Credit crisis: You ain’t seen nothin’ yet

We’re already seeing some dominoes start to wobble in the legal community, as the short- and medium-term impact of the financial crisis becomes clearer. If you’re a law firm CFO or a law student nearing graduation, you probably won’t like what’s coming. But it looks to me like there are much bigger pieces likely to fall very soon.

Let’s start with the dominoes. Here’s an article from the Fulton County Daily Report about the impact of the credit crunch on law firms’ lines of credit, something I mused about last week. Lawyers who traditionally have not made accounts receivable a priority should read this:

Some banks are increasing their scrutiny of law firm loans, attaching more covenants and conditions and looking ahead to how well firms can collect their receivables in the coming year. According to some bankers and consultants who focus on law firm lending, a lag in collection time is pushing firms not just to borrow more money but also to increase holdbacks on partner compensation and, perhaps, decrease overall profit distributions.

Dan DiPietro, client head of the law firm group at Citi Private Bank, said his employer still views lawyers as a good credit risk — despite the crisis coursing through the markets and the collapse or merger of clients that supply billable hours to many of the nation’s law firms. … “What has changed is our focus and discipline on pricing and making sure that we’re pricing with the view that this is not a standalone credit facility but is generating other revenue. … In this market, there’s a huge focus on overall returns.”

Like many banks, Citi looks at firms’ cash flow, receivables and work in progress when assessing their creditworthiness and how much cash to advance on revolving or long-term lines of credit. … Citi is giving existing loans a higher level of scrutiny and is looking more closely at firms on an individual basis to assess how the economic turmoil might affect their receivables.

Then there’s law students, the vast majority of whom wouldn’t be able to meet tuition and living expenses without student loans — loans that are suddenly looking very dicey, according to an article in the National Law Journal: Continue Reading

Customized casebooks vs. collaborative knowledge

Ready or not, here they come: electronic law texts are gaining momentum. A conference in Seattle this weekend on the future of the legal casebook will discuss how these books can be made widely available in electronic format (here are Gene Koo’s submissions for the workshop). The growing popularity of Amazon’s Kindle, especially the book-sized version on the horizon, has made the long-mooted concept of law school e-books a sudden possibility.

Judging from these articles, it seems there are two main concerns about law school e-books. The first is that students can’t scribble on and highlight a Kindle the way they can a textbook. Not to be too blasé about it, but I tend to think that’s only a matter of time and technology. Adobe already allows you to make highlights and place notes on PDF documents, and lets you copy-and-paste sections of relevant text when tagging an article for future reference; either of these approaches could point the way forward.

The second concern is that authors’ copyrights will be violated if their words can be copied and circulated by anyone with an e-book version of their works. I’m pretty sure this ship has already sailed: if you make your living off anything that can be copied and e-mailed, you need to find another business model or another line of work. This isn’t a technology or copyright enforcement issue so much as it is the ongoing challenge to publishers to find another way to monetize good content.

But I think there’s a third concern that doesn’t appear to be getting a lot of attention yet: that e-books might lead us towards a siloized approach to legal education and scholarship. Continue Reading

Results, not résumés

Professor William Henderson, who teaches at the University of Indiana Faculty of Law and blogs at Empirical Legal Studies, has written a watershed treatise on how large law firms recruit and use associates. The ELS blog summarizes it, the ABA Journal reports on it, and Bruce MacEwen and Gerry Riskin have already flagged it as an extremely significant contribution to the ongoing evolution of the traditional law firm business model. With apologies for a brevity that glosses over some important points, here’s a summary of Are We Selling Results or Résumés?: The Underexplored Linkage between Human Resource Strategies and Firm-Specific Capital, and some ideas that flow from it.

Large US law firms are deeply tied to the “Cravath system” of hiring new lawyers, generally defined as recruiting the most outstanding law students from the top law schools and giving them the best training. This was a great idea when Cravath Swaine & Moore first developed it early last century, because it was a branding strategy: Cravath deserves your business because we hire only the best of the best. But because the firm became so successful — for a variety of reasons — other firms copied its hiring strategy, and the Cravath method, once an innovation, became narrow-minded standard operating procedure.

Today, demand for corporate legal work has skyrocketed, exhausting the talent pool to which firms — because of their adherence to the Cravath method — have restricted themselves when recruiting the associates who do this work. Accordingly, with rising demand overwhelming a fixed talent supply, the cost of new lawyers has risen as high as $160,000 a year, well above the value of the services they provide.

This has numerous negative effects. Firms either pass on these cost increases to increasingly incensed clients, or absorb them in lower partnership profits, leading elite partners to decamp for more lucrative firms. Worse, top clients order firms not to place these overpaid associates on their files, meaning young lawyers are trapped in the most dead-end work from the least interesting clients, hurting morale, exacerbating attrition and damaging the firm’s future leadership development.

The most obvious solution for the firms — increase supply by hiring outside the “elite” group — is verboten, because these firms fear a loss of prestige associated with hiring “second-rate” graduates from “second-rate” schools. (Firms have already conceded ground by digging deeper into the graduating classes of elite schools for new recruits). A recruit’s “pedigree” now holds entirely disproportionate importance in law firms’ hiring decisions, and no major firm seems prepared to risk breaking ranks to try something different.

Henderson proposes something different, a new approach premised on a groundbreaking productivity study at Bell Laboratories in the early 1990s. In a nutshell, the study found that knowledge workers’ productivity was not tied to traditional measures of excellence such as IQ and self-confidence, but to a series of work strategies such as taking initiative, sharing knowledge, and managing work commitments, most of which are trainable. Continue Reading

Law schools join the talent war

Northwestern University School of Law garnered a lot of attention last week by announcing a series of curriculum changes, most prominently the creation of an accelerated JD program that would allow students to graduate with a law degree in 24 months, rather than the traditional 36. While Dayton and Southwestern law schools have gone this route before, NU is the first “elite” faculty (ninth in the irrationally important US News & World Report rankings) to go this route.

Most of the reaction to Northwestern’s announcement centered on the new two-year law degree, which some observers (including many commenters at the Wall Street Journal Law Blog) misread as a decision to “drop the third year” of law school. NU Law isn’t reducing its courseload by a third; it’s squeezing the traditional three-year degree into two calendar years, by means of a summer semester, extra courses each semester, and mini-courses between semesters. It’s a far more intense and challenging experience, not the easier one that eliminating the final year of school would suggest.

Predictably, the traditional three-year degree has staunch defenders, including those at NU’s crosstown rivals, who call the new plan an irresponsible compression that will produce inferior lawyers. Others worry that the law school experience is already sufficiently intense, and that cramming it into two years will damage students. But Dayton Law’s Dean of Students Lori Shaw sees no evidence that her program’s two-year enrolees missed out on the full law school experience: “It’s fascinating to see how much they can do.”

Now, in reality, accelerating a law degree by administering it in two years isn’t that big a deal — it’s certainly nothing like the major innovations undertaken at Washington & Lee Law School, which made its third year entirely experiential as part of a massive program overhaul. What really caught my attention — and that of Douglas Berman at Law School Innovation — were other aspects of Northwestern’s announcement that generated much less fanfare. From the Inside HigherEd article:

Northwestern is adding three new required courses (to the nine currently required, largely following a traditional law curriculum), starting with the two-year program and eventually being required of everyone. The new requirements are:

  • Quantitative analysis (accounting, finance and statistics).
  • Dynamics of legal behavior (teamwork, leadership and project management).
  • Strategic decision making.

These topic areas were grouped by faculty members based on the focus groups of what legal employers need….

These are all key elements of any law practice that intends to succeed in the 21st century. Particularly interesting are the mentions of project management, a skill I’m seeing repeatedly referenced by in-house counsel as a must-have ability that most lawyers simply don’t, and teamwork, an essential ability in the new collaborative lawyer-client relationship. Then there’s Northwestern Law’s renewed emphasis on teaching communications skills: Continue Reading

Ban the law school lecture

The simmering debate over whether to allow laptops into the law school classroom came to a head in March, with the decision by the University of Chicago Faculty of Law to ban wireless access in class. Follow those links, as well as this one from Paul Caron’s TaxProf Blog (HT: Dennis Kennedy), and you’ll be struck by the sheer volume of comments (178 at the Freakonomics blog alone) from people who feel strongly for or against the ban. It should be no surprise that students and profs tend to line up on opposite sides of this debate.

Well, first of all, there’s a qualitative difference between simply allowing laptops into class and enabling those laptops’ Internet capacities through wireless access. Banning laptops today would be tantamount to banning pen and paper in a 1990 classroom — law students now take notes directly onto their computers, and I don’t see the point in making them take notes manually in class and then type them out later at home (though I’ve heard, and can testify, that writing in longhand seems to engage different and more creative parts of the brain than typing).

So a laptop should be viewed as an essential learning tool nowadays. But activate that laptop’s wireless capacity, and suddenly the entire Net is inside the classroom on dozens of different screens, and that’s a whole different story.

It’s true that millennials are great multi-taskers and can surf the web for a few minutes while still staying engaged in the flow of the lecture. But if you’re sitting in class and there are 50 different screens between you and the professor, featuring a continuous flow of video, e-mails, Facebook pages and the like, there’s no way you won’t be distracted. Your eyes will be drawn whether you like it or not, and your attention will be divided any number of ways. The individual surfer can control what she sees, but the people behind her can’t. That’s not fair, and it damages the larger learning environment.

That said, I don’t see any way in which a wireless ban is sensible or feasible. In most cases, wireless access isn’t something you can just turn on and off at the classroom door — other parts of the school need it (especially the library), and in any event, there are private- and pubic-sector wifi sources outside of those provided by the university. You could order students to disable their laptops’ wireless access, but who’s going to police that? The professor is busy lecturing, few students will be anxious to squeal on their classmates, and anyway, is this really something we want to introduce to the law classroom? Muni-wifi’s struggles notwithstanding, we’re heading rapidly towards a “wireless everywhere” future, so we need a better solution than prohibition.

But maybe the problem isn’t students accessing the Internet during law school lectures. Maybe the problem is that the law school lecture itself is an instutition whose pedagogical day has passed. Continue Reading

The seven-year law degree

There are a couple of well-known phenomena about legal careers that, when juxtaposed, might give us better insight into how lawyers enter the profession.

The first is the common assumption that a law degree is far easier postgraduate degree to obtain than, say, a medical degree or Ph.D. Would-be doctors spend four years in medical school, which is extremely hard to get into and not exactly easy to graduate from; thereafter, they spend anywhere from three to eight years in internship and residency. To acquire a Ph.D, you need a Master’s (usually two years) and a Doctorate, which is at least another four, and you need to be extraordinarily bright. Other degrees with various specializations can be equally daunting.

Law, on the other hand, requires just three years of law school, and either the passage of a one-time Bar exam (e.g., the U.S.) or the completion of a one-year apprenticeship period (e.g., Canada). Moreover, the failure rate in law school is far lower than in other postgraduate programs. Once you’re admitted, you’re almost guaranteed to graduate and very likely to be called to the Bar soon thereafter, at which point you have the means to stay employed pretty much as long as you want.

Depending on the region where you work, your employer, what kind of law you practise, how good you are at it, and how attached you are to a well-rounded life outside the work sphere, you’ll then generate an annual income ranging anywhere from $30,000 up to millions of dollars. Even if your debt load leaving school is upwards of $100,000, that’s a pretty fine return on investment and a fairly low-risk and low-demand route into what is still a respected profession.

The second phenomenon is the disconnect and dissatisfaction experienced by many new law graduates during their first few years of practice, especially in large firms. A recent Hildebrandt study seriously questioned the perception that big-firm associates are an altogether miserable lot, but many of these lawyers nonetheless experience angst, unhappiness and disillusionment as they make the adjustment from law school and from the promises of flexible, family-friendly environments these firms increasingly make. Continue Reading

Micro law schools

Two interesting articles by Alex Dimson at Law Is Cool today have me thinking about a possible next step in the evolution of law schools. Two Ontario universities have applied to set up law schools: Lakehead University in Thunder Bay and Wilfrid Laurier University in Waterloo. Alex reports that Lakehead’s application, although on shakier ground with both the Law Society of Upper Canada and other law deans, seems to have political momentum, while Laurier’s isn’t so fortunate. I personally think there should be no new law schools until Ontario fixes its training and licencing regime, but that’s a story for another day.

What interests me more is how the universities are pitching the proposed law schools. Lakehead suggests a class size of just 50 students, while Laurier envisions no more than 75, and each is described as specializing for particular regions and practice areas. According to Law Times, the Lakehead school “would focus on aboriginal law, access to justice in northern and rural communities, decreased access to the profession for students from northern Ontario, and the decline of participation in sole and small firms in the area.” In the LIC story, University President Fred Gilbert added natural resources to the list. Thunder Bay is in small-town Ontario, deep in mining country and close to several aboriginal populations, so the program sounds like it would be very much tailored to the community.

Laurier, meanwhile, is in Canada’s new high-tech heartland of Waterloo, home of BlackBerry maker Research In Motion and other innovative companies. Laurier President Fred Blouw framed the issue this way in another Law Times story: “With respect to the Kitchener-Waterloo area as a hub of intellectual property development around the technology sector, [there is] a tremendous need for specialized legal training, legal knowledge, and a need for more bodies.” The story adds that “the school also draws many students from rural centres, where lawyers often practice in a small firm or sole practitioner setting.”

This makes me wonder if, following the lead of microbreweries and microlenders, we might someday soon see the debut of the micro law school: a boutique institution with intentionally small class sizes that aims to produce graduates specialized for certain types of private-practice careers. Continue Reading

Cheating or collaborating?

All I can say is, I’d love to see the law school that tries to flunk a student for setting up a Facebook study group, as Ryerson University in Toronto did this week. Maybe this is a generational thing — I’m officially an X’er, though my leanings are more millennial — but I can’t see how an online discussion group does anything but facilitate learning, not circumvent it. And more to the point, how it’s any different from students gathering in an empty room on campus to do exactly the same thing. I expect Ryerson will change course within a matter of days.

What strikes me, though, is that the way in which we expect students to accomplish tasks in school is very different from how we actually accomplish tasks in our workplaces. If you’re working on a factum or a memo and you’re not sure about something you’re writing, do you head down to the library for an afternoon of thrashing through the authoritative source materials till you’ve learned what you need, “showing your work” as you go? No. You walk down the hall and ask a colleague who’s more familiar with the subject to explain it to you. It’s faster, easier, cheaper for the client, and almost certainly more effective in understanding the concept.

Teamwork is how things get done now, without exception, in the professional world. Law firms boast about “open-door policies” whereby lawyers exchange ideas with each other, and they make great efforts to pool collective knowledge into KM systems. New recruits are quizzed on their ability to work well in groups and contribute towards successful team dynamics. Corporate deals and major litigation require concerted, collective efforts to achieve goals. Online listservs like Solosez are a lifeline for sole practitioners. Corporate law departments want closer working relationships with their outside counsel. In short, no one succeeds in the legal environment by shunning collaborative efforts.

Yet law schools still devote the majority of their time to testing what an individual student can do on her own, not what she can accomplish in a group setting. Unlike MBA programs, where students work on cases in group after group, many law students can graduate without ever having contributed to a team project, learning how to integrate their expertise into a diverse set of personalities and workflow preferences. If there’s any truth to the old charge that law schools “don’t prepare students for law practice,” it’s not in failing to teach professional skills per se, but in failing to train students to learn from each other, to treat knowledge as a gift to be shared, and to give the best of themselves towards the success of the team.

Any law school that wants to earn a real competitive advantage, in terms of producing graduates ready to professionally collaborate, should think seriously about revamping its curriculum to encourage the academic equivalent of Facebook groups: live, in-person, problem-solving working groups, with rotating memberships to ensure you’re not just working with people you like. Increasingly, lawyers will succeed or fail on their teamwork skills; law schools have an obligation to reflect that.

Update: With a hat tip to the Law School Innovation blog, here’s a school that gets it: Washington and Lee University Law School in Virginia is completely overhauling its third year:

• The new third year curriculum will be entirely experiential, comprised of law practice simulations, real-client experiences, the development of professionalism, and development of law practice skills.

• All students will participate in a year-long professionalism program that will include the participation of practicing lawyers and judges and assist students in the development of professionalism in all its aspects, including legal ethics, civility in practice, civic engagement and leadership, and pro bono service.

• The core intellectual experiences in the third year will be presented entirely through a mix of practicum courses that simulate legal practice environments, legal clinics, and internships.

• The demanding intellectual content of the third year will instead be presented in realistic settings that simulate actual client experiences, requiring students to exercise professional judgment, work in teams, solve problems, counsel clients, negotiate solutions, serve as advocates and counselors—the full complement of professional activity that engages practicing lawyers

There’s much, much more, and it’s exhilarating. Read the summary of the new program for more, as well as my earlier thoughts on the third year of law school.

The why of law school

I took piano lessons as a kid. I didn’t hugely enjoy them, not least because of the timing — 10:00 to 11:00 Saturday morning was primo cartoon time — but the instructor was my aunt and it was kind of expected that all the nephews and nieces had to do their time. Anyway, I didn’t stick with it, and as a result I now can’t play much more than Chopsticks. But the experience did allow me to appreciate things like 2 Pianos, 4 Hands, as well as this opening to a recent blog entry by Steve Friedland at Best Practices for Legal Education:

Imagine taking a piano lesson with a teacher who asks questions, but gives little on-the-spot feedback. Imagine the teacher returning week after week, stating after each lesson, “I will give you feedback after our big, end of the session recital.” Imagine the recital occurring and the teacher taking notes and walking away. One month later, in the mail, you receive your feedback, a single letter grade, B. That is the way we traditionally do feedback in legal education, including only a single summative final examination as the sole evaluation and feedback mechanism.

It’s remarkable that so many law school courses are still graded on a 100% final exam and nothing else, reducing an entire semester’s worth of readings, lectures and notes to a single three-hour writing exercise. I remember those exams vividly: cram for several days beforehand, unload everything you can remember in a hand-cramping frenzy, and forget most of it immediately afterwards as you crammed for the next one.

You can call that a lot of things — a rite of passage, a hoop to jump through, a waste of time — but you’d be hard-pressed to call it a good way to learn and retain knowledge. With law faculties following the lead of other disciplines and emphasizing skills other than teaching (e.g., research and publication), the quality of the pedagogical experience doesn’t figure to become any more of a top priority.

Now, that said, does it really matter? Continue Reading