A Profession On The Verge Of A Paradigm Shift?

Law school enrollment is tanking, threatening the viability of some law schools. A continuing stream of announcements of law firm layoffs fills the legal periodicals. Client expectations about what they will pay for and what they expect to receive in return are changing dramatically. Are these changes transient market corrections, prompted by recent economic difficulties, or the beginning of a paradigm shift in how legal services will be provided in the future? The Federation of Defense & Corporate Counsel is taking a long, hard look at this critical issue. A day-long program at the FDCC Winter Meeting in Marco Island, from March 4 to 7, 2014, will examine the future of legal education, law firms, and client expectations. Longer term, the Federation has formed a committee to prepare a white paper on where the profession is headed to better prepare their members and the client community for what lies ahead.

The Future Of Legal Education

Law school enrollment has fallen dramatically to the lowest point in thirty years. The drop is reaching crisis proportions at some law schools. “At schools like Vermont, Hamline, Seton Hall, and Dayton … enrollment is down precipitously. At Hamline, for example, enrollment is down 55 percent since 2010, according to the Journal. At Seton Hall, it dropped 43 percent from 2010 to 2012. Schools have responded by cutting class sizes and faculty jobs too.”[1]

The reason is simple and obvious. An American Bar Association study found that only 55 percent of the law students graduating in 2011 found full-time legal jobs within nine months of graduation. The immediate consequence is young lawyers with nowhere to practice drifting into other jobs – lost forever to the profession they chose. Long term, promising college students are increasingly asking why they should incur tens of thousands of dollars of law school debt (on top of their undergraduate debt) to enter a field where jobs are increasingly scarce. The marketplace has spoken, and smart young people are turning away from a future as lawyers. The troubling question is, what will this brain drain do to the law firms – and ultimately, the clients whom they serve – in the long term?

Indiana University Law School professor William Henderson, a speaker at the FDCC’s upcoming Winter Meeting, has been studying these issues for some time. Among the topics he will address is what law schools must do to meet new challenges. If the present paradigm is not meeting market demands, what skills should law schools be teaching to meet the future needs of future clients? Should there be fewer law schools and fewer students? Should there be a strata of law schools teaching different skills, from traditional Big Law model lawyers to tech-savvy graduates trained for non-traditional, technology-driven legal service providers? What kind of disruption will there be in the supply of new lawyers during such a shakeout phase?

Professor Henderson argues that the paradigm has already shifted. Law firms in the future will use fewer traditional associates. The number of summer associate positions in law firms listed in the National Association for Law Placement Directory has almost fallen in half from 2002 through 2012. This means that there are approximately 6,000 fewer summer associate positions now than there were ten years ago.[2]

The question for clients and law firms looms – as baby boomer partners move into retirement, will there be sufficient numbers of talented younger attorneys to take their place? If this proposition seems far-fetched, one should understand that the traditional associate position is being crowded out by staff attorneys, “of counsel” attorneys, and legal outsourcing.

The Future Of Law Firms

Are college students turning away from law school the proverbial “canaries in the coal mine?” Does their concern for their own future signal drastic changes ahead for law firms? Law firms and corporate legal departments are increasingly scrambling to keep up with accelerating changes. Whether small, medium, or large in size, all law firms will continue to face new assaults on their current methods of attracting, serving, and keeping clients. Such assaults will affect both clients’ use of law firms and law firms’ bottom line profits. The day of the billable hour model is not totally gone, but new models are moving into the legal marketplace at a rapid pace.

Experts caution that the changes ahead are more than slight course changes. Altman Weil partner Tom Clay, another speaker at the upcoming FDCC Winter Meeting, predicts that “[t]he business of law will radically change within the next few years, so lawyers are in for an exceptionally bumpy ride.” Richard Susskind forecasts that “[l]egal institutions, and lawyers, are at a crossroads . . . and are poised to change more radically over the next two decades than they have over the last two centuries."[3]

Much is uncertain, but this much is clear: the law firm that does not begin to adapt – now – to the changes coming to the marketplace in the next five to ten years will find itself well behind the curve a decade from now (if not out of business). Law firms will need to adapt to permanent pricing pressures; continued commoditization of legal services; new sources of competition, including tech-driven legal service providers; outsourcing and online legal services; and accelerating technology-based and process-driven alternatives to traditional lawyering. Further, law firms today must consider and address how their present demographics (age and experience of their lawyers) will affect competitiveness and profitability a decade from now. Sitting atop of all the “economic” issues facing law firms in the coming years will be the task of balancing profitability with giving clients the high-quality legal services they need – which is the reason many lawyers became lawyers in the first place.

Clients’ Expectations

These dramatic changes in the legal world are not happening in a vacuum. Clients and client needs are driving the process. Over 70 percent of law firms responding to an Altman Weil survey reported feeling pressure from clients not just to cut costs, but rather to change the value proposition in legal service delivery.[4] Tim Pratt, President of the FDCC and General Counsel of Boston Scientific Corporation, made this observation: “Cost savings can be achieved not just by alternative fee arrangements, but by minimizing the internal resources needed to manage outside lawyers – we are looking for outside counsel essentially to be extensions of our internal legal department. Corporate clients are past the point of tossing work out to hundreds of outside lawyers who need significant oversight and training. We are looking to partner with fewer lawyers who know our business, understand our pressures, and can essentially manage themselves.”

The FDCC will explore, at its Winter Meeting and beyond, how practicing attorneys, located in-house and at outside firms, can navigate through the current turbulence roiling law schools and law firms alike, in order to align with their clients’ needs and continue to provide successful and cost-effective legal services as they move forward into an uncertain future. In Tim Pratt’s view, “The FDCC is particularly well-suited to take a hard look at these issues. While tumultuous times lie ahead, the Federation brings top defense counsel, insurance industry professionals, and in-house counsel together in an environment where honest communication is the norm. We will be taking a hard formal look at this issue over the next year.”