Law21 to host Blawg Review!

I’m delighted to be hosting the next edition of Blawg Review (#207)  on Monday, April 13. For those not familiar, Blawg Review is a weekly collection of the best of the legal blogosphere, assembled each week by a different law blogger. This post is to invite all Law21 readers to nominate great posts made during this week (April 6-12) for consideration for Blawg Review #207. Not all entries will make the final cut — there’s a tremendous amount of content submitted for these things, and I’m actually hoping that my version will be a little briefer than some recent entries — but I still want to encourage as many submissions as possible.

The mid-April date for the Law21 Blawg Review reflects both the founding of the Canadian Bar Association and the establishment of Canada’s constitution and Charter of Rights. Accordingly, I’d like to make an extra effort to showcase Canadian law blogs for the rest of the world. (This week’s edition of Blawg Review, as it happens, by May It Please The Court’s J. Craig Williams, referenced Tartan Day’s Canadian connections). So this post is also an open invitation to Canadian law bloggers (and their readers) to submit their favourites — it’d be great to see a lot of nominees from our incredibly deep pool of law blog talent in Canada.

It’s best to make your submissions through the official Blawg Review channels rather than by direct email to me. You can submit your nomination by going to the “Submission Guidelines” page at Blawg Review and following the directions there. Thanks in advance for your assistance in showing off the week’s best law blogs!

At ABA TECHSHOW

I’m back in Chicago, my favourite US city, for ABA TECHSHOW. Looking forward to meeting old friends and making new ones while picking up the latest in legal technology, practice management, and innovation insights. This year, if all goes well, I’m also going to try some liveblogging, or at least, quasi-liveblogging, from various sessions, building in enough time to correct my two-fingered typing. Where feasible, I’ll also try my hand at Twittering during the conference — if you’re interested, you can take a look at whatever I have to say at my Twitter homepage. No matter how successful (or not) those efforts are, I’ll do another wrap-up post when I get back home.

Join “Legal Innovation” at LinkedIn

As I’ve mentioned before, I’m serving as Chair this year of the InnovAction Awards, an annual presentation by the College of Law Practice Management (which, by the way, has announced the September dates for its high-powered Futures Conference).  The InnovAction Awards recognize and promote law firms, legal departments, and other providers of legal services that are blazing new trails in how lawyers conduct their business and serve their clients. It’s been a tremendous success, and I strongly encourage you to look to your own and your colleagues’ practices to see if you have an initiative that meets the InnovAction criteria.

Anyway, as part of the promotional process for the Awards, I created a “Legal Innovation” group at LinkedIn. The purpose is twofold: to raise awareness of the Awards and encourage people to submit entries, and to help lead the accelerating conversation within the legal profession around innovation.  Here’s the group profile:

Innovation is finally breaking into the mainstream of law practice. A combination of technological advances, competitive pressures, and client demands have led to a tipping point for innovation in legal services. This group is dedicated to furthering the cause of legal innovation. We build enthusiasm for doing things differently and better in the law. We talk about how legal innovation can be encouraged in law firms and law departments. And we identify examples of legal innovation for others to follow.

Membership is open to all legal professionals (and their clients) everywhere who care about making the profession better through a willingness to innovate. The College of Law Practice Management’s InnovAction Awards, which recognize exceptional innovation in legal practice and client service, helped launch this group.

Please consider this an invitation to all Law21 readers to come join the more than 200 lawyers, clients, consultants, and law practice professionals who’ve already become part of what looks to be a really interesting and dynamic community. Applications to join require approval, but I’ll get to them as quickly as I can, Monday through Friday. Thanks, and look forward to seeing you at LinkedIn!

Rightsizing

The massive grocery superstore in my neighbourhood has something like 17 checkouts. Great, you might think — 17 lines, no waiting. But I do wait, often, behind two or three people usually, and it’s not because the store is bulging with shoppers at any given time. It’s because at least some of those checkouts are always unattended — in fact, in almost four years buying groceries there, even at Christmas and other high-volume times, I’ve never seen all 17 checkouts in use. I’m not sure I’ve seen more than 12, and I’ve often seen fewer than five. And invariably, I have to line up.

Then there’s the check-in counter at the airport. I always get my boarding pass at home or at the self-serve kiosk, but I still need to drop off my bags and get my claim ticket, so invariably there’s another line waiting for me. And no matter how heavy or light the passenger traffic, I see the same thing — only a handful of the check-in stations are ever occupied. It should go without saying that checking out of a supermarket and checking into a flight are the most critical points of contact these companies have with their customers.

I wonder if my grocery store or airline has ever done the math here. You have to figure the cost of paying a reasonably diligent 20-something to run eggs over a scanner for eight hours would be covered by one family’s grocery bill, or that the cost of a few counter shifts at the airport ought to be paid for by one executive-class ticket. Meanwhile, the capital these companies have invested in their idle workstations depreciates away — a cost ultimately borne by those customers shifting irritably on their feet as they wait in a nearby lineup.

But this isn’t a post about understaffing in the food and travel industries; it’s about the growing downside of overcapacity. These companies evidently felt compelled to create a bigger footprint than they actually required or intended to fill. Possibly they anticipated greater growth in prosperous times ahead (though I think we just came through as much prosperity as we’re going to see for awhile).  More likely, though, they just thought (as we all tend to do) that size is self-evidently good. Maybe they liked seeing all those workstations on the blueprints. Maybe they liked being able to attach “bigger than ever” to a project that bears their name.

Here’s the problem: “more than necessary” is out. I don’t just mean as a matter of aesthetics, the fear of being seen as extravagant in a time of restraint. I mean that as a business imperative, carrying more than you need to get the job done is not just inefficient, it’s now dangerous. Seth Godin puts it this way:

Many businesses that are in trouble are in trouble for a simple reason: they’re the wrong size. A newspaper that only had a few dozen employees would be doing great today. But they have hundreds or thousands of employees because that was an appropriate scale twenty years ago. …

It’s tempting to get bigger. But is bigger better? In many cases, it’s worse, particularly when you can leverage reliable systems that are cheaper and faster and more stable in the outside world. If you can make your product better by assembling it yourself, you should. But if that action makes it worse, why do it?

That last paragraph applies to pretty much everyone except lawyers. Many law firms are as big as they want to be, not as big as they need to be. They hire and acquire and expand because of the peculiar financial logic of legal services: the more people you have working for you, the more you can bill and the more money you can make. In other industries, the market sets the price and demand drives profitability; in the law, the seller sets the price and supply drives profitability. But as the basic rules of commerce finally start filtering into the legal services marketplace, that’s all starting to change.

The mega-firms now chopping thousands of jobs are, as I’ve said before, not conducting layoffs: they’re reducing their full-time employee complement indefinitely. These firms were overlawyered (and often overstaffed) relative to the value of the services they were performing — but it didn’t matter, because there were no effective market pressures to reduce costs. Now, these firms are having to seriously consider ways to automate basic tasks, and to delegate and outsource mid-level work, in the name of efficiency. They have to “leverage reliable systems that are cheaper and faster and more stable in the outside world.” Reducing unnecessary capacity is only the first step; getting more efficient is the next and more important one.

This applies to firms of all sizes, even solos, because it’s not just about whether you have too many lawyers on the payroll. It’s about whether you’ve struck the right balance between the services you’re delivering to the marketplace and the resources you’ve accumulated to deliver those services. It’s the rare law firm that has fewer resources than it needs to service its clients. More often, firms overextend themselves in terms of workers, salary, bonuses, equipment, decor, locations, practice areas — overbuilding their capacity because, at least in part, the costs of overcapacity have always been directly transferable to the client.

Overcapacity is bad from a financial perspective, but it might actually be worse from a marketing and client relationship angle. One effect of a multitude of workstations at the supermarket or airport is to create an expectation of convenient and rapid service. That’s why the failure to utilize those workstations  is doubly irritating to the customer: it’s not just poor service, but poorer service than the company evidently is capable of delivering. An unstaffed check-in or checkout sends the message: “You mean so little to us that we can’t be bothered to put someone at a station we’ve already built and paid for.”

Take a moment to look around your law practice for empty check-in counters and extraneous check-out lanes — acquisitions that have outlived whatever usefulness they once had, promises you’ve made to clients that you no longer intend to keep. If you say you practise w, x, y and z law, can clients get equally effective representation in each of them? If you give them your phone, fax, email and web coordinates, can they get fast information and responses on any of them? If you’re offering clients a host of newsletters, is their content actually worth the investment of clients’ time? If you’re making them wait in a million-dollar lobby, are they going to get million-dollar service?

Figure out the capacity disconnects in your practice —  from underemployed professionals to extravagant premises, from inefficient workflows to dusty websites and abandoned blogs.  And as soon as you identify them, fix them. Think of it as a new definition of “rightsizing” — as your chance to make your practice the size and shape it needs to be.

How to solve the legal employment crisis

The cover story in last week’s Economist got me thinking about the looming crisis in lawyer employment. “When jobs disappear” paints a bleak picture of a rising wave of unemployment worldwide that will hurt more and last longer than past employment crises. The credit crunch has forced companies to cut costs rapidly, while the massive deleveraging underway in most consumer economies means that the eventual recovery will proceed slower and will crest lower than we’ve become used to. But the key point is this:

[W]hen demand does revive, the composition of jobs will change. In a post-bubble world, indebted consumers will save more, and surplus economies, from China to Germany, will have to rely more on domestic spending. The booming industries of recent years, from construction to finance, will not bounce back. Millions of people, from Wall Street bankers to Chinese migrants, will need to find wholly different lines of work.

In its editorial leader, the magazine drives the point home further:

[M]any of yesterday’s jobs, from Spanish bricklayer to Wall Street trader, are not coming back. People will have to shift out of old occupations and into new ones.

We’ve been bingeing on reports of law firm layoffs for a few months now, and there’s every reason to think those reports will continue through 2009. But we haven’t spent as much time looking at the big picture: there is a growing population of lawyers whose jobs are gone for good, and a larger group of lawyers whose underlying business models are fast becoming obsolete.

Many of the junior associate and staff positions cut in the past several months won’t be filled again. We’ve always known that low-level associates billed out at a handsome profit by midsize and large firms would survive only as long as clients continued to tolerate the law firm business model and its rank inefficiencies. During the recession, clients just won’t be able to afford that; when the recession finally eases, they won’t be willing to afford it, hardened by the lessons meted out in the financial wilderness. Similarly, legal support staff still carry out many automatable and outsourceable tasks. By the time the recession ends, those tasks simply won’t justify a person sitting in an office or cubicle adjacent to a lawyer.

You could actually argue that there hasn’t been a “market” for many of these positions, in the sense of a financial justification or imperative, for some years now. Firms could be as inefficient in their workflow as they liked, because they could always pass the cost of that inefficiency on to the client, who would put up with it for reasons unknown. But the recession is bringing all that to an abrupt halt, and firms suddenly are having to either rectify those inefficiencies or absorb their cost. The results are plain to see on the unemployment line, which figures to get longer before it’s all over.

That’s all bad enough. But the same fate awaits other legal jobs still to disappear, including some held by senior associates, partners, and even solo and small-firm lawyers. There will still be a market demand for these positions after the recession. But the level of demand will be lower because the economy figures to putter along below its recent peak for as much as a decade, so fewer such lawyers will be needed. Moreover, the nature of what the market demands of these positions will be so different from what it is now that many lawyers will be unable to meet it.

During the recession, we’re all going to learn to do more with less. Cost-saving efficiency and “good-enough” quality will be the twin standards by which purchases of all kinds will be made, including legal services. Lawyers have never needed to be efficient and they’ve always preferred an exhaustive answer to an adequate one; they’re not going to adjust easily, and some won’t adjust at all. Clients also will need their lawyers to focus more on high-value services that demand advisory skills and judgment, and less on than repetitive tasks that require boxes to be ticked off and i’s to be dotted. That’s going to be more than a business model challenge; that’s a new way for many legal professionals to view themselves and their functions, and again, some simply won’t  have the wherewithal to meet the new expectations.

So there are two separate problems that need imminent addressing:

1. A legal employment crisis. Before it’s all over, tens of thousands of lawyers and legal support professionals will have lost their jobs and will have little prospect of finding replacement positions (the Economist reports that the chances of an unemployed American worker finding another job soon are the lowest since records started being kept 50 years ago). Younger lawyers are deep in debt and short on experience; older lawyers have families to support in the teeth of an economic meltdown and are too highly specialized to be easily retrainable and transferable to other professions or industries. What will they do?

And more importantly for the profession, who will help them do it? Governments are preparing aid and retraining packages for workers in manufacturing and other hobbled industries; who’s doing the same thing for lawyers whose careers have been cut down by the financial crisis and the recession it spawned? Whose job is it to do that? Law societies and state bars exist to govern the profession, not to care for its members. Bar associations look out for lawyers, but they are strapped for resources, and not every lawyer is a member. Law schools lose interest in their students shortly after graduation. Who will help meet the unemployed lawyer crisis?

2. A legal training crisis. As heart-wrenching as the fate of jobless lawyers is, an arguably bigger problem is arising profession-wide: the adjustment to a new type of legal career. Technology, globalization, and extra-professional competition have already damaged or even eviscerated many types of legal careers. It doesn’t take long to count all the residential real estate lawyers in jurisdictions where title insurance has taken hold, or the thriving general practices anywhere (but especially in small towns). Estates and family lawyers were already feeling competitors’ breath on the back of their neck. But when the recession really takes hold, few legal positions will be safe: who, for instance, will be able to afford to go to trial? Pro se representation is now a growth industry.

The types of work for which lawyers will be in demand and from which they can make a living are changing, and no one really knows into what. But our law school, bar admission, and continuing education systems continue to grind along churning out lawyers suited for 20th-century practice. Practitioners have complained for years that law schools don’t prepare their students for practice; but the irony is that even if every law school changed overnight to become full-scale career preparation institutes, it still wouldn’t help that much. That’s because no one can say what market demands and consequent skills will be required of lawyers in the year 2015, 2025 or 2035. It’s a serious problem for education generally (the linked video is incredibly insightful), but no less an issue for the legal profession for that.

So we have an immediate problem — a growing crowd of lawyers whose jobs aren’t coming back and whose interests have no obvious advocate — and a mounting crisis — a fundamental change in the nature of legal services for which our profession seems largely unprepared. Are there any roads leading out of this morass? I think there’s at least one: opening up the deep and largely untapped potential of the latent legal market.

Several commentators have pointed out the unrealized market of millions of people who, as Richard Susskind memorably expresses it, need a fence at the top of a cliff, not an ambulance at the bottom. Preventive legal services — customized legal checkups and health regimens that anticipate and reduce the occurrence and impact of legal problems — is the way of the future for many lawyers. Whether online or in person, for corporations or individuals, bespoke or varying slightly from a standard construction, these kinds of services promise the dual benefit of using lawyers’ most valuable skills as well as helping achieve the larger social good of a more legally informed and prepared population. A legal problem may be solved in months or weeks; good legal health requires a lifetime of wise legal advice.

If you’re a person, organization or corporation looking to catch the next wave, here it is: open up an institute dedicated to retraining current lawyers and training prospective ones to provide preventive legal services to latent legal markets (here’s a great model). It’s not enough simply to teach lawyers to carry out their current practices more efficiently and effectively; we need to start training them in the ways of an entirely different type of legal business from that which now holds sway in the profession. We need lawyers who can not only see and analyze legal problems that have occurred, but who can anticipate and reduce the risk of problems that could or will occur if left untreated. We need fewer antibiotics and surgeries in the law; we need more flu shots, vaccines and diet-and-exercise regimens.

A legal profession centered around the prevention of problems first and the resolution of problems second would be a better, happier, healthier and more socially beneficial profession than the one we have now.  We’re facing both a drop in the demand for traditional legal services and the rise of a jobless lawyer population ready and willing to try something different. There may be no better time to give this approach a legitimate shot.

Peer pressure

“If all your friends jumped off a bridge, would you do it too?” Every parent has uttered some variation on that line to a child who insists on doing something unwise, over-priced, or physically perilous simply because “everyone else is doing it.” Training children to resist peer pressure is one of the thankless but necessary tasks of parenthood, one we hope will pay off later in life with adults unafraid to assert their independence and chart their own paths.

Lawyers, unfortunately, don’t receive that kind of parental guidance — if anything, we’re over-encouraged to copy the example of our predecessors and to always rely on  precedent. And of course, the financial rewards of the traditional lawyer billing model are so obvious that lawyers have a lot of incentives not to blaze any new trails. Hence, the “mastodons” of which Sun GC Mike Dillon memorably wrote a couple of years ago — vast herds of massive beasts that stay tightly packed and lumber together in the most convenient direction. Generally speaking, law firms recruit, hire, compensate, bill and manage their affairs pretty much the same as other firms — a recipe for disaster in the corporate world, but a guarantee of continuity in the bubble-wrapped legal universe.

But with the recession grinding steadily on, and many firms forced to make increasing resort to staff, associate and even partner cuts, something interesting is emerging: the upside of peer pressure. Just as firms felt obliged to match their rivals’ associate salaries and bonuses in the boom, they now feel even more obliged to make equivalent provisions for those cast aside in the bust. Most large-firm severance packages cluster around the 2-3 months’ notice mark — and there’s a vocal community ready to track all those packages and publicly note any firm that deviates from the norm.

Firms that exceed the average, like Latham & Watkins, rescue or even improve their brand among recruits; firms that fall short can be excoriated. Take the example of DLA Piper’s London office, which managed to squeeze several years’ worth of bad publicity into a single week.  A series of memos and meetings following the firm’s decision to cut 140 staff and lawyers revealed a huge amount of internal animosity that still has the UK bar talking. In the wired age, the cost of looking cheap or insensitive in the eyes of the blawgosphere just isn’t worth the risk of pinching pennies.

But the positive effects of peer pressure can reach beyond severance packages. When Simpson Thacher & Bartlett hit upon the innovative idea of sending underemployed associates into public service work, it was only a matter of weeks before other firms copied the idea themselves. And Norton Rose’s decision to explore four-day work weeks in order to save jobs is already generating positive press — it’s likely only a matter of time before this one picks up  momentum too.

The upshot of these developments is that firms are being strongly motivated to do as well by their current and former employees as possible — the astounding level of animosity levelled at AIG executives these days should frighten any rational organization — and that can only be a good thing for both law firm workers and the overall level of workplace relations. But the really neat thing is that the herd mentality might actually help the larger cause of innovation and practice management reform in law firms. The need to be seen as actively and creatively responding to the crisis is pushing more firms to try new things and announce them publicly.

Take the example of lockstep compensation, a longstanding tradition that has merit in tightly focused, culturally solid firms, but has the effect elsewhere of rewarding lawyers simply on the basis of seniority. When Howrey LLP set out to overhaul its lockstep compensation system two years ago, the response from the profession was dismissive at best. Now, firms are jostling with each other to be the latest to institute merit-based pay and similar sins against the status quo. Not even partners are safe from the change in the herd’s mood — either from the prospect of potential explusion or from having to share the pain of the firm’s struggles.

Then there’s annual rate increases, a law firm tradition as reliable as the spring equinox. Even as recently as last fall, firms fully expected to issue their normal rate-increase notice to clients. Now, though, as Altman Weil’s Tom Clay puts it: “Nobody is that naive — or dumb.” In worst shape of all might be the almighty billable hour itself. When managing partners of top-rated firms talk to the New York Times about killing the billable hour, you know a paradigm is shifting.

And where paradigms go, law firms hasten to follow, even if it means facing up to some pretty radical changes in how they do business. Lawyers don’t like change, but they like isolation much less. As more and more lawyers and firms shuffle hastily towards new ground, it looks as if a watershed shift in private law practice —  a cross-over moment, a critical-mass point — is now only a matter of time. Where’s your nearest bridge?

This is not a drill

I’ve experienced it, and maybe you have, too. In mid-flight, the seat-belt light comes on and the pilot announces that the airplane is entering an area of turbulence. Shortly afterward, various shakes and jolts start bumping you around, and while it can be unnerving, you knew it was coming and you’re not too concerned. Then, with no warning comes a WHAM, a sickening two- or three-second drop, as a particularly powerful air pocket rocks the plane. There’s a lurch in your stomach and you think for an instant: this could be really bad.

Yesterday, at least 800 jobs disappeared from law firms in the US and the UK — there may well have been more, because rumours of “stealth” or “performance” layoffs have been circulating for awhile. White & Case accounted for half those firings, divided equally between lawyers and staff — but remarkably, the firm also talked openly about a partnership cull too,  something I suggested last week was imminent. In addition, Morgan Lewis not only joined the layoff parade, but also postponed the start date for its incoming lawyers by one year, meaning the firm will have no first-year lawyer class in 2009.

These are just the most notable developments in one day from the largest firms — the mainstream legal media isn’t looking at what’s happening to small, mid-size and regional firms. But the lurch I talked about isn’t just from these numbers, or even from the thousands of layoffs that preceded them: it’s from a couple of hard realities hitting home. One, job losses in the legal profession are just getting started — this thing is picking up speed and no one knows where or how it will end. And two, “this thing” is a lot more than a recession.

Put those law firm numbers — vanishingly small in the greater scheme of things — in the context of some truly sobering economic news worldwide. Evidence is accumulating that our situation is leaving “recession” behind and is rapidly approaching something that requires adjectives like “Great.” But this isn’t a depression, capital-D or otherwise — it’s something altogether new. The New York Times identifies it as a fundamental reshaping of the economy in the US and other western countries, a shift into different types and means of  productivity.  Jeff Jarvis calls it a Great Restructuring: “It’s more than jobs lost and companies folding. It’s a new economy built on a new society that we are only just beginning to recognize if not understand.”

Many underlying beliefs about how economic value is generated are simply falling away, and we don’t yet know what will replace them — all we know is that it’ll be different from what we had before. That’s why many of the legal job losses we’re seeing, in firms of all sizes, aren’t temporary layoffs that will return when the recession ends. They’re eliminations — positions that won’t come back, because the underlying mechanics of value in legal services are changing and the new environment that emerges from this crisis won’t require them.

The first wave, as we’ve seen, is the beginning of the end of large groups of associates in law firms. But we’re also seeing transactional legal work transformed  by online document assembly, changing the face of smaller practices and tapping into new latent markets. We’re seeing law firm partners find competitive and personal benefits by becoming virtual lawyers. We’re seeing that large firms themselves require reconstruction at the business-model level, and some of the problems are so severe that the solution is not realignment or re-engineering, but replacement. And we can foresee major changes to lawyers’ regulatory environment and firms’ subsequent evolution into full corporate entities.

The frightening thing — or the exhilarating thing, depending on how you view it — is that nobody knows what’s going to happen next. This really is an unprecedented development. The legal industry has been through recessions before, and it has a pretty decent idea of how to cope with those. But there are no blueprints for a fundamental reordering of the rules of business — both our clients’ businesses and our own. The Wall Street Journal notes that the most significant employment crisis underway right now is in the professional sector, and that “we are totally unprepared for this phenomenon.”

I don’t know what to tell you at this point. There’s not much you can do during the earthquake itself, beyond trying to keep your balance and hoping nothing large will collapse on top of you. Don’t rely on previous procedures to get  through this, but do rely on your professionalism and commitment to service. Invest in anything that will enhance your ability to collaborate with others. Stay as close to your clients as you can, and grope with them towards what new definitions of value and service in the law will look like — under no circumstances let them arrive at those conclusions on their own. And remember that we’re approaching a moment of maximum possibility in the law — you’re getting closer to being able to define the terms of exactly the legal career you want. Everything’s up for grabs — so grab something.

Note to regular readers: I’ll be out of town for several days and hope to return to blogging later next week.

The other shoe

If you like your comedy dark, track the law firm layoff news. There’s the partner at Pillsbury LLP who, seated on a crowded but quiet commuter train into NewYork City, conducted a loud cellphone conversation with a colleague at the office that revealed planned associate layoffs at the firm, right down to naming the names of pending victims. There’s McDermott Will & Emery in Chicago deciding to eliminate free coffee in the lobby of one floor of the firm’s offices, a move purportedly meant to express congruence with larger cuts but that came across to many observers as, you know, kind of chintzy. There’s the saga of a laid-off associate in the engaging Above The Law serial “Notes from the Breadline,”  with updates like this:

The next morning I e-mail the partner to tell him that I’d like to talk to the client, explain my departure, and say goodbye. A few hours later, I have heard nothing in response, so I call him. “Oh, don’t worry about it,” the partner says breezily. “I talked to them already.” I ask him what he said. “I told them that you decided to ‘move along,’ if you know what I mean,” he answers. No, I think, I don’t know what you mean.

But whether firms choose to take the callous route, or seem to be trying to soften the blow (cf. Latham & Watkins’ severance, Simpson Thacher’s pro bono plan)  the practical and human reality behind the thousands of layoff notices at big law firms is just plain ugly. I won’t bother trying to update the latest round of notices — suffice to say some of the biggest names in the US and UK legal profession are shedding anywhere from 10% to 20% of their associate workforce and an equivalent or greater number of staff. But when you look behind the rain of numbers, something interesting starts to emerge: the sense that these are just the warm-ups, not the main event.

First of all, cutting associates by the hundreds is not something you do if you expect the economy to turn around soon — otherwise, you’re just paying termination costs to people you’re going to have to rehire in less than a year. Firms understand perfectly well the negative fallout from layoffs, so a bloodletting on this scale indicates two things. One is that there’s no work for these people and none is expected soon, which must reflect what clients are telling firms about their own near-term prospects. The other is that firms don’t expect to need so many associates when things pick up again — partly because the post-recession workload won’t be as heavy, and partly because the good old days of stocking up on associates and riding their billable hours to profit are coming to a swift end. In other words, this isn’t just reducing headcount and expenses — this looks like the start of a fundamental and possibly permanent restructuring of the law firm model.

Secondly, there’s the other shoe that hasn’t yet dropped — partner cuts. With a few exceptions, we haven’t heard the ugly word “de-equitization” spoken much over the last several months. That might be because there won’t be any — that firms are confident that the associate and staff firings will be enough to safeguard profitability and keep the ship afloat, making more drastic moves unnecessary. Or it might be because the associate and staff cuts are the easy place to start, a non-controversial way to improve the bottom line short-term and give everyone a clearer picture of exactly what the profitability situation actually is. Once that picture emerges  by early summer, and is overlaid with what the firms’ internal assessments are saying about the subsequent 12 to 18 months, then the second round of personnel explosions should start going off.

Most people would agree that many large law firms overhired, to at least some degree, on staff and associates — that’s why these cuts have come so large and so quickly. But what’s not talked about much is that many law firms are also over-partnered. The Boomer generation has swelled the ranks of law firms partnerships just as it swelled the upper ranks of every business and organization in North America. I think you’d have a hard time maintaining that all those partnerships were equally earned on merit and productivity — or that, if they were up for partnership today, all or most of those lawyers would get serious consideration. Gen-X lawyers have complained for years about how the Boomers took all the best seats at the table largely by virtue of arriving first. I think we’re starting to see the same thought occur, belatedly, to the partners themselves.

Most law firms of any size are riddled with inefficiencies, from how they bill to how they compensate to how they process tasks to how they hire. We’re beginning to see, through the steady rise of flat fees and customized pay and automation and outsourcing, each of these inefficiencies start to be squeezed out of the system. Through all of this, one  inefficiency — the composition of partnerships — has been all but sacrosanct. I think we’re a few months and a deepening recession away from seeing that final wall breached.

The evolution of lawyer regulation

The thing about change is that once it gets rolling, it’s almost impossible to control and can go in directions you neither anticipated nor like very much. That thought occurred to me while reading a report issued last week by the Legal Services Policy Institute, the think-tank division of UK legal training company The College of LawTowards a New Regulatory Structure for Corporate and Commercial Legal Services: Options for Change is just 23 pages long, half of which is a lengthy appendix. But what the report recommends looks to me like an entirely new system of lawyer regulation, one I’m not sure I’m crazy about.

A little background: if you’ve been following the course of events flowing from the Clementi Report and the 2007 Legal Services Act, you’ll know that the UK legal profession is in the midst of redefining itself. On this side of the pond, we mostly hear about the LSA’s provisions to allow alternative business structures and non-lawyer ownership of law firms. But a major element of the reforms involved splitting the Law Society’s previously dual functions of solicitor regulation and representation, on the grounds that the same body could not both govern professionals in the public interest while also advocating for the interests of those professionals.

Regulation of the legal profession in England & Wales is to be the overall province of the newly created Legal Services Board, which launched on Jan. 1 and aims to assume all the powers assigned to it under the LSA by the end of this year. The Board will oversee all the various regulatory bodies for lawyers, such as the Bar Council, the Institute of Legal Executives and the Council for Licensed Conveyancers. Until the Board becomes fully functional, the Law Society technically remains the approved frontline regulator of solicitors, through the Solicitors Regulation Authority, which was partly spun off from the Law Society for this purpose. The SRA remains officially part of the Law Society, but is independent from it. Relations between the two are not always warm, and have just taken a marked turn for the frosty.

This is kind of an interim period in the regulatory overhaul process: the Legal Services Board is active but not yet fully on stream. That’s why some people were taken by surprise last fall when, with one day’s notice to the SRA, the Law Society commissioned a report to review the lawyer regulation process. That report’s author in turn commissioned a sub-report on whether current regulation of law firms serving corporate clients is satisfactory. It’s in the context of this mishmash of reports and political jostling that the Legal Services Policy Institute report was issued and needs to be understood.

The report’s premise, as I read it, is that a single regulatory framework can no longer properly govern the extreme range of solicitors’ practices in England & Wales. More specifically, the traditional framework, geared towards sole and small-firm practice in smaller communities, simply doesn’t work for the major corporate/commercial firms of London and their clients. In areas ranging from defalcations and conflicts of interest to client sophistication and lawyer transfers from other jurisdictions, rules meant for a smaller profession serving private clients constrain and damage global firms serving massive corporate and institutional clients.

The report’s recommended solutions are radical. While nodding towards a midway approach — merely modifying the current SRA regulations for large commercial firms — the report’s clear preference is to create a brand new regulatory regime for these large firms and the lawyers who work within them. This new regulator would create and administer new qualifying criteria and would even bestow a new title for these firms’ lawyers to use (the report refers to these, in uncomfortably Orwellian terms, as “NewReg,” “NewQual” and “NewTitle”). Here’s how the Institute summarizes its case for a new regulatory regime: Continue Reading

The future law book

Two thought-provoking posts from the UK shed some light on the future of the printed word in law. Nick Holmes at Binary Law notes the accelerating demise of the printed law review journal and other hard-copy forms of legal scholarship: “Where online equivalents are already paid for out of the budget or where free access materials might substitute, print will suffer severely.” Only practice texts will survive the value cull, he forecasts.

Scott Vine at Information Overlord chimes in to predict that the e-book reader (Kindle, Iliad, Sony, etc.) represents the light at the end of the tunnel for legal publishers: “[I]f I were a lawyer, who could have all the legal journals I wanted and all the legal texts I wanted – displayed as they would be in a ‘traditional’ print run – all on one device that I could keep in my desk or take with me to client meetings etc., then I would be a very happy bunny.”

Like Scott, I think e-book readers are the future of legal publishing, especially if their creators take to heart some of Seth Godin’s many recommendations for the Kindle. The second-most important application for e-readers in the legal context, I think, will be the hyperlink: the ability to leap from the book on your lap to a relevant page on the Net with 0ne click. You could click from a judicial interpretation or expert analysis of a statute or regulation directly to the most current version of the statute or regulation itself; imagine how that would reshape publications like annotated statues or criminal codes. Or think about footnotes on steroids: instead of just a reference to another work of significance, you get a link to the work itself.

But I think the killer app for legal e-books will be RSS. As every law librarian and legal researcher knows, the drawback to law books lies in post-publication developments. Looseleaf updaters have been around for ages, and have never become less laborious to insert one page at a time. Legal publishers tried issuing new CD-ROMs every month, but I don’t think that really caught on. Online research services remain the most reliable source of updated legal information — but not only do they remain expensive, they also require you to seek out the information you want. But what if the information you needed sought you out?

An RSS-enabled legal e-book would update itself. An authoritative Court of Appeal case at the time of publication might later be overruled by a Supreme Court; within days or even hours, the e-book would automatically change to reflect that. The proclamation of statutory amendments or the coming-into-force of regulations would download themselves while you sleep. Bulletins from tax authorities or rulings from securities commissions would appear with that little yellow “New” tag. A legal book — be it a casebook, a reporter series, an annotation — would become a constantly self-refreshing authority, truly the latest word in the law.

Legal publishers wouldn’t be able to sell annual or subsequent editions of popular texts; but they would be able to open up a whole new market of real-time knowledge refreshment. The speed and accuracy of updates could become  points of competition between publishers (a category that could include the established giants as well as upstart individuals or bloggers).  In addition to downloading the new Supreme Court ruling, a publisher could also offer access to an analysis of the decision by its in-house expert, perhaps as a value-added part of the user’s monthly subscription that enables the downloads. Online CLEs regarding a recently revised subject area could be advertised as part of the update.  Or how about access to relevant wikis to which other e-book users contribute?

In ways like these, the legal e-book could become a dynamic, full-scale legal knowledge portal — 24/7 Net-connected, automatically updated, linked to a community of writers and readers, plugged in to a collaborative legal knowledge world well beyond the written word. That would do more than revolutionize the legal publishing industry — it would help change how lawyers view and use legal knowledge.