Last week I attended ALM’s Legal Week, which used to be called Legal Tech New York. While the program remains heavily e-discovery focused the folks at American Lawyer Media have taken a big step toward making the conference more applicable to all of legal. The keynotes in particular had broad appeal. While I sadly missed the Tuesday morning keynote featuring MIT Professor Andrew McAfee, I did catch the Tuesday evening “State of the Legal Industry” keynote.
The keynote was a panel that discussed the state and direction of the legal sector and featured a BigLaw lawyer and several in-house counsel at large companies like GE and MetLife. Because of the high-level nature of the discussion and because I live and breathe the “state of the legal industry” there wasn’t much that was shared that I hadn’t heard or considered. But one phrase caught my attention. During a transition, the moderator said: “Let’s talk about the war for talent.’” Specifically, she was referring to the challenge that big firms have in competing for talent from the top law schools and the struggle that ensues when large corporations try to hire lawyers away from big law firms.
Health of law schools
A few days later, Law School Transparency (LST) released its State of Legal Education 2017 Update. The report reinforced what LST has already established in legal education: students are at the greatest risk of being exploited at schools where LSAT scores and bar passage rates are decreasing. This trend mimics broader trends in legal education: law school applications are down. But it’s not just applications at the less selective schools like the ones LST called out: the number of law school applicants at the top 20 schools (rankings according to U.S. News) has decreased by 18%. This has translated into a drop in LSAT scores among the weakest applicants in the class, not only at less prestigious schools but at schools like Georgetown (down six points) and the University of Michigan (down four points).
Health of tech
The term “war for talent” is also familiar to me – but not in the way it was used in the keynote. In my hometown of Seattle, the “war for talent” is a reference to the challenges of finding, hiring, and retaining technology talent. The competition to secure top talent out of local, well-regarded, institutions like the University of Washington is fierce. This is to say nothing about the competition to hire from top computer science programs like Carnegie Mellon, Stanford, or MIT.
So when the moderator at Tuesday’s panel mentioned the “war for talent” my mind went not to the tragic plight of lawyers on Wall Street, torn between Big Law and in-house opportunities, but to the war for talent between the legal sector and other sectors in the economy for the best and brightest collegiate minds. If the LST data is any indication, the legal sector is losing this battle not on Wall Street but before the LSAT.
Why is legal losing this battle?
In my opinion, there are many possible reasons that the legal sector is losing this battle. One is that in good economic times, students tend to wade into the job market instead of pursuing graduate education. The economy isn’t booming but we’re not in recession anymore. Maybe students are opting to go to work instead of going to law school? The LST stats don’t compare legal to other graduate schools – perhaps law is not performing as badly as other graduate schools or there’s some other macro force at work? Others suggest that lawyers’ prohibition on fee-sharing keeps non-lawyers from coming into the legal sector (I’ve certainly argued as much) by limiting the possible economic upside exclusively to lawyers. This creates little to no economic incentive for non-lawyers to contribute to the legal sector. Maybe it’s just a reputation problem – lawyers and the legal sector are certainly not as sexy as entertainment, technology, or even finance.
There are just my uneducated guesses at what might be happening. Here’s the thing: the question wasn’t even mentioned. But I don’t want to throw the Legal Week folks under the bus. This was a bit of a missed opportunity from the point of view of their panel, they’re not the only ones not seeing this problem. The legal sector has always generally suffered from a bit of insularity, assuming that anything that happens outside of the legal sector is not relevant. If there’s anything that the rise of technology and the internet has taught us, it’s that everything is connected. Threats to a business model can come from unexpected places, like weakness in the pipeline of people coming into law school. It’s time for everyone in legal to look at the sector and its health holistically.
Opportunity ahead
The potential weakness in the law student pipeline also represents an opportunity, particularly for legal technology. The legal technology sector is one place to try to attract those who are interested in the legal sector but disenchanted by the current stigma surrounding legal. First, the legal technology sector offers an opportunity to do things differently. Just as the technology sector is remaking long-held corporate rules, legal technology offers the same prospect to the legal sector. It’s also true that some of those who are opting out of the legal path are opting into careers in technology. The two don’t have to be mutually exclusive. Those interested in technology can have a career in the legal as part of the legal technology sector.
So, I completely understand why the Legal Week keynote panel failed to highlight the struggling law school pipeline. Beyond the conference’s traditional focus on e-discovery, the topic is not something that most lawyers are watching. It’s my hope for the future that all “state of the industry” panels and discussions would take a more comprehensive definition of “industry” and try to account for some of the larger-scale trends affecting legal.
11 comments
William Crossett
Thanks for your perspective. We struggle to find Attorneys and Staff who not only understand but wish to explore "Tech" solutions. I worry that the downward push of fees only exacerbates the situation. How many times have I heard we give too much away for free?
Dan Lear
William - thanks for the note. It's an interesting question. Certainly the possibility of increased technological adoption in legal raises the possibility of greater automation, bringing down the costs of delivering some services - meaning lawyers give away more for free. However, I don't think that the solution is to resist or ignore the potential of technology applied to law. As many have said the greatest potential to serve clients lies in lawyer plus technology.
Beyond that it's my opinion - though I'll acknowledge that this hasn't been rigorously investigated - that much of what lawyers give away (present company excluded of course) could be monetized under the right circumstances. To the extent that lawyers give too much away it's because they haven't figured out how to get paid for what they give away.
Finally, wanted to acknowledge your point about tech competent staff. My piece spoke to tech competence of lawyers and the lawyer pipeline but tech competence of staff is just as, if not more, relevant to the success of a law firm. So glad you brought that up.
JW500
This is ridiculous. There was a massive oversupply of lawyers being churned out by law schools of all calibers. The market forces finally caused an ugly and painful correction. It's not over. We need to lose dozens of law schools. If schools are lowering standards it is because they refuse to reduce seats and lay off professors.
Splitting fees with non-lawyer has nothing to do with this issue.
"The war for talent" characterization is also ridiculous. I don't believe it exists at all. Law firms are starting to pay absurd salaries to first year attorneys in big legal markets (NY, DC, LA, etc.) That salary inflation was one of things luring too many students into law school. But it was all part of a game of ratcheting up fees every year to corporations. Now that is getting harder to do and something is going to have to give. Most likely the percentage of lawyer being paid the high salaries upon admission to the bar will continue to be very small or get smaller.
The lawyer pipeline is closer to equilibrium but probably still exceeds the demand. To suggest otherwise is to give some kids false hope.
Dan Lear
JW - thanks for the note. I'm a bit turned around by your comment but let me see if I can quickly respond. At first you suggest there is an oversupply of lawyers then at the end you suggest that we're closer to equilibrium. If closing law schools (a dozen or so, as you suggest) is the solution I think we've only seen the closure of one or two. So equilibrium may still be a ways off.
As far as fee-splitting, that's a much more complex issue. I'm not delving into that here (and I linked to my thoughts on the matter in the post) but the economics are pretty straightforward. A good chunk of technology talent today goes where they can reap the greatest reward for their skill. Right now, technical talent finds that not just in salary but in ownership stake in the form of stock options. No technical person can own any part of a law firm unless they are a lawyer - and even then I believe some states require the lawyer-owner to be engaged in the management or practice of law (though I may be mistaken about that last part). This is also true at the undergraduate level. If you are a super-smart young person today with your pick of college majors you're likely (not certain, but likely) to take your talent to the technology sector and major in CS, or EE, or IS or the like because those majors command the greatest salaries. And, just as I hinted in the piece above, few and far between (probably closer to zero) are the MIT, CMU or even UW technology grads who say "I want to take my technical expertise and apply it in the legal sector, let alone go to law school." And that's a shame because those folks are the best and the brightest of today's youth. Legal doesn't need only technical talent but it needs more not only for their technical expertise but because those are the greatest young minds.
As far as false hope, while I agree with you 100% that encouraging students to go to law school today with the expectation that they will be lawyers in the mold of yesterdays lawyers is wrong, I'm bullish on the sector generally. I think there are lots of opportunities for smart technology-inclined law grads and smart technology-inclined non-law grads to come to the legal sector not to do what's always been done but to change (or in the common popular parlance "disrupt") the sector and make it into one in which lawyers are happier and more successful, clients get better and more comprehensive service, and those who don't have access to the system today have a better shot at getting it. That's dreaming big, I know, but I'd rather encourage those kinds of people to enter the sector than more lawyers in the mold of those that we've always had. Or, worse yet, listen to yet another discussion about a "war for talent" in a small portion of the sector that doesn't take into account broader trends in the economy.
Mark
With respect to the decrease in interest in law school, I'll say the same thing that I'd tell my nephews if they expressed an interest in the law. Big Law is an industry with high barriers to entry (massive student loan debt, lots of dues paying, very elitist, etc.) and very low levels of respect for the associates. Basically, you go to law school, followed by Big Law to pay off your loans as quickly as possible while enduring some pretty bad mistreatment, and then you quit to figure out what you really want to do with your life. This all was less apparent to the outside world before the financial crisis, but the financial crisis led to a series of articles discussing the problems of lawyers and showing the law to lack the stability people thought it had.
Also, Big Law is also not normally a value add endeavor - it serves to protect preexisting value or to take value from others rather than to create value. I'm one of the fortunate ones who works in the law but not Big Law. But for most young people who want to be able to follow a track, it's better to go for tech, which at least is a field that's charting the course of the future.
Dom
I couldn't agree with JW500 more. The profession and our clients are poorly served by an environment that essentially allows anyone with a bachelor's degree to go to law school. Because it is prestigious for colleges and universities to have law schools, there are as many or more law schools now than there were before 2007, even though some of them are financial drains on their larger institution. If we want the best and the brightest to enter our profession, we need to re-examine legal education and the vast oversupply of law schools and law school graduates. I was impressed by the approach the the Florida legislature took (or so I was told by an admissions director of a Florida law school) and set a maximum pass rate of 68% for the Florida bar. As a sitting judge, I see too many cases where counsel is too busy operating a business - which, unfortunately, is what our profession has turned into - to effectively prepare their cases and represent clients before me. In large part, this is because of the financial pressure many attorneys face due to the oversupply of attorneys. While some may argue that such a situation serves to reduce legal fees, a poorly represented client is getting no bargain.
Dan Lear
Your Honor,
Thanks a lot for stopping by and even more for offering you opinion. I don't think anyone would disagree about your oversupply point. However, I'm not convinced that the "law as a business" mindset is the problem or even a problem. To the extent that law isn't or wasn't a business that's because it was a protected monopoly. It's true, monopoly status may have encouraged lawyers to spend more time on their cases but the it also created a situation those lawyers who do have innate or otherwise learned business skills compete vigorously and aggressively for work from those who can pay for it, while those lawyers without business skills struggle (as you suggest) to make ends meet.
It has also made legal services and legal information so scarce that not only do a limited few have access to legal services but many don't even know that the problem that they have is legal. (See American Bar Foundation work by Rebecca Sandefur)
The solution isn't less business in law. It's more. With regard to the lawyers who can't run businesses and practice at the same time issue I would say: well-run businesses and quality service aren't mutually exclusive. There are many examples in our economy of companies large and small that provide a quality, consistent experience across lots of customers. The problem with those lawyers who struggle to run a business and provide quality legal service is not the fact that their law firm is a business (law firms have always been businesses), it's that those lawyers were never trained how to run a business so they run it poorly - and both the businesses and legal services suffer.
I'm also convinced that more business and more tech in law would help expand access to services. Analogies of legal services to technology aren't perfect (they never are) but they're persuasive. Ride-sharing companies like Lyft and Uber have demonstrated that there is a "latent" demand for transportation services. There are people who use these services to a much greater extent than they ever would have used taxis. Ride-sharing has tapped into the latent demand for transportation by providing a value proposition (a combination of price, convenience, and value extracted) that makes using ride-sharing services very attractive. I'm convinced that there is latent demand in legal services if the services can be provided at a price and convenience level that matches other consumer experiences in the market today. I'm also convinced, however, that the people to help tap into this latent demand and figure out how to deliver these services are not traditionally trained lawyers delivering legal services the way they've always done delivered them. Sure, we can retrain lawyers to be more like technologists but we can also tap into the technology braintrust coming out of college today and learn from them. If we could only convince them to come to legal. But currently we can't. Because we're too focused on the wrong "war for talent."
Dan
Sharmil Mckee
Jw500, so your solution to the dearth of talent is to make the talent pool even smaller. With all due respect, that's backwards thinking and represents the true problem with our industry. Instead of changing, we assume the old ways were the best ways. We can no longer insulate our industry from competition with arcane barriers to entry like "top law schools" nomenclature. There are no shortcuts to identifying "talented" attorneys. We don't spend any time figuring out the characteristics of a talented attorney. We simply assume if you graduated from a top "tier" law school, then you are a talented attorney. Again, nonsense. It's time for new thinking. (And yes, I am a recruiter, so attorney talent is my business).
Dan Lear
Preach!
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