On Thursday, March 26, at 2:00 pm EST, Ronda Muir will lead an audio conference sponsored by the Center for Competitive Management entitled "Turning Lawyers Into Leaders: How to Survive the Economic Slide." The discussion will cover who leaders are, what skills and attributes they should have in this economic climate and how to develop them. For more information and to register.
In a review of law school news, applications are holding steady but expected to go up, tuition is up, letter grades are being changed to pass/fail, big law firms continued through 2008 to hire apace, law schools are having it out with the ABA over accreditation, and then there is the case of the graduate who burned his Harvard Law School diploma.
Applications. Although a few law schools, including Duke, surging 4%, and Penn, rising 6%, and the D.C. area schools mentioned below, have seen increases in the number of applications, according to communications director Wendy Margolis of the Law School Admission Council, law school applications nationally have risen by less than 1% from last year, despite the dismal state of the economy. That compares to a 17.6% increase in the national law school applicant pool in 2002 following the 2001 recession.
A bigger surge in law school applications may come next year, she says, since the economic debacle striking so late in 2008 limited the ability of many applicants to apply in time for this year’s spring decisions. However, the higher cost of law school tuition today and the limited availability of loans also may be discouraging potential applicants.
Certainly the number of students applying to D.C.-area law schools has surged as the economy sunk. George Washington University Law School’s applicant numbers are up 8%, the University of Virginia School of Law’s applicants have risen more than 10%, and Georgetown University Law Center has received 12% more applications than last year.
Andrew Cornblatt, Georgetown’s dean of admissions, says the law school pushed its deadline back a month to March 2 to accommodate last-minute applicants coping with lay-offs and other bad economic news. His office received roughly 1,000 applications on Feb. 2 and Feb. 3 combined, a sign that people were rushing to get in before the original deadline.
Tuition. Most law schools are raising tuition for the 2009-10 school year by 3% to 15%. Stanford Law School, for example, announced a 3.75% raise and Saint Louis University School of Law is raising tuition by 3%, less than its traditional annual increase of 5%.
Budget cuts in some states are forcing public law schools to debate tuition increases. In Missouri, Governor Jay Nixon has proposed no tuition increases if the legislature doesn’t cut the higher education budget.
Ellen Suni, dean of the University of Missouri-Kansas City School of Law, where annual tuition and fees total about $15,000 for in-state students and $29,000 for those from out-of-state, tuition went up 3.8% last year. Tuition hikes reflect increases in competitive faculty salaries and library expenses that have gone up by more than 10% each year, she says, even though the school has done some cost cutting, such as instituting a hiring freeze.
Albany Law School announced that it is freezing tuition, currently $38,900, for the 2009-10 school year and plans to increase scholarships as well, even though annual giving is anticipated to be down by 10% for the year. Said Thomas F. Guernsey, president and dean, in "these particularly uncertain times, we want to do what we can to make it easier for students who are incurring all this debt." The school is also considering various cost-cutting measures, such as reducing the number of speakers and their travel costs, temporarily halting courses that have only a few students, and converting paper copying to electronic storage.
On the other side of the pond, three of London’s leading law schools are increasing the cost of both their Legal Practice Course and Graduate Diploma in Law by an average of 9%.
Grades. Several leading law schools are retooling their grading policies, with some making major revisions. Harvard Law School and Stanford Law School, for example, are switching to pass/fail systems, which Yale Law School has used for decades. And New York University School of Law now allows professors to give more A's. Columbia Law School says it is also reviewing its grading systems.
The changes are being made to create fairer evaluation systems and to better convey students' accomplishments to employers, educators say, although it’s hard to see how a switch from grades to pass/fail accomplishes either. Other advantages cited by the law schools are incentives to professors to conceive innovative course work, reducing grade anxiety of students and providing a fairer comparison of students.
"I think each school has to look at their culture, their own pedagogy, their own curriculum and make a decision for themselves what works best," said Michael A. Fitts, dean of the University of Pennsylvania Law School. Since 1995, the school has given traditional letter grades and sees no need to change that, Fitts said.
The University of Chicago Law School and Northwestern University School of Law said that they have no plans to change their letter grade-based systems. The University of California, Berkeley School of Law uses high honors, honors and pass designations and has no intention of changing that policy, said Stephen D. Sugarman, a professor at Berkeley. "When you have a less refined grading system, people who are employing your graduates are going to make distinctions, but they'll make them on their own grounds," he said.
Hiring. Despite the economy, the nation’s biggest law firms—the NLJ 250-- hired roughly the same percentage of graduates from the top 20 schools in 2008 (54.6%) as they did in 2007 (54.9%). And the quality of hires arguably went up: those firms also hired 5.3% more graduates than in 2007 from their favorite schools among the top 20. Columbia was at the top of the list of schools sending the highest percentage of graduates (70.5%) directly to NLJ 250 firms, and Boston University School of Law rounded out the bottom with 41.2% of graduates going to those firms. Yale Law School fell from the top 20 list for 2008 primarily because it sends so many, roughly 40%, of its graduates to clerkships.
The hiring statistics make it clear how hard it is to change direction mid-stream for big firms, which usually operate on a two-year hiring cycle and extend offers to most summer associates.
Compressed JD/MBA. Yale announced recently that it is adding a joint juris doctor and master of business administration program for completion in three academic years. The offering is in addition to the school's existing joint J.D. and MBA program that takes four years. Yale is not the first to offer a J.D. and MBA in three years: Indiana University School of Law — Indianapolis and Northwestern University School of Law also do.
Accreditation. Northwestern University is leading a charge to revamp the criteria that the American Bar Association follows to grant U.S. law schools accreditation.
Outgoing Northwestern University President Henry Bienen has sent a letter to 35 other law schools asking them to sign a statement that urges the ABA's Council on Legal Education and Admission to the Bar to stop stipulating employment terms at law schools. Bienen explained in the letter that the ABA had threatened to revoke his law school's accreditation because it did not provide tenure to its clinical faculty and law library director. The demands were ultimately dropped, but the letter contends it was "an attempted infringement on our authority to govern our institutions." With supporters on both sides, the issue is dividing the law school administration community.
Burning Your Diploma. "Jack," a self-described, anonymous, 30s-something lawyer in D.C., who graduated from Harvard Law School has caught the attention of many in the legal field. He blogs in Adventures of Voluntary Simplicity about giving up the material excess associated with corporate law for a simpler life . Last year he burnt his diploma in a YouTube display and in spite of the economic environment has announced that he intends to leave his $300,000+ legal position.
Continue Reading...On Wednesday, March 25, at 12:30 pm EDST, Ronda Muir and Robin Rolfe will lead a round table discussion of "How Progressively Managed and Adaptive IP Firms Can Gain an Advantage in a Down Economy." Sponsored by the Association of Patent Law Firms (APLF) as part of its Brand of Excellence series, this program is offered at no charge and to members only. Additional information can be obtained by contacting admin@plf.org.
Innovation may be coming to law firms the hard way—prompted by crippling economic conditions. As pointed out in our entry “Fearing Fear“ on February 9, a natural reaction to the downturn is fear, which often neurologically prompts “pencil counting,” or furiously holding on to whatever you still have. Fortunately, if you push through the fear, there is the possibility of another response, and that is creative innovation. So far there are not any major revisions to the business model, to be sure, but at least there are some spasms of change.
Law firms are notorious lemmings, hesitant to do anything everybody else isn't doing. But in this downturn firms are starting to take more individualized approaches to managing their businesses, particularly with respect to reducing their largest expense: compensation. Reducing compensation costs through across-the-board associate salary and bonus freezes, delays, or cuts, jettisoning practice groups that are not deemed profitable or imposing layoffs have been the most common steps taken. Another approach is a reduced hours work week--targeted, across-the-board, or by invitation to those who want a period of work-life balance that errs on the "life" side. Even “furlough,” a fancy corporate word for temporary unemployment, is appearing in the downturn vocabulary of law firms, with the promise of holding on to talent for when business returns.
Pillsbury, one of the firms whose layoffs were outed by Above the Law because of a partner's indiscreet cell phone conversation on a commuter train, has preempted those layoffs with a “voluntary departure plan” for lawyers who want to leave of their own accord.
But some firms are also paying new associates to arrive later, to work at public or non-profit organizations, or to be seconded to clients, a move that can cement wobbly client relationships.
Another approach is to manage compensation by changing or expanding tiers. A number of firms have de-equitized partners and quite a few are considering thinning their non-equity partner ranks by moving those attorneys into different tiers.
WilmerHale is putting more steps firm-wide on its attorney ladder. To the titles of associate, counsel and partner will be added senior associate, special counsel, senior partner (for those approaching retirement) and senior counsel (for partners practicing beyond normal retirement age). Co-managing partner Bill Perlstein hopes the move will increase flexibility and allow attorneys a greater choice for their career path. Given increasing attorney preferences, particularly among Gen Xers and Yers, for more personal control over their schedules, additional tiers, if announced and managed thoughtfully, can help create a more satisfied, productive team.
Partner compensation is often the “untouchable” at firms, but even there, change is in the offing. Chicago firm Much Shelist Denenberg has announced a temporary across-the-board 10% pay cut for all lawyers, partners as well as associates, through the end of its fiscal year. Sharing the pain can promote those firms that pride themselves on their egalitarian treatment of all lawyers.
Patton Boggs recently announced that it is replacing its “eat-what-you-kill” partner compensation system with one that also rewards cooperation and firm-wide business development, associate mentoring and training, and moving clients to the next generation of client managers. The compensation review will look back three years instead of two to give partners longer to realize on business development efforts. Under this system, a partner’s income cannot fall in any given year more than 25%. Over 90 percent of equity partners voted for the change, which managing partner Stuart Pape called an “incentive for doing things that are supportive, collaborative and productive…In bad times, a meritocratic system is absolutely the best model.”
On the other side of the pond, similar tactics, and innovation, prevail. Allen and Overy, when axing 450 attorneys and staff, announced that it was spinning off part of its practice, imposing a pay freeze and asking remaining partners to each contribute an average of about $50,000 in additional capital to the firm. That move is expected not only to boost the firm's coffers but to raise the commitment to the partnership and its success of those partners willing to put their dollars there.
Doing It Right
The way that these initiatives are both announced and carried out have a major impact on firm culture and morale. Latham & Watkins’ stunning announcement recently of layoffs of 12% of its associates was accompanied by very generous (six months compared to three months) separation payments and health insurance, as well as interim salaries for new associates who delay their entry a year. In spite of the severity of the layoffs and questions about what the firm will look like in the future, the street buzz on the firm's handling of the layoffs has been positive—“classy” is Bruce MacEwen’s assessment. Similarly, the Philadelphia District Attorney's Office rescinded offers to its incoming attorneys only after several attempts to cut costs, and, when the inevitable occurred, actively sought jobs at other DA offices for those dis-invited, hoping to preserve relationships with lawyers who they might one day want to extend offers to again.
Latham and others have also received kudos for making the cuts in one whack instead of dribbling them out, as Dechert, for example, seems intent on doing. Although the realities of the downturn may drive some firms to second and third whacks. In one of the largest cuts of this layoff season to date, Orrick sent home 12 percent of its nonpartner lawyers on Tuesday, the second cut after a November 2008 one that promised to be the one and only. Those laid off Tuesday didn't fare as well as those cut in November: they got three months' severance instead of five.
Sign of the Times or Window into the Future?
Are these fairly modest innovations we are seeing now simply a sign of these difficult times, or do they signal a growing snowball of changes that could well roll far into our future?
These changes are not in and of themselves going to make any major inroads on the broken business model that now exists, but hopefully they signal a greater willingness (ok, motivated by a gun to the head) to get out there and slog through the swamp of uncertainty until we find firmer ground.
Experimentation is what will drive innovation, and up till now law firms have been fat and sassy enough to be able to afford not to experiment. But the old "one size fits all" attitude about how firms should be run is beginning to fray. Unusually bad market conditions have freed firms to stop copying what everyone else is doing and look more carefully at and respond more creatively to who they specifically are, where they are headed and what resources and skills they need to get there.
Given the layoffs across the country, if a recovery is not in motion soon, the next issue for firms to grapple with creatively may well be the dissonance between recruitment and retention that the current structure produces. How long can firms withstand waves of painful and expensive "forced attrition" at the same time they are undertaking time-consuming and expensive recruitment and training of new incoming associates, who may well then be forced to move on in a few years?
After arrival dates, compensation, bonuses and tiers have been manipulated, we can then start facing the decisions that will direct innovation toward the very structure of our firms and the traditional lawyer life-cycles there.
January’s carnage, in which U.S. law firms laid off more than 1,500 attorneys and staff, has been followed by further freefall in February, with layoffs exceeding January's by a considerable margin—at last count more than 2,000 attorneys and staff lost their jobs.
On a single day, February 12, "Bloody Thursday,” U.S. law firms announced axing 800 attorneys and staff. And Friday Latham & Watkins announced internally that it is laying off 190 associates and 250 staff--more than double the number that Above the Law tipsters had warned of earlier this week.(That being Above the Law’s second major inside tip, having earlier reported a Pillsbury partner’s indiscreet cell-phone disclosure on a commuter train.)
The scenario is playing out in every corner of legal practice. The Philadelphia District Attorney's Office — a large law firm in its own right — for the first time rescinded offers to its incoming class of 12 attorneys. The 300-attorney office typically sees about 10 percent attrition each year, which enables it to bring in a class of up to 35 people, as it did last year. But in this latest fiscal year, only two people left,
The office rescinded offers to all 12, according to Kathleen McDonnell, chief of legislation and head of the hiring committee in the District Attorney's Office. McDonnell said that, given the dire state of the city's financial outlook, it became clear that the smaller class size, delaying start dates and loosening a three-year commitment policy were not going to be enough to justify bringing in any new attorneys.
And of course the losses are not limited to this side of the pond. On February 19 a top London-based firm, Allen & Overy, announced cutting up to 450 attorneys and staff.
The question being asked is whether these are drastic responses confined to the current unprecedented economic situation or whether the long-term future of individual law firms, and perhaps the practice of law generally, is being restructured.
Stay tuned. (And see upcoming entry "Innovation During the Downturn.")
In the meantime, to satisfy your morbid curiosity, and make the anxiety even more accessible, you can go to Layoff Tracker or the American Lawyer’s Layoff List for the latest.
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Happy Holidays and A Prosperous and Peaceful New Year!
No, Virginia, there is no Santa Claus, but thankfully there is gratitude and hope, which I wish for all my subscribers during this holiday season and throughout the new year! With these twin gifts come prosperity and peace--let us work together to make sure you are beneficiaries in the coming year of both.
The Law People Management Gang
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