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It Shouldn’t Suck to be an Associate at a Law Firm, Part II


It Shouldn’t Suck to be an Associate at a Law Firm, Part II.

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It Shouldn’t Suck to be an Associate at a Law Firm, Part II


Front page of the first issue of The Wall Stre...

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                                                                             Jerome Kowalski

                                                                             Kowalski & Associates

                                                                             January, 2012

                                                                            

Today’s Wall Street Journal  features a piece entitled “Law Firm Keep Squeezing Associates,” which will likely engender some great buzz on the blogosphere serving the law firm associate population and, in all likelihood, a yawn from law firm partners. This article comes on the heels of the second annual extravaganza, attendance for which is appropriately limited to but a few elites, entitled “The Annual Spring Bonuses Follies.” In all events, I would suggest that perhaps law firm partners and law firm leadership ought to take a closer at some of the issues raised in the Journal.

The Journal generally addressed the well worn issue of fewer openings at BigLaw and fewer job prospects for recently graduated law students. Anecdotal evidence suggests hiring is down about 30% (a fact we also have observed as generally true). The Journal also mentioned the longer and rockier road to partnership.

But the big takeaway in the piece, a fact well already known to many of us, is that since the crash four years ago, associate compensation has been stagnant, while the average associate has seen an increase in his or her workload by 2.3% since 2007, which the Journal calculates to be approximately 50 additional hours a year.  The new base “normal” appears to be approximately 1,650 hours a year, which the Journal Suggest amounts to about 37.5 hours a week; the Journal relies on the besieged NALP (hardly a bulwark for full and open disclosure where employment opportunities for lawyers are concerned) for arriving at this conclusion. Yale Law School last year did its own math and concluded that in order to bill 1,850 hours a year, an associate needed to spend at least 55 hours a week in the office, with three weeks of vacation and two weeks of vacation, sick days and holidays.  Yale concludes that in order for an associate to bill in the 2,000 a year range, he or she will need to work for about 12 hours a day and three weekend days a month. And that does not accurately include time spent at departmental meetings, firm functions, commuting, serving on administrative committees, recruiting, pro bono work, griping about being overworked or otherwise shooting the breeze with colleagues, friends or family. The reality, as we all know, is that an honest time reporter needs to work in the seventy hour a week range.

But let’s get back to that additional 50 hours a year squeezed out of associates since the onset of The Great Recession. Roughly translated, at an average of $300 an hour, associates have each contributed an extra $150,000 to their respective firm’s bottom line, without their firm’s incurring any incremental cost. A few firms, in an entirely short sighted fashion, in our opinion, have bestowed “Spring bonuses,” generally topped out at $37,000, while the bulk of BigLaw firms have simply enhanced partner profitability.

The fact is that Spring bonuses have a Marie Antoinette quality about them, a sort of noblesse oblige.  As Steve Harper noted, law firms should do better. They do not enhance associate morale nor do they halt associate attrition. The temporal cure to associate attrition has been an abysmal job market. But, for those who are planning on checking out, all that many law firms have done is have associates defer packing their bags until the bonus check clears. Spring bonuses not quite as satisfying as yesterday’s passing summer breezes, the recent autumnal foliage or Thanksgiving turkey. The breezes, foliage and turkey will likely return at their respective times and seasons; Spring bonuses, who knows?  With law firm revenues rising last year at a sluggish 3% and expenses at 9%, law firms, under pressure to keep PPP at the highest levels and the bulk of AmLaw 100 firms having gotten along just fine without them, this chimera will likely evaporate.

Well then, what’s the point?  There are two: We all know that associates are law firms’ most important profit centers. We also need to be reminded that keeping the young men and women toiling away productively at 60 hours a week, during their decade-long march to the brass ring, optimally requires them to have a high degree of job satisfaction, which has nothing to do with compensation or bonuses.  For nearly a century, every study performed by every industrial psychologist and labor economist has consistently reported that when people identify the reasons they leave their jobs, they rate compensation at the very bottom of their lists.  Overwork ranks at about the same. We know how to keep associates satisfied and productive, but we largely continue to ignore long learned basic human resources principles.

So, let’s take a look at the extra $150,000 per annum each associate is contributing to law firm revenue streams.  Why not engage your associates in a dialogue as to what should be done to improve their lives. Some might suggest an increase in base compensation to help them amortize student loans (and if you hear that don’t wince and worry what the neighbors might think), some might suggest rolling the work squeeze and laying off some of those collective additional 50 hours a year on a couple of new associates. After all, if you have 100 associates, you have effectively replaced two associates by having those remaining in the galleon just row harder. Exhausted oarsmen often collapse or jump ship. The golden chains of Spring bonuses won’t keep your associates tied to their oars. In fact, even The Great Recession and the burden of student debt do not necessarily keep them in the ship’s underbelly deprived of sunlight and overworked; one associate recently left his firm to open a bike shop, anther jumped ship to simply walk across the country.

The second point is quite simply, it still shouldn’t suck to be an associate at a law firm.

© Jerome Kowalski, January, 2012. All Rights reserved.

Jerry Kowalski is the founder of Kowalski & Associates, a consulting firm serving the legal profession exclusively. Jerry is a regular contributor to a variety of publications and is a frequent (always engaging and often humorous) speaker to a variety of forums. Jerry can be reached at jkowalski@kowalskiassociates.com or at 212 832 9070, Extension 310.

A Cost Way Too High to Pay: The New York Times on the Price of Law School Tuition


A Cost Way Too High to Pay: The New York Times on the Price of Law School Tuition.

A Cost Way Too High to Pay: The New York Times on the Price of Law School Tuition


English: The New York Times building in New Yo...

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                                                                             Jerome Kowalski

                                                                             Kowalski & Associates

                                                                             December, 2011

David Segal of The New York Times today continued with his hard hitting series exposing the continuing crisis in American legal education. In his current piece, entitled “The Price to Play Its Way,” Segal features The Duncan Law School in the Appalachians (why there is a need for a law school in the Appalachians in a grotesquely over-lawyered nation is a separate question. I’ve addressed elsewhere.  I have also covered  Segal’s previous revelations concerning law schools revelations about legal education being akin to the non-existent Emperor’s new clothes elsewhere in this blog.

Segal’s basic premise is that law schools are unnecessarily over priced because of capricious rules and grotesquely unnecessary requirements promulgated by the American Bar Association’s Section on Legal Education and Admission to the Bar. In order  to comply with the ABA’s outmoded requirements, Duncan is required to maintain a fairly bare boned library at an annual cost of $175,000, while in truth, that cost can be eliminated virtually in its entirety through the use of computer terminals and a Wi Fi installation, just as most law firms have done.  The largest expense item for Duncan is maintaining the ABA mandated 16 full time faculty members, along with three adjuncts, which soaks up 75% of Duncan’s budget.  In Segal’s previous installment, Segal described how law school graduates acquire no practical lawyering skills at law schools, largely because they are taught by full time faculty who rarely have spent a nanosecond practicing law.  The result, Segal explained is lowered hiring by law firms and a general refusal by clients to pay for the hours spent during a lawyer’s first two years of employment, during which he or she is largely engaged in the basic skills of lawyering.

Duncan apparently endeavors to run a lean machine, charging tuition of only $28,664 per annum. With housing and other costs, that tab could run to $50,000, Segal reports.

[Update:]  On Tuesday, December 20, 2011, two days the Times article appeared, the ABA withdrew its provisional accreditation of Duncan .

[Update:   On December 22, Duncan sued the ABA claiming antitrust violations. As reported in local media “The lawsuit, according to LMU officials, alleges the American Bar Association denied the Duncan School of Law provisional accreditation as a means of limiting the number of law schools, and therefore attorneys, across the country.” After reading the entire series by David Segal – you can start here – I leave it to the reader to insert an appropriate bon mot ].

Segal’s report comes on the heels of a report issued by Dean Jim Chin of the University of Louisville, in which Dean Chin said, as reported by The National Law Journal:

 “Using the debt standards set by mortgage providers as guidelines, Chen concluded that law graduates need to earn three times their law school tuition annually to enjoy what he termed “adequate” financial viability. That assumes they borrow only the amount of their law school tuition and lack additional debt — a conservative assumption, Chen said.

Thus, graduates of relatively low-cost schools charging annual tuition of $16,000 would need to earn $48,000; graduates of schools charging $32,000 would need to earn $96,000; and graduates of schools charging $48,000 would need to earn $144,000.

To maintain a “good” level of financial viability — meaning they could easily secure loans and would be very financially secure — graduates must earn six times their annual tuition, Chen calculates. That means graduates of $16,000-a-year schools would need to earn $96,000; graduates of $32,000 schools would need to earn $192,000; and graduates of $48,000 schools would need to earn $288,000.

To maintain “marginal” financial viability, graduates of $16,000-a-year schools would need to earn at least $32,000; graduates of $32,000 schools would need to earn $64,000; and graduates of $48,000 schools would need to earn $96,000.

According to the National Association of Law Placement, new law graduates earn, on average, $68,500.”

Thus, using Chen’s algorithm, Duncan graduates would need to earn $144,000 to maintain adequate living standards and $288,000 for better standard of living. Neither one of those numbers appears to be within Duncan Law School’s grasps.  And Duncan is not alone, it only was featured by The Times as this week’s poster child.

Chen’s paper is an interesting follow on to the paper written by Professor Herwig Schlunk of Villanova in 2009, using pre-recession data, in which he included only  pre-recession in which he looked at the value proposition of law school.  The title of Schlunk’s work says it all:  “Mamas: Don’t Let Your Babies Grow Up to Be Lawyers.”  and since Schlunk wrote his paper, starting salaries for lawyers has decreased by approximately $10,000 and law school tuitions have increased by approximately 10%.

Law school professors seem to be doing considerably better.  Their median pay is $120,000 to $150,000; with some “superstars” earning more than $300,000.   By any measure, that’s not bad pay for teaching three courses a week, writing the occasional hour and taking on unlimited clients for private gigs and getting to charge those clients premium fees, after all a “professor” skilled or not, gets to bill at the highest end of the food chain.

Segal suggests that this entire exercise is part of the ABA’s guild system, creating artificial barriers to entry, while forcing law firms to bill young associates at $300 an hour, so that they can get paid a sufficiently high salary in order to pay off their artificially high student loans.  The real problem with this circular reasoning is that the music seems to have stopped playing and there are way too few seats for the players to pounce upon. NALP reported that only 60% of 2010 law school graduates actually found jobs requiring a law degree and, as noted, their median salary was only $68,500. It’s highly unlikely that universities will do the right thing by closing down their law schools since law schools and medical schools are second only to athletic programs in bringing the cash home to universities. Law professors are most unlikely to blow the whistles on their own safe perches, with but a few notable exceptions, such as Brian Tamahana.

Professor Larry Ribstein of the University of  Illinois School of Law, never a big fan of Segal, is a proponent for simply deregulating the practice of law. Ribstein got up even earlier than I did today and, read Segal’s piece and quickly posted at length on his sensational blog, “Truth on the Market” as follows:

 The NYT article typically fails to articulate the causes and cures of our over-priced legal system beyond the commonplace that the ABA somehow manages to restrict competition. Segal blames the law professors, finding comfort in the scam-bloggers’ simple-minded denunciation of high-priced legal scholarship. But since Segal doesn’t explain how a bunch of eggheads sitting around writing useless articles came to control the ABA, he sounds like he’s blaming the mosquitoes for banning DDT. This narrow focus isn’t surprising given Segal’s mission, which not to analyze or educate, but to entertain with simplistic narratives and pithy quotes.

So what’s really happening? The cause of the current situation, as I make clear in my Practicing Theory, is obviously the practicing bar, a powerful lawyer interest group with an incentive to keep the price of legal services high. Lawyers operate not only through the ABA but also local bar associations. Legal educators (law professors, law school and university administrators) come into the picture because they manage the key instrument for doing so — the academic institutions that keep the price of entry high. If the lawyers really wanted to make law school cheaper and more “practical” they could do it in an instant.

Gillian Hadfield’s suggestion to Segal of alternative accrediting bodies is one possible future world, but there are others. The route to all of these worlds isn’t simply changing the law school accreditation system (accreditation is pervasive throughout the education world), but changing the system of lawyer licensing which maintains the current one-size-fits-all approach. But how to do that when the powerful lawyers’ guild has maintained its grip on the process for almost a century?

As I have discussed (Practicing Theory, Law’s Information Revolution, Delawyering the Corporation, Death of Big Law) the answer lies in the current rise of technology and global competition, which are combining with the soaring costs of legal services to crack the foundations of the current regulatory system. Systemic changes such as changing the choice of law rules regulation of the structure of law practice and changing the intellectual property rules governing legal information products (Law’s Information Revolution, Law as a Byproduct) could hasten this process.

Reform of law school accreditation ultimately will come along with significant changes to lawyer licensing whether lawyers and law professors like it or not. Regulation of legal services will be unbundled, with only core legal services (however that comes to be defined) subject to anything like the current level of regulation, and other areas regulated at different levels or deregulated altogether. [Emphasis supplied]

Both Segal and Ribstein have, in my opinion, missed the train.  The market abhors guild type rules. That’s why even in tightly controlled economies, there are always black markets.

As I have suggested a number of times, the market for providing legal services is already widely deregulated. The Duncans of this world have only a very short half life and even top tier law schools will continue to suffer serious body blows as the demand for BigLaw associates will continue to wane.  Duncan-type law school graduates will largely be competing at a distinct competitive disadvantage with thoroughly unregulated Internet based providers of legal services, which do not need to post their bar admission certificates on their web sites. At the same time, BigLaw will be competing, again to its competitive disadvantage, with offshore unregulated alternative providers of legal services, which are continuing to grab sizeable market share and are indifferent to the requirements of having an ABA sanctioned law degree or even an American bar admission. The market – consumers of legal services – large and small are equally indifferent as to whether these providers of legal services have an ABA accredited education or even a bar admission.

Regulators are largely indifferent to the Internet based providers of legal services. Forty-eight of the fifty states have greeted ubiquitous ads by these Internet providers with a gaping yawn. The State of Washington early on began a proceeding against LegalZom.com, which was settled by requiring Legal Zoom.com to include a disclaimer on its advertising that it does not provide advice [sic].  That little side step. Stands in sharp contrast to a Missouri court’s holding. After submission of evidence from both sides, the court found that LegalZom.com is in fact actively practicing law.  LegalZoom.com got out from under that ruling by another two step:  The Missouri case was brought by several class action firms, which promptly settled with LegalZoom.com, under an arrangement in which LegalZoom will make some small changes in its advertising and operations and, presumably, the class action plaintiffs’ counsel will cash a check for legal fees. LegalZoom.com is now doing battle with North Carolina in order to obtain approval for a prepaid legal serviced plan, not unlike that being offered by competing Rocketlawyer.com.

The academies won’t solve their problems by opening branches abroad.  India already has over 900 law schools.

As John Kennedy famously said in 1961 in accepting personal blame for the Cuban Bay of Pigs fiasco, “Victory has a thousand fathers; defeat is an orphan.”  The law school tuition crisis, say the law schools, is the fault of the profession, which needs to charge high hourly rates to sustain the BigLaw model.  Academics point a finger at the ABA.  Law firms seem pretty indifferent; they are just cutting back on new hires and starting salaries, for those lucky enough to grab the brass ring, don’t support tuition loan amortization, food and shelter.

© Jerome Kowalski, December, 2011.  All Rights Reserved.

 

Jerry Kowalski, who provides consulting services to law firms, is also a dynamic (and often humorous) speaker on topics of interest to the profession and can be reached at jkowalski@kowalskiassociates.com .

What They Don’t Teach Law Students: Lawyering


What They Don’t Teach Law Students: Lawyering.

What They Don’t Teach Law Students: Lawyering


Jerome Kowalski

Kowalski & Associates

November, 2011

 

David Segal, a venerable reporter for The New York Times continues his series of feature length exposes on the serious shortcomings and often blatant fraud in modern American legal education in his piece today entitled “What They Don’t Teach Law Students: Lawyering” . I previously addressed this critical issue and proposed some solutions; particularly following the rest of the world and requiring mandatory clerkships by law school graduates as a condition for bar admission, as required by every other nation in the world.

Segal previously exposed the fact that law school education is a rigged losing game as well as the shell game many law schools engage in with regard to the vanishing law school merit scholarship.

Segal and the Times continue to travel where few dare to tread.  Hopefully his powerful voice and  the venerable Times will be the catalyst for much needed change.

 

Now that Clients Won’t Pay for Training Young Associates, How are We Going to Teach Young Lawyers the Skills of Lawyering?


Now that Clients Won’t Pay for Training Young Associates, How are We Going to Teach Young Lawyers the Skills of Lawyering?.

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