are primarily tool makers.  Their tools facilitate better, faster, or cheaper legal output.  kCura, mentioned above, works primarily in the e-discovery space.  Lex Machina provides analytic tools that inform the strategy and valuation of IP litigation cases.  KM Standards, Neota Logic, and Exemplify provide tools and platforms that facilitate transactional practice.  In the future, these companies may open the door to the standardization of a wide array of commercial transactions.  And standardization drives down transaction costs and increases legal certainty -- all good from the client's perspective.
  • PeopleLaw.  These companies are using innovative business models to tap into the latent people hemisphere.  Modria is a venture capital-financed online dispute resolution company with DNA that traces back to PayPal and the Harvard Negotiations Workshop.  See Would You Bet on the Future of Online Dispute Resolution (ODR)?  Legal Whiteboard, Oct 20, 2013.  LegalForce is already an online tour de force in trademarks -- a service virtually every small business needs.  The company is attempting to translate its brand loyalty in trademarks into to new consumer-friendly storefront experience.  Its first store is in the heart of University Avenue in Palo Alto.  LegalForce wants to be the virtual and physical portal that start-up entrepreneurs turn to when looking for legal advice.

Conclusion

When I write about the changes occurring in the legal marketplace, I worry whether the substance and methodology of U.S. legal education provides an excellent education for a legal world that is gradually fading away, and very little preparation for the highly interdisciplinary legal world that is coming into being. 

Legal educators are fiduciaries to our students and institutions. It is our job to worry about them and for them and act accordingly.  Surely, the minimum acceptable response to the facts at hand is unease and a willingness to engage in deliberation and planning.  Although I agree we need to stay calm, I disagree that we need to carry on.  The great law schools of the 21st century will be those that adapt and change to keep pace with the legal needs of the citizenry and broader society.  And that task has barely begun.

[PDF version]

March 17, 2014 in Blog posts worth reading, Current events, Data on legal education, Data on the profession, Innovations in law, Innovations in legal education, New and Noteworthy, Scholarship on legal education, Scholarship on the legal profession, Structural change | Permalink | Comments (16)

Sunday, December 8, 2013

Did the Market for Law Firm Associates Peak 25 Years Ago?

Based on the chart below, which reflects 35 years of large law firm data, the answer appears to be yes.  The chart enables us to compare two very simple trendlines: the percentage of lawyers in NLJ 250 law firms who have the title of Associates versus the percentage with the title of Partner. 

Figure1

The chart above was generated by my colleague, Evan Parker-Stephen, who is Director of Analytics at Lawyer Metrics.  I asked Evan to crunch these data after some of research I was working on revealed a 50% decline in Summer Associate hiring between 2002 and 2012 at the ~600 law firms listed in the NALP Directory (11,302 to 5,584). In other words, 2008 is the wrong reference point. See Sea Change, NALP Bulletin (Aug 2013).  Something more substantial was (is) happening.

Indeed, the 35-year graphic above provides a true wide-angle view, which in turn reveals an absolutely remarkable story.  Associates were most integral to the large law firm model over 25 years ago.  Although large law firms went on a hirng spree at various points during the 1990s and 2000s, the firms themselves were simultaneously adding a new layer of human capital that was neither associate or partner/owner.  And in the process, associates were gradually being marginalized. The graph below (also NLJ 250 data) reveals the growing middle section of the so-called Diamond Model:

Figure2_highres

So what does all this mean?  

My best analysis is set forth in a short research monograph I wrote with Evan, entitled "The Diamond Law Firm: A New Model or the Pyramid Unraveling?"  The punchline is that large law firms appear to be chasing short-term profits at the expense of longer-term sustainability.  It would not be the first industry sector to lose its competitive advantage through myopic strategy -- as the saying goes, nothing fails like success.  See Henderson, Three Generations of U.S. Lawyers: Generalist, Specialist, Project Manager.  Large firms are not going extinct.  But as a matter of demographics, they are greying.  If BigLaw were trading on the Nasdaq, the analysts would be very critical of this trend.  

December 8, 2013 in Blog posts worth reading, Data on the profession, Important research, Law Firms, New and Noteworthy, Scholarship on the legal profession, Structural change | Permalink | Comments (9)

Sunday, December 1, 2013

From Big Law to Lean Law

RibsteinIn 2012, Bruce Kobayashi and the George Mason Law & Economics Center organized an ambitious conference series entitled, "Unlocking the Law: Building on the Work of Professor Larry Ribstein."  The collective work product has recently been published in the International Review of Law & Economics.  

My contribution was an essay entitled "From Big Law to Lean Law."  It is a  review of Larry's seminal "The Death of Big Law" article, with the benefit of three years of data and the gradual realization that the entire legal profession is on the brink of a major structural transformation.

The "Death of Big Law"  first appeared on SSRN in the fall of 2009.  The following spring, I attended the annual Georgetown Center on the Legal Profession conference, where Larry's analysis and conclusions were presented to a large audience of Big Law partners, including managing partner commentators.  Suffice to say, the reaction was one of polite bafflement.

"From Big Law to Lean Law" was my best attempt to serve as a translator, albeit with the benefit of three years of market data and hindsight.  Here is the abstract

In a provocative 2009 essay entitled The Death of Big Law, the late Larry Ribstein predicted the shrinkage, devolution, and ultimate demise of the traditional large law firm. At the time virtually no practicing lawyer took Larry seriously. The nation’s large firms were only one year removed from record revenues and profits. Several decades of relentless growth had conditioned all of us to expect the inevitable rebound. Similarly, few law professors (including me) grasped the full reach of Larry’s analysis. His essay was not just another academic analysis. Rather, he was describing a seismic paradigm shift that would profoundly disrupt the economics of legal education and cast into doubt nearly a century of academic conventions. Suffice to say, the events of the last three years have made us humbler and wiser.

This essay revisits Larry’s seminal essay. Its primary goal is to make Larry’s original thesis much more tractable and concrete. It consists of three main pillars: (1) the organizational mindset and incentive structures that blinds large law partners to the gravity of their long-term business problems; (2) a specific rather than abstract description of the technologies and entrepreneurs that are gradually eating away at the work that has traditionally belonged to Big Law; and (3) the economics of the coming “Lean Law” era. With these data in hand, we can begin the difficult process of letting go of old ideas and architecting new institutions that better fit the needs of a 21st century economy.

(SSRN link.)  In the service of explaining these complex market dynamics to lawyers, legal educators, and law students, I am posting the figures used in the paper, which can be downloaded from Slideshare.

December 1, 2013 in Data on the profession, Important research, Law Firms, Scholarship on the legal profession, Structural change | Permalink | Comments (0)

Sunday, November 24, 2013

Understanding Trends in Demographics of Law Students – Part Three

Why the Difference in Response to Market Signals?

In Part One, I analyzed how analysis of changes in applicants from LSAC’s Top 240 Feeder Schools demonstrates that graduates of more elite colleges and universities have abandoned legal education at a rate greater than graduates of less elite colleges and universities. 

In Part Two, I analyzed how the pool of applicants to law school has shifted with a greater decrease among applicants with high LSATs than among applicants with low LSATs resulting in a corresponding  increase in the number and percentage of matriculants with LSATs of <150.

What might explain why applicants to law school are down more significantly among graduates of more elite colleges and universities than among graduates of less elite colleges and universities?  What might explain why applicants to law school are down more significantly among those with LSATs of 165+ than among those with LSATs of <150?  Is there some relationship between these data points?

There likely is some relationship between these data points.  Many of the more elite schools in the LSAC’s list of the Top 240 Feeder Schools have historically been schools whose graduates on average have higher LSAT scores compared with graduates from less elite schools.  The LSAC’s 1995 publication, Legal Education at the Close of the Twentieth Century:  Descriptions and Analyses of Students, Financing, and Professional Expectations and Attitudes, authored by Linda F. Wightman, discusses the characteristics of the population of students who entered law school in the fall of 1991.  Roughly 31% of the students scoring in the top quarter in terms of LSAT came from very highly selective undergraduate schools, roughly 31% from highly selective undergraduate schools, and only 17% from the least selective undergraduate schools.  Id. at page 38, Table 20. Thus, it is very likely that these two data points are related – that the greater decline among applicants from more elite colleges and universities is correlated directly with the greater decline among applicants with LSAT scores of 165+.

I want to offer three possible explanations for this differential response to market signals among different populations of prospective law students.  The first two focus on the possibility that market signals are communicated differently to different populations.  The third focuses on how different populations of prospective law students simply might respond to the same market signals in markedly different ways.

Different Pre-Law Advising Resources May Mean Market Signals Penetrate Some Populations of Prospective Law Students More Deeply Than Other Populations of Prospective Law Students.  Focusing first on the nature of the feeder schools, one possibility is that access to pre-law advising resources differs across these different categories of feeder schools resulting in different messages being communicated to applicants from less elite colleges and universities than to applicants from more elite colleges and universities regarding the cost of legal education and the diminished employment prospects for law school graduates in recent years.  Perhaps there are more robust pre-law advising programs among the elite colleges and universities than among the less elite colleges and universities, with pre-law advisors who really have their finger on the pulse of what is happening in legal education and the legal employment market.  Perhaps these more robust pre-law advising programs are engaging in programming and advising that communicates more effectively to prospective law students the significant costs of legal education and the ways in which the challenging employment reality for law graduates in recent years makes the significant cost problematic.  As a result, perhaps larger percentages of prospective law students at more elite colleges and universities are getting more information about the increasing costs and diminished employment prospects for law graduates and are deciding to wait to apply to law school or are deciding to pursue a different career completely. 

Alternatively, pre-law advisors may have different responses to market signals in thinking about their role in advising students.  Perhaps pre-law advisors at more elite colleges and universities are more directive about discouraging students from considering law school while pre-law advisors at less elite colleges and universities are more inclined simply to support student interest in pursuing law school.

There clearly are disparate allocations of resources to pre-law advising across various colleges and universities, different levels of engagement among pre-law advisors and different perspectives on how directive one should be in advising students considering law school.  That said, I am not sure these differences necessarily can be delineated in relation to the extent to which a college or university is considered an elite college or university or a less elite college or university.  Moreover, with so much information now available on the internet, it is not clear that pre-law advisors are the primary source of information for prospective law students. 

These hypotheses would benefit from being explored empirically.  What are the relative pre-law advising resources at the schools down more than 30% in applicants between 2010 and 2012 relative to the pre-law advising resources at the schools down less than 10%? Are pre-law advisors at the colleges and universities down more than 30% in applicants between 2010 and 2012 more inclined to affirmatively discourage students from considering law school than pre-law advisors at  colleges and universities down less than 10%?  Were prospective students at these two categories of schools really receiving different messages about the employment situation for law graduates and the cost of law school?

Different Social Network Signals and Influences --- Another possibility might involve social network signals and influences.  Significant empirical data indicates that on average different socio-economic populations attend different types of colleges and universities.  Among those entering law school in fall 1991 from very highly selective undergraduate schools, nearly three times as many were from families from upper socio-economic status as from lower-middle socio-economic status.  Legal Education at the Close of the Twentieth Century:  Descriptions and Analyses of Students, Financing, and Professional Expectations and Attitudes, at page 38, Table 20.  By contrast, among those entering law school in fall 1991 from the least selective undergraduate schools, nearly twice as many were from lower-middle socio-economic status as from upper socio-economic status.  Id. Similarly, there is fairly significant empirical data indicating that different socio-economic populations generally attend different tiers of law schools with more of the socio-economically elite at higher-ranked law schools and fewer of the socio-economically elite at lower-ranked low schools.  Id. at pages 30-31,  Table 15 and Figure 7; Richard H. Sander and Jane R. Bambauer, The Secret of My Success:  How Status, Eliteness and School Performance Shape Legal Careers, 9 J. Empirical Legal Stud. 893, Table 2 (2012)(analysis of the After the JD dataset looking at a representative sample of law school graduates who took the bar in 2000). 

Given this background, it would seem plausible that graduates of more elite colleges and universities on average represent more of an upper-income socio-economic population who may know more lawyers than graduates of less elite colleges and universities who may on average represent more of a middle class socio-economic population.  The parents of graduates of more elite colleges and universities may be more likely to be lawyers and/or have friends who are lawyers.  Thus, it is possible that graduates of more elite colleges and universities may be more likely to have received negative signals about the rising cost of legal education and the diminished employment prospects for law school graduates in recent years from family and friends than did their peers from less elite colleges and universities.  This hypothesis also would benefit from being explored empirically.

Different Decision Matrices Based on Socio-Economic Status and Opportunity – Another possibility is that regardless of whether students across different types of feeder schools really are getting different messages about the costs of legal education and the challenging employment prospects for law school graduates, they simply may be making different decisions in response to that information.  This hypothesis builds on the possibility that different populations of prospective law students may have different motivations for considering law school or may evaluate the value of a legal education using different parameters given different sets of options that might be available to them.  It is possible that the market signals regarding employment of law graduates are more nuanced than we might generally appreciate.  

For example, it may be that graduates of elite colleges and universities, who also tend to be among the socio-economic elite, have a variety of employment options coming out of college that are more attractive than law school at the moment given the diminished job prospects for law graduates in recent years.  If these students generally value a law degree primarily because of the status associated with acquiring a “prestigious” job in a big firm upon graduating from law school, than the significant decline in big firm jobs might frame their analysis of the value-proposition of law school.  Changes in the legal employment marketplace, particularly significant declines in the number of positions with “prestigious” big firms, may have made the legal profession less attractive to the socio-economic elite, who may be able to pursue job opportunities in finance, investment banking, consulting, or technology, or meaningful public interest opportunities such as Teach for America, that are viewed favorably within their social network. 

By contrast, for graduates of less elite colleges and universities, who are generally not from the socio-economic elite, fewer opportunities may be available in finance, investment banking, consulting, and technology.  In addition, they may lack the financial flexibility to make Teach for America or other public interest opportunities viable.  Moreover, this set of prospective law students may be more motivated simply about becoming a lawyer and acquiring the status that comes with being a lawyer (even if they are not going to become a big firm lawyer, but are simply going to be a family law attorney, or a public defender or a worker’s comp attorney).  This population may be less focused on big firm options and less concerned about the lack of jobs in that niche within the market and may see any position within the legal profession as a path toward financial security and social status, despite the increasing costs of legal education and the diminished employment prospects of law graduates. 

These hypotheses also may merit more empirical assessment.  What are the graduates of more elite colleges and universities choosing to do in greater numbers as significantly smaller numbers apply to law school?  Are there different motivations for pursuing law school among different socio-economic populations?

Regardless of the explanation for the current changes in application patterns, it would appear that the population of law students not only is shrinking, but may be going through a modest demographic transformation, with a somewhat smaller percentage of law students representing the socio-economic elite and a somewhat larger percentage of law students from lower on the socio-economic scale.  First-year students in 2013 may be slightly less “blue blood” and slightly more “blue collar” than they were in 1991.  Whether this is a short-term trend or a longer term reality remains to be seen.  What it might mean for legal education and the legal profession over time also remains to be seen.

November 24, 2013 in Data on legal education, Data on the profession, Scholarship on legal education, Scholarship on the legal profession | Permalink | Comments (0)

Tuesday, September 17, 2013

Dan Katz on Legal Prediction and Legal Metrics

This presentation by Dan Katz is worth reviewing.

posted by Bill Henderson

September 17, 2013 in Blog posts worth reading, Cross industry comparisons, Current events, Innovations in law, New and Noteworthy, Scholarship on the legal profession, Structural change | Permalink | Comments (0)

Wednesday, June 5, 2013

Empirical Evidence of Competencies Necessary for Advancement in Law Firms

For those trying to better understand how legal education can better prepare law students for the world that awaits them, I would encourage you to take a look at the draft article my colleague, Neil Hamilton, Director of the Holloran Center for Ethical Leadership in the Professions at the University of St. Thomas School of Law, recently posted on SSRN. The article is entitled Law-Firm Competency Models and Student Professional Success: Building on a Foundation of Professional Formation/Professionalism. Here is some of the description from the abstract:

A law student who understands legal employer competency models can differentiate him or herself from other graduates by using the three years of law school to develop (and to create supporting evidence to demonstrate) specific competencies beyond just knowledge of doctrinal law, legal analysis, and some written and oral communication skills. . . .

In Part I below, this essay analyzes all available empirical research on the values, virtues, capacities and skills in law firm competency models that define the competencies of the most effective and successful lawyers. Part II examines empirical evidence on the competencies that clients evaluate. Part III evaluates the competencies that make the most difference in fast-track associate and partnership promotions. These data and analyses lead to several bold propositions developed in Part IV:

1. Law students and legal educators should identify and understand the values, virtues, capacities and skills (the competencies) of highly effective and successful lawyers in different types of practice (one major example is law firm competency models analyzed below in Part I);

2. Each student should use all three years of experiences both inside and outside of law school (including the required and elective curriculum, extracurricular activities, and paid or pro bono work experiences) to develop and be able to demonstrate evidence of the competencies that legal employers and clients want in the student’s area of employment interest;

3. Law schools should develop a competency-based curriculum that helps each student develop and be able to demonstrate the competencies that legal employers and clients want; and

4. Both law students and law schools should understand that the values, virtues, capacities and skills of professional formation (professionalism) are the foundation for excellence at all of the competencies of an effective and successful lawyer.

The article presents far more useful information than can be summarized here, and different readers may be struck by different things discussed in the article. One of the most significant takeaways for me, however, is the convergence around an array of competencies frequently not taught in law school. The article analyzes competency models used to assess associate development at 14 medium to large law firms in the Twin Cities and compares that with some other literature on competencies clients look for in attorneys. The analysis demonstrates that in addition to traditionally understood technical skills – legal analysis, oral and written communication, and knowledge of the law – there is significant convergence around several competencies frequently not taught in law school – 1) Ability to initiate and maintain strong work and team relationships; 2) Good judgment/common sense/problem-solving; 3) Business development/marketing/client retention; 4) Project management including high quality, efficiency, and timeliness; 5) Dedication to client service/responsive to client; and 6) Initiative/ambition/drive/strong work ethic.

Whether law schools are going to be able to find efficient ways to offer students opportunities to develop these competencies, it is imperative that we make our students aware that they need to be developing these competencies to give themselves the greatest likelihood of professional success.

[posted by Jerry Organ]

June 5, 2013 in Data on legal education, Data on the profession, Important research, Innovations in legal education, Law Firms, Scholarship on legal education, Scholarship on the legal profession | Permalink | Comments (0)

Friday, January 18, 2013

A Blueprint for Change

Several months ago I wrote a book review of Brian Tamanaha's important book, Failing Law Schools.  In the last paragraph, I wrote:

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

I tried to write Part II, but a blog post just was not up to the task.  Further, I sensed that my colleagues were in no mood for half-baked solutions. There has been enormous criticism of legal education on the blogs and in the media, but very little in the way of detailed prescriptions to improve the situation.  I felt an obligation to back off on the criticism and focus on solutions.  So, in essence, Part II of my Tamanaha review became an article.

I just posted to SSRN an article entitled "A Blueprint for Change" forthcoming in the Pepperdine Law Review.  It is both a diagnosis and a proposed solution -- a solution I am actively pursuing. Here is the abstract:

This Article discusses the financial viability of law schools in the face of massive structural changes now occurring within the legal industry. It then offers a blueprint for change – a realistic way for law schools to retool themselves in an attempt to provide our students with high quality professional employment in a rapidly changing world. Because no institution can instantaneously reinvent itself, a key element of my proposal is the “12% solution.” Approximately 12% of faculty members take the lead on building a competency-based curriculum that is designed to accelerate the development of valuable skills and behaviors prized by both legal and nonlegal employers. For a variety of practical reasons, successful implementation of the blueprint requires law schools to band together in consortia. The goal of these initiatives needs to be the creation and implementation of a world-class professional education in which our graduates consistently and measurably outperform graduates from traditional J.D. programs.

I have a large backlog of shorter articles and analyses that I have not posted because I wanted my own detailed solution in the public domain.   I hope to tie all of these ideas together over the coming weeks.

Thank you, Brian Tamanaha, for writing an book that required me to think in terms of solutions.

[posted by Bill Henderson]

January 18, 2013 in Current events, Data on legal education, Data on the profession, Innovations in legal education, Scholarship on legal education, Scholarship on the legal profession, Structural change | Permalink | Comments (2)

Friday, July 27, 2012

Encouraging Data on Law Firm Diversity

Here is some welcomed good news for the legal industry--we now have data showing diverse lawyers, within certain large and important legal markets, ascending to law firm partnership in significant numbers.  Let me be clear.  I am reporting progress here, not perfection.  But the progress provides key insights on how to further reduce the partnership diversity gap.Nalplogo

The research, which I just published in the NALP Bulletin (see "Diversity by the Numbers," July 2012), is based on the 2005-06 edition of the NALP Directory of Legal Employers. The NALP Directory is a city-by-city guide for several hundred law firms that  participate in the on-campus interview (OCI) process.  This information includes a breakdown of lawyers by firm, branch office, title, and race/gender/GLBT status.  (See full article for overview data.)

The aggregate-level statistics are not every encouraging--less than 5% of partners at these corporate firms are minority.  These are the type of bleak statistics that frame the diversity discussion.  Yet, when the data are disaggregated, we see racial subgroup making substantial partnership inroads in specific geographic markets.  For African-Americans, it is Atlanta and Washington, DC; for Asians, it is L.A., San Francisco, and Pacific Northwest/Rocky Mountain region; for Hispanics, it is Houston, Dallas, Miami and L.A.  Further, these partnerships disproportionately in AmLaw 200 firms.

The map and table below expresses these geographic variations using a location quotient methodology.

Nalp2012julyfigures

(Note: CSA means "Consolidated Statistical Area", a geographic area defined by the U.S. Census Bureau.  Among other things, CSAs are very large metropolitan area labor markets.)

In the map above, the emphasis on large metropolitan areas is deliberate.  Among the 600+ law firm in the 2005-06 Directory, 64.2% of their attorneys worked in the top 10 metropolitan markets; these same markets also accounted for 74.8% of hiring at the NALP firms.

A Location Quotient (LQ) is a tool for identifying relative surpluses or shortages of an economic activity within specific locations.  If, for example, the percentage of female partners in New York City is the same as the entire US market, the location quotient for female partners would be 1.00.  In fact, the LQ for female partners in New York City is .87.  This means that are 13% fewer female parters in New York City relative to the total base of New York City partners.  Likewise, the LQ for African American partners in Atlanta is 2.67.  This means that there are 167% more African American partners in Atlanta relative to the total Atlanta partnership base. Cells in Yellow are underrepresented by more than 10%; cells in blue are overrepresented by more than 10%.

The implication of this analysis is that significant diversity tends to exist in pockets that follow distinctive demographic patterns.  These significant pockets rebut the pessimistic view, held by some, that minority partners lack the skills and ability to be successful in large corporate law firms.  Quite the opposite is true -- minority lawyers' willingness to enter a market and persist at a firm is likely influenced by number of people from the same minority group who have ascended to the partner level.  If you are a African American lawyer, the wind is at your back in DC or Altanta, but in many branch offices in Dallas, Phoenix or Boston you will be breaking barriers.

This brings up the issue of pipeline, which is a precursor to any hoped for progress on partner diversity. 

To look at pipeline-to-partner issues, I created separate regression models to predict the % minority associates within a law office (not the firm as whole).  I ran the model separate for African American, Asians, Hispanics, GLBT and females. Each factor below makes an independent contribution to a larger pipeline of diverse associates.

  • Geography matters.  Diverse associates are disproportionally going to the same market where their same subgroup has been successful becoming partner.  African Americans to Atlanta and DC; Asians to the west coast; Hispanics to the major markets in the Southeast and Southwest.
  • Large Firms.  Large firms are more successful recruiting diverse associates. This could be salary, prestige, recruitng resources.
  • Large Offices.  Bigger branch offices are more successful.  This could be recruiting resources or a more appealing variety of practice areas.
  • % of Diverse Partners.  This is the critical factor -- for every category, % of partners is associates with higher % of associates.  This is independent of size and geography!  Further, there is zero crossover effect. 

Quoting from the full article, "The takeaway from the above analysis is both simple and frustrating.  We would have more African American (or Hispanic or Asian or Female or GLBT) associates if only we had more African-American (or Hispanic or Asian or Female or GLBT) partners.  But getting more diverse partners will be slow going until we become better at retaining, rather than just recruiting, diverse associates.  The first generation of diverse lawyers will, by definition, not have the benefit of diverse mentors.  And in many firms, or at least branch offices, the first generation has not yet arrived."

I am really grateful to NALP for giving me access to this unique dataset.  It caused me to think much more deeply on how lawyer development can be used to create greater diversity in the huge number of branch offices where there is no critical mass of diverse partners.  It short, it is all about creating a competency model and evaluation system--i.e., a roadmap--that makes the path to partnership more explicit.  Why am I bullish on our ability to make progress on partnership diversity?  Because these systems simultaneously advance profitability and diversity.  The article recounts one such example.

[posted by Bill Henderson]

July 27, 2012 in Data on the profession, Important research, Innovations in law, Law Firms, New and Noteworthy, Scholarship on the legal profession | Permalink | Comments (0)

Tuesday, July 17, 2012

UK's Legal Services Board Releases Study on Individual Legal Consumer Market

LsblogoWith the passage of the Legal Services Act 2007, the UK began the process of liberalizing its market for legal services.  The UK legal market and all of legal education is now regulated by the Legal Services Board, which is presided over by a nonlawyer civil servant named Chris Kenney.  

The LSB's regulatory objectives are set out in Section 1 of the Act. They include: "(a) protecting and promoting the public interest";  "(c) improving access to justice"; "(d) protecting and promoting the interests of consumers"; "(e) promoting competition in the provision of services within subsection (2)"; and "(g) increasing public understanding of the citizen's legal rights and duties[.]"

One of the fruits of the new LSB regime is this just released empirical study on how British citizens evaluate and make decisions about their own legal needs. In a nutshell, they often go in alone without the benefit of a lawyer. Further, only about 20% of this unmet legal need fall in the domain of "reserved legal activities," which require a licensed legal professional.

Although the report does not come out and says this, the implication of the myriad statistics is that the British consumer market is ripe for commodification through technology and mass distribution channels.  When confronted with a legal need, face-to-face counseling with a skilled professional may be the ideal, but that is far from the reality for most British citizens.

[posted by Bill Henderson]

July 17, 2012 in Cross industry comparisons, Current events, Data on the profession, Innovations in law, Scholarship on the legal profession, Structural change | Permalink | Comments (1)