TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, September 26, 2017

'When Clients Sneeze, Law Firms Catch A Cold; Law Schools Get The Flu; And Law Students Contract Pneumonia'

Forbes, Who Will Train Tomorrow's Lawyers and How Will They Learn?:

The legal industry is an ecosystem; there’s an inter-dependency between and among its elements. So, for example, when clients sneeze, law firms catch a cold; law schools get the flu; and law students contract pneumonia. A recent American Lawyer article, Pay for Associate Hours? More Companies Say'No Thanks' underscored the interdependency — and misalignment — of law's stakeholders. It quoted from a speech by Mark Smolik, the general counsel of DHL Supply Chain Americas, saying he would no longer subsidize on-the-job-training of law firm associates. That’s an industry secret everyone knows, but it is newsworthy when the GC of a major corporation says it publicly.

Mr. Smolik’s remark extends beyond his department’s policy on outsourcing work to young lawyers; it is an indictment of the Academy for its failure to produce practice-ready graduates with required skillsets and a swipe at law firms for their failure to more fully invest in associate training to drive client value. The GC’s comment provides context for the vast migration of work from law firms to in-house departments and service providers. It’s one reason — together with the failure of law schools and firms to distinguish between legal ‘practice’ and ‘the business of delivering legal services’ — why corporate legal departments — law’s largest consumers — are also its leading providers.

A recent ALM Intelligence Report noted that 73% of legal work is now performed in-house—much of it by legal operations (‘legal ops’) teams that leverage technology and process to strip out — disaggregate — high volume, low value, repetitive ‘practice’ tasks that were once handled by law firms with a brute force, labor intensive approach that suited their economic model. Now, in the digital age, many of those tasks are automated, delivered as products — not services — or performed by lower-priced human resources and/or by machines. This is today’s legal marketplace. It is foreign to most law school faculty who are detached from the rapidly changing marketplace. Fortunately for law students and those already in the marketplace, there are efficient, accessible, cost-effective, and just-in-time learning tools available to fill knowledge gaps and to teach new skills. ...

Most Law Schools are Still Focused on ‘Teaching the Law’ — That Alone Doesn’t Cut It Anymore

Law school curricula, faculties, delivery models, and cost need a reboot. The gap between what the marketplace demands and the competencies most law grads possess — not to mention the amount of their educational debt — is staggering. There are several reasons to explain the delta: (1) the detachment of most law schools from the marketplace; (2) tenured faculty’s characteristic absence of practice experience; (3) a ‘business as usual’ approach to legal education when that no longer cuts it; (4) a widespread misconception — especially among top-tier law schools — that the conveyor belt that carried a majority of graduates into large firms is balky but not about to break; (5) failure to grasp that legal ‘practice’ is shrinking while legal operations and the business of law is expanding — law schools teach almost exclusively for practice careers; and (6) failure to provide more full-time faculty positions for those with practice experience and different backgrounds than the pedigree-centric, narrowly tailored Law Review, clerkship, and academic career paths of most tenured faculty.

The legal Academy might look to medical academics where faculty must demonstrate excellence in practice, (relevant) research, and teaching. True, a handful of law schools — Northwestern, Stanford, and Michigan State come to mind — are taking steps to narrow the divide between their curricula and the new marketplace. But most are preparing students for a legal marketplace that is finally witnessing the disruption that other industries — including professional services — have experienced due to the confluence of the global financial crisis, the acceleration of technological advances, and globalization. A new buy-sell dynamic has taken hold, and legal delivery is experiencing a major overhaul involving by whom, how, from what structure, and at what cost ‘legal’ services are delivered. Most law schools and firms have yet to read the memo, much less to take proactive steps in response. ...

New educational tools — and delivery models — are a quick, cost-effective, accessible way to align the competencies and skillsets of newly-minted and early-mid stage lawyers with a rapidly changing marketplace. Law schools will, of course, continue to play a key role in that process. To be effective, they must better understand the marketplace — especially consumer expectations — and recognize that legal delivery is not simply about lawyers anymore. Nor is imbuing students with ‘knowledge of the law’ — without more — a sufficient output for law schools. Critical thinking remains a seminal skill for lawyers but, without more, is insufficient training for the new legal marketplace.

http://taxprof.typepad.com/taxprof_blog/2017/09/when-clients-sneeze-law-firms-catch-a-cold-law-schools-get-the-flu-and-law-students-contract-pneumon.html

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Comments

This has been talked about for years and change has been slow in coming. Thinking back historically - when I was a junior associate at the beginning of the '80s, my Wall Street firm and an arrangement with its major bank client that all lawyers were billed at the same rate, from the most senior to the most junior (I think it was $110/hour back then), taken out of the usual (then) large retainer. The client thought it was getting a good deal, since they weren't overpaying for top lawyers; the firm thought it was a good deal since the most junior associates were assigned to as much of the client's work as possible, supervised by senior associates, and with the partners making cameo appearances as needed. Firm is still around and doing well... the client not so much.

Another anecdote from the old old days. Before WWII, at least in some cities including Philadelphia, junior associates were not paid; rather they paid the law firm for their training. I head about this from a prominent Wall Street firm partner from a humble background (got an ivy league education on a football scholarship) who started at a Philadelphia firm. They thought they were doing him favor by not charging him, but he need an income as he had a wife and small children, so he caught a train to New Yokr and was promptly offered a (low) paying job at the Wall Street firm.

Junior associates were not very well paid before around 1968, when Cravath jumped first year pay from ~8k to about ~12k and other firms followed suit. Back then, the pay was low enough you could not bill the time of first years (thinking of it as overhead) or bill their time a rates low enough a client didn't mind paying it.

Posted by: CatoRenasci | Sep 27, 2017 6:10:41 AM