Happy New Year!

Wishing you a healthy and happy New Year

From all of us at LegalEase Solutions

Less Than Happy Holidays For Associates

The outlook gets grimmer for associates, as several sources highlight their rough road.

As we previously discussed, The National Law Journal last month reported a 1.5 percent drop in the total number of associates at the country's 250 larges law firms.

Last week, the AmLaw Daily reported on the latest Robert Half Legal Hiring Index, in which seven percent more respondents said their firms intend to add jobs in the first quarter of 2011 over the the fourth quarter of 2010.

That would appear to be good news, except for this caveat:

"Fifty-two percent of respondents reported difficulty in finding skilled legal professionals. According to Volkert at Robert Half, this suggests that while law firms and legal corporate departments may have openings, they are mostly interested in candidates who are currently employed."

To dampen the outlook even further, simply being an employed associate doesn't seem to mean what it used to. The ABA Journal recently wrote:

"Some associates who managed to avoid layoffs now lack the exposure and experience of their peers from three to five years ago."

According to that article, the unexpected consequence of the recession is that many associates who retained their jobs spent the last two years doing "pro bono work and marketing", resulting in an unprecedented lack of real experience.

"Across the board at leading law firms in Chicago, Los Angeles and New York City, there are associates who haven’t gained the experience compared to years past, says Sheri Michaels, a partner at legal recruiter Major, Lindsey & Africa in New York City."

Which leads legal recruiter Amy McCormack to observe yet another potential change to the business of law:

"The dearth of experienced associates is even more reason for firms to abandon traditional class distinctions and evaluate junior lawyers on actual experience and legal skills."

Deeper into the Citi Private Bank Law Watch Survey

The AmLaw Daily last week featured some continuing coverage of the Citi Private Bank Law Watch Third Quarter 2010 results.

Citi Private Bank's Law Firm Group chairman Dan DiPietro and senior client adviser Gretta Rusanow expanded upon some of the findings of the recent comprehensive survey, emphasizing:

"... an increasing willingness on the part of general counsel to branch out beyond their traditional law firms are forcing many law firms to compete on price, and others to innovate in order to be profitable and sustainable in this changed market."

DiPeitro and Rusanow write that they've spent "the past three months, having traveled throughout the U.S. and London conducting roundtables with managing partners of over 150 firms, meeting with individual law firms, and learning how firms are responding to this flat market..."

One of the prominent themes they're hearing is "the constant pricing pressures firms face, and how they are responding to these pressures."

They report that two shifts in the traditional business model are leading the altered landscape:

New Low Cost Competitors

• DiPeitro and Rusanow report that the general counsel they've spoken to are facing unrelenting pressure to internally reduce outside legal costs and are now more open than ever to "other options given the availability of off-shore legal service providers, and Am Law Second Hundred firms prepared to offer services at a lower cost than the traditional law firms."

• DiPeitro and Rusanow also note that "Am Law 100 firms have commented to us about the increased competition from these alternative providers, as well as from smaller firms who are able to provide legal services at significantly lower rates because of lower cost structures."

Alternative Fee Arrangements -- Pricing and Project Management

According to DiPeitro and Rusanow, "In addition to simply discounting fees, we see an increased focus on alternative fee arrangements (AFAs)."

While AFA's are becoming more standard, the task now is to work the kinks out. To that, DiPeitro and Rusanow broke it down even further:

• The first challenge is "how to accurately price services at the outset. Firms have started to consider how they might mine data in their practice management systems and knowledge management systems to create accurate cost predictions for matters. Some firms have formed committees composed of IT, finance, knowledge management, and practice group representatives working together to identify the common characteristics of various matters, and in so doing, improving the predictability of matter costs. In other words, these firms are moving from a reactive stance to a more strategic, scientific approach to pricing of legal services."

• "The second challenge firms confront is, once they have agreed to an AFA, how can they ensure that the work will be completed within the agreed scope and to budget. To do so, some law firms are retaining professional project managers. Other firms are placing that responsibility on lawyers by conducting project management training sessions for partners and attorneys in the firm."

Interesting the trends we started looking at 18 to 24 months ago are now becoming firmly rooted in the new normal.

The Law School Disconnect

A couple interesting posts this past week highlight conflicting trends on a collision course.

The Law School Admissions Council reported that the number of people taking the Law School Admissions Test last October was the second highest ever.

A closer look at the LSAC's chart shows this is part of a greater trend.

• The highest number of October test takers in the history of the exam occurred last year.

• The highest number of June test takers ever was this year.

• The second and third highest number of June test takers was last year and the year before.

• The highest number of December test takers was last year, with the second highest number of December test takers being the year prior.

• The highest and second highest number of February test takers also took place in the last two years.

However, as The American Lawyer summarizes their 2010 Survey of the Am Law 200 they conclude:

• The survey "suggests that many of the changes implemented during the recession--smaller associate classes, postponed start dates for new hires, reductions in the equity pool, and scaled-back profit expectations--are here to stay, at least for a while."

While at Above The Law, a debate over whether a 1L with "only" $21,000 of debt invested in law school should read the writing on the wall and drop out now.

80% of the responders concurred that the fiscally wise move would be to drop out now.

So we have a record number of potential law school students facing a record squeeze on entry to the profession. Something has to give.

Moneyball for Lawyers?

The November issue of National Jurist featured an article by University of Indiana law professor William Henderson advocating big changes in the way law firms assess which candidates to hire and train, and that article has prompted quite a bit of discussion.

The Wall Street Journal says that Mr. Henderson "pokes a variety of holes in the way big law firms have gone about their hiring for decades and decades — essentially luring the folks with the highest GPAs at the top 15 or so law schools."

The ABA Journal reports that Henderson's company, Lawyer Metrics, will apply a "Moneyball" approach to help quantify what qualities partners seek in an associate (referencing the best selling book about Oakland A's General Manager Billy Beane, who introduced a revolutionary statistical-based method of evaluating baseball prospects).

Henderson himself writes as an example that, "In 2007 and 2008, 46 percent of all entry-level associates at an AmLaw 100 firm were graduates of a Top 14 law school . . . Yet, during this same period, 39 percent of lawyers promoted to partner were from Top 14 schools. Further, as of 2009, only 35 percent of general counsels for a Fortune 500 company had graduated from a Top 14 school. This suggests that the advantage of higher test scores and academic pedigree diminishes rather than compounds over time — at least for partnership or general counsel positions."

Steven Harper at AmLaw Daly voices concern that Henderson's data-driven approach won't account for "politics and luck."


The Moneyball analogy is apt if Henderson is taking a bottom-up approach -- since Billy Beane first looked solely at unbiased statistical data and then taught managers and scouts a new way of assessing talent based on the data.

However, if as AmLaw Daly reports, Henderson's approach includes asking partners "about what values and traits they want in their lawyers", then his method is a top-down approach that is the exact opposite of Moneyball.

The goal should not be to assess the data in light of what partners already think they want.

If Henderson really wants to act as Billy Beane would, he needs to assess the data and then tell partners what they should want, even if what they should want is very different than what they think they want.

Thomson Reuters Embraces Legal Process Outsourcing

Thomson Reuters announced last Thursday that they'd aquired a leading legal outsourcing company, Pangea3, in a move that according to the compnay:

"Gives Thomson Reuters a leadership position in the fast-growing legal process outsourcing market."

Reuters' press release notes that:

• Peter Warwick, president and chief executive officer of Thomson Reuters Legal, said legal process outsourcing will be key to helping law firms and corporate legal departments be more responsive and cost-effective.

• The acquisition is true to their mission to help the legal system perform better, every day, worldwide; we will now bring to the legal marketplace a responsive, high-quality, transformative resource for a broad range of legal support work.

• This is particularly important as law firms and general counsel adjust to the realities of the 'new normal,' where efficiency, quality and responsiveness are paramount," he noted.

• The LPO marketplace is growing at more than 20 percent annually and projected to exceed U.S. $1 billion this year.

The ABA Journal reported that:

"Thomson Reuters already has about 8,400 employees in India, but this would apparently be the first time the company would be providing legal services themselves, rather than just legal information and consulting services to law firms and other legal providers. The move into providing legal services – and, at least in a small way, competing with its own legal information clients – comes at an interesting time, as the United Kingdom readies to allow companies to invest in law firms next year."

It is definitely an interesting development, but one that is clearly consistent with the Reuters' strategy "to develop world-class information, software and workflow solutions for legal professionals around the world."

Because legal process outsourcing fits squarely under the heading of "Workflow Solutions."

The Survey of Small Firm Economics

Last week we looked at the survey of the 250 largest U.S. firms, and this week we'll look at The Survey of Law Firm Economics, a joint project of ALM Legal Intelligence and The National Law Journal, for which the majority of respondents were firms with fewer than 150 attorneys.

Consistent with the largest firms, the small and mid-size firms also saw an historically unprecedented double dip.

According to law.com:

In 2008, revenue per lawyer declined by the largest percentage in 25 years — nearly 5%. In 2009, the figure dropped again, this time by less than 1%. Although the decrease was slight, a two-year drop in revenue-per-lawyer figures is unprecedented for firms taking this survey.

And yet, according to the report, small and mid-size firms actually increased profitability by:

• Aggressive cost cutting.

• Expense per attorney dropped by 5% in 2009, the largest ever decrease in expense-per-lawyer.

• Expense-per-lawyer also dropped in 2008, making it the first consecutive year drop in that category since numbers have been tracked.

• Net income was also up by 2.7%.

• However, actual realization rates dropped 2%, and partners wrote off 7% more of their time than in 2008.

• Billable hours also dropped for both partners and associates.

So, if billable hours were down and clients were paying less of their bills, was aggressive cost cutting the sole component of the rise in net income?

No. According to the report, small and mid-size firms also compensated by raising rates.

Hourly rates for the average equity partner are now at an all-time high among surveyed firms.

Which means we seem to have a disconnect. Because most observers feel the balance of power has shifted to the client side. And, as we've discussed, the current ACC Value Challenge expects firms to drop costs by 25% next year.

It would appear that expectations on one or both sides of the equation will have to change.

Results from the NLJ 250

The National Law Journal's annual survey of the 250 largest U.S.-based law firms by headcount is out, and the numbers are starting to crystallize our collective perceptions from the last two years.

The largest U.S. law firms trimmed another 1,400, making this the second consecutive year of cuts and the largest two-year decrease in headcount in the ranking's 33 year history.

Over the last two years, the NLJ 250 have shed more than 5% of their attorneys. The only other consecutive two-year decrease was 1992-93, which saw cuts totaling less than 2%. So, we're clearly in uncharted territory here.

Digging a little deeper into the numbers we see:

• More than half of the 250 saw decreases, while more than 2/3 of the top 50 saw declines.

• Some firms even saw double-digit percentage cuts.

• Associates, again, took the biggest hit, accounting for the majority of the decreased headcount.

• Where headcount did rise in 2010 was in the "other category", which includes non-associate attorneys, contract lawyers, and temporary attorneys.

According to Altman Weil consultant Ward Bower, "There are fewer lawyers producing more work and more revenue." Which means "there's been a reset."

"Law firms are unlikely to hire hordes of associates as they had before the 2007 recession any time soon, if ever."

And this seems to be another indicator that what used to be considered associate-level work is now being accomplished via new, emerging channels.

Collecting Law Firm Data

Last week we discussed the ACC Value Challenge's latest initiative to reduce law firm spending by 25% in 2011.

One obvious question was what tactics will Law Firms ultimately embrace to tackle such a hefty directive?

Corporate Counsel reported last week on one interesting new tool that may factor into the mix.

ACC's longtime general counsel Susan Hackett announced the organization's new initiative to ask law departments to post their internal data -- anonymously -- on an ACC site so all firms can compare how their departments are performing.

The vast majority of law firms track internal data like:

• Outside Legal Expenses

• Actual Performance Compared to Amount Budgeted

• Department Spending as a Percentage of Revenue

But this data is of limited value if it can't be measured against other firms, and that's what the ACC's new database seeks to correct. According to General Counsel:

"Only 24 percent of the survey's respondents said they have the tools or capacity to benchmark their legal departments against others. And that inability to compare, Hackett said, is preventing them from making more effective use of the numbers."

Hackett said they hope to have something up and running, "even if not fully 'populated,'" by mid-2011.

The New Normal

The ABA Journal is hosting The New Normal, an ongoing discussion between Paul Lippe, the CEO of Legal OnRamp, and Patrick Lamb, founding member of Valorem Law Group, about the changes occurring in the delivery of legal services.

The phrase "New Normal" describes how technology and global competition are creating a new normal of relentless change, and this past discussion focused on the next wave of value demands from GCs.

According to the article, from GCs perspective, they are now coming from a place where "most things we buy are getting cheaper while law is getting more expensive."

Which leads GCs to question how can law firms can "say you’re putting our interests first when you don’t realize global competition could put us out of business if I don’t manage every aspect of my operations more efficiently?”

We've discussed the ACC Value Challenge before on this blog, but now according to its chairman, Mike Roster, “25% in cost savings for 2011 is the new target."

Roster continues, "I've spoken to many top GCs and this is what they're planning to get to next year, and it's achievable. And by trying to get there, they’ll actually do a better job.”

The New Normal wondered if a goal of a 25% cost reduction would be a "catastrophe or an opportunity", and they postulated that in their experience "seeking modest, incremental improvements usually changes little; seeking dramatic improvements (which requires simultaneously redefining objectives, resources and constraints) often – but of course not always – leads to breakthroughs."

25% cost reductions in 2011 is no doubt an aggressive goal. It will be interesting to see how adamant GCs remain, and what tactics law firms ultimately embrace to tackle such a hefty directive.

Trends Gaining Traction in Bureau of Labor Statistics Report

The ABA Journal last week highlighted the recent U.S. Bureau of Labor Statistics Report that contained good news for paralegals.

But if you really look at the actual BLS Report, it is striking how the trends that have emerged over the last two years are now shaping projections for the legal job market.

According to the report:

• "Corporations in particular are expected to increase their in-house legal departments to cut costs. The wide range of tasks paralegals can perform has helped to increase their employment in small and medium-size establishments of all types."

There has been debate whether cost cutting is a trend during challenging economic times or whether it is the new reality, and this report seems to assume the latter.

• "Demand for paralegals also is expected to grow as an expanding population increasingly requires legal services, especially in areas such as intellectual property, healthcare, international law, elder issues, criminal law, and environmental law. The growth of prepaid legal plans also should contribute to the demand for legal services."

There has been no shortage of talk about alternative billing models, but it is noteworthy to see one gaining enough traction to factor into government labor projections.

• "Employment of paralegals and legal assistants is projected to grow 28 percent between 2008 and 2018, much faster than the average for all occupations. Employers are trying to reduce costs and increase the availability and efficiency of legal services by hiring paralegals to perform tasks once done by lawyers."

At the core of legal service outsourcing is the idea that some rudimentary, associate-level legal work can be effectively executed by lower cost regional or international lawyers. But this government report takes that idea one step further, implying that some functions can be delegated to non-lawyers, which is something clients may want to watch warily.

Challenges of Constant Connectivity and Instant Communication

A couple articles this week highlighted the challenges and considerations arising from our current state of constant connectivity and instant communication.

We've all hit 'send' on an email, only to feel that wave of doubt. Should I have sent it? Could it be misinterpreted?

If that concern with an overly hasty missive exists with email -- which at least forces us to slow down a little and compose a thoughtful (hopefully) message -- the potential for rushed and ill-considered communication exponentially increases with text messaging, which is by nature immediate and fragmented.

Other potential pitfalls of instant communication for lawyers were assessed by Samantha Southall at Law Technology News, including texts from new/potential clients, inflammatory texts from opposing counsel, texts that contain derogatory comments about colleagues or judges, and inquiries from reporters.

One of Southall's observations turns out to be the best rule of thumb: Treat every electronic response as though it is going to be seen in print, attributed to you, in a newspaper. And we'll take it one step further: Act as though your comment in that newspaper is going to be read by your mother.

The other timely article appeared in law.com, where Harry Valetk discussed the challenges of a socially networked jury.

Valetk's conclusion that trial courts must "adapt to jurors hopelessly dependent on information" includes the following focal points:

Probe jurors during voir dire on Facebook and Twitter use. Establish frequency of use and a juror's ability to refrain from using social networking tools during trial.

Monitor juror Facebook and Twitter activity during trial. Tools like Social Mention allow you to search blogs, microblogs, networks, videos and much more. This engine also allows you to create alerts for your search terms that you can have e-mailed to you daily.

Ask the trial judge to remind jurors that they may come forward to report a fellow juror's misconduct. The judge should also remind jurors about the fines and other potential consequences for failing to follow the court's ban on communicating with others about the case.

Warn jurors before and after every jury break about the court's ban on communicating with others about the case during trial, including the use of Facebook, Twitter and other web-based tools.

Explain the logic behind the presumption of juror prejudice. Jurors today may be more receptive to complying with court-ordered bans on communicating with others during trial if they understand the logic behind the ban.

Survey of Law Firm Financial Performance

Last month's midyear survey results from Citi Private Bank's Survey of Law Firm Financial Performance offered some much needed good news, however each positive nugget came tempered with caveats.

According to coverage in AmericanLawyer.com:

The Good News: Law firm expenses decreased, compared with the first half of 2009.

The Mitigating Factors: Lower expenses are largely due to the reductions in lawyer head count that firms implemented last year. Also, since these reductions took effect mainly in the second half of 2009, we will now start to see much flatter year-to-year comparisons.

The Good News: The impact of head count reductions has been positive, with productivity up about 4 percent and contribution per lawyer (revenue per lawyer minus expense per lawyer) up almost 20 percent.

The Mitigating Factors: We're coming from a low base, and there will be a bump in head count created by the new incoming class starting in the third quarter, so firms may still have excess capacity.

The Good News: Billing rates are up, trending at 4 percent. This is a good result, albeit lower than the historic 6-7 percent.

The Mitigating Factors: We have two caveats. These rate increases are before realization, and we're still hearing that realization is under pressure (though not falling as steeply as in 2009). Further, since leverage is declining, rate increases may be artificially inflated because a higher percentage of more senior lawyers with higher billing rates are doing the work.

The Good News: Net income and profit per equity partner for the first half of 2010 show improvement over the same period in 2009.

The Mitigating Factors: Given the traditional bump in fourth-quarter collections, this may not be an accurate reflection of net income and profit per equity partner for full-year 2010 and cannot be taken as a prediction.

The Good News: As a sector, demand at global firms is up by almost 2 percent.

The Mitigating Factor: Global firms underperformed the industry over the last two years.

Taken as a whole, there seem to be enough rays of sunshine to argue that we may have at least reached the bottom. But there are more than enough caveats to argue that we're still deep in the canyon.

Tech Savvy Cost Reductions

Florida commercial litigation lawyer Marc Dobin wrote an informative article for law.com on cost saving tech solutions for smaller firms.

Starting with securing a firm's web presence, Dobin recommends GoDaddy.com, which offers domain name registration, very low cost web hosting, and has tremendous customer service to assist the novices.

While GoDaddy also offers adequate, free website templates, Dobin points to justia.net for the free version of their search engine optimized websites specifically for law firms. According to the article: "It is a template-based, form-based, legal-specific website, but is very professional looking and has good SEO. It is probably 75 percent of what I would want with a website with 0 percent of the cost."

For the firm's blog, he utilized the free Google product blogger.com, and then he registered his blog's domain name to protect against domain name poachers.

For email he turned to another Google product at Google Business Solutions that provides email accounts that function just like Gmail accounts -- but they also allow a firm to use their registered domain name.

The Google Business email accounts also have POP3 access, so IPhones and BlackBerries can access the mailbox.

Rather than a land-line fax, Dobin highlights unityfax.com -- a site that allows you to send and receive faxes (using a traditional fax number) via the web or email. For only $4.99 a month for unlimited inbound faxes, it is cheaper than a fax line and you can keep your fax number permanently (in fact, they can even port your existing fax number).

Dobin explains the way unityfax operates: "The faxes are sent to an e-mail address that can then forward them, using a Google Mail filter, to any user on the domain." And because the faxes are received as PDFs, they can be read on your computer or smartphone.

And for document delivery, he recommends yousendit.com, which allows password protected large volume delivery of electronic documents. You can send up to 2 GB of files in a password protected zip folder for $3.99, which is a significant savings over Fed-Exing hard copies.

As every legacy form of communication and marketing now offers a digital complement or alternative, Mr. Dobin underscores the advantage enjoyed by the technologically savvy.

Ernst & Young's Global GC on the Evolution of the Business of Law

Each week there seems to be a new indication of the evolution of the business of law.

This past week, American Lawyer.com posted a video of a conversation with Ernst & Young's Global General Counsel, Trevor Faure, discussing the future of the law firm model, as well as the client model.

Some of the highlights of the interview include:

• Currently, GC's are facing the application of world class business methodology to the practice of law.

• Attorneys across the board are being asked to increase coverage, compliance, and client satisfaction, while minimizing costs and stabilizing headcount.

• To do this, attorneys need to -- on some level -- define, measure, and analyze elements of the business, including financial efficiency.

• If GC doesn't address the issues of efficiency, then Finance or Procurement will.

• While lawyers may be conservative by nature -- and perhaps not the most comfortable with data and financial management -- they are nonetheless facing demands for financial efficiency driven by globalization.

• The challenge for lawyers is to become business astute, which means facing the imperative of translating complex, subjective, unpredictable services into some sort of metric-based management.

• This challenge applies to every size of law firm or general counsel.

• Even when the economy completely rebounds, the re-evaluation of the attorney/client relationship is not going to revert to pre-recession status, because...

• Globalization is a one-way street. The movement of capital around the world seeking the highest return is resulting in both law firms and clients building and designing efficiencies that they are not likely to give back.

Corporate-Minded Law

September's ABA Journal has a feature story on the growing momentum of private equity legal-service companies taking market share away from the traditional law school model.

According to the article, "Backed by institutions, private investors and hedge funds, these entrepreneurs and financiers employ a growing legion of lawyers in the United States and offshore."

"Even though their enterprises don't counsel clients—they are prohibited from doing so by the ABA Model Rules of Professional Conduct—they are changing expectations about how legal services are priced and delivered."

The common denominator for these legal service companies' business models is the unbundling of traditional legal disciplines and then providing specific efficiencies.

• Some drive down costs by automating routine legal tasks.

• Others assemble dedicated teams of lawyers for in-house legal departments to draft simple contracts, review documents and conduct research.

• Still others use proprietary models to predict probable outcomes in complex commercial litigation, then contract to finance the most promising cases, freeing up corporate litigants' capital for other uses.

This emerging hybrid of lawyer-entrepreneurs "speak a language investors understand. Rather than profits per partner, they talk about market share and return on invested capital. They converse as easily about finance, technology and management as finer points of law. And their enterprises produce steady returns even when unemployment soars and stock markets tank."

The Return of Legal Rebels

The ABA Journal started their Legal Rebel's project last fall, with a manifesto announcing their commitment to innovation in the legal profession, questioning the status quo, and using technology to serve clients and society.

After an eight month hiatus, the Legal Rebels site looks to be back in the saddle, with profiles featuring a slew of innovative and off-the-beaten-path approaches to the business of law.

Included in the updates are:

• A young lawyer who purchased a 100-year-old firm on craigslist and is now thriving in a small town.

• Continued coverage of SoloCorps.

• The story of an ex-prison guard's path to law school.

• The need for bookkeeping skills in a solo practice.

• How the lessons of military intelligence apply to a solo practitioner.

Add these to the 50 existing profiles, which weigh in heavily on technology, and the Legal Rebels project remains an important look at the stew of ideas shaping the next generation of lawyers.

SoloCorps

With a wink and a nod to the classic movie "Blues Brothers", Carolyn Elefant and Lisa Solomon kick off their road trip with: "It's 529 miles to Omaha, we've got two fully-charged laptop batteries, a Kodak Zi8, it's hot and we're wearing sunglasses."

This is SoloCorps, a multi-armed social media project organized by two East Coast entrepreneurial solo practitioners who set out to explore the "the rich range of experiences of solos and small firm lawyers across the country."

Lisa and Carolyn's posts at myshingle.com provide an overview of the project, which inlcudes attending solo-themed conferences and capturing the stories and experiences of like-minded attorneys. As Lisa writes:

"As lawyers, we’re all constantly telling stories, whether we’re making an impassioned closing argument before a jury or just swapping war stories over drinks after work. And, as longtime members of Solosez, Carolyn and I have witnessed, time and again, experienced lawyers helping newer ones by sharing stories of what they’ve been through over the years."

"As you’ve probably read a million times, the legal profession is in a state of upheaval, with conventional law jobs being lost each day and biglaw on the demise. Yet out of this turmoil, the solo experience endures and inspires."

Part mentoring program and part documentation of the different approaches to being a solo or small firm, you can view travelogue videos and interviews with lawyers (topics range from Alternative Legal Careers to Going Solo After Big Law to IP to general interviews) on their blog.

Follow the project on Twitter (hashtag #soloheart)

Or meet up with the SoloCorp project September 29 - October 1 at the 7th Annual Solo and Small Firm Institute in Grand Rapids, MI.

Leaving Big Law Behind

Much of what we've been discussing on this blog for the past year went mainstream last week, with Slate profiling the evolving Big Law model as a field "rife with upheaval".

Listed as one of Slate's five most read articles, the piece touched on many of the hot buttons that insiders have been watching, including:

• The assault on the billable hour, via The Economist.

• The wide range of alternative models currently testing the waters.

• Outsourcing internationally to teams of attorneys in India, via the New York Times.

• Onshoring to lower cost regions within the U.S., via The Washington Post.

• The Great Recession's squeeze on the legal field.

The article also identifies "companies below the $100 million revenue level" as the primary target clients of Big Law ex pats.

Finally, the piece notes that the transformation taking place in the business of law is not unique; rather it is simply the legal profession catching up with most other industries:

"Partners who ditch overcomplicated Big Law practices for nimble, flexible shops that facilitate simpler client relationships are like other denizens of the little-guy economy."

E-Discovery and Social Networking

Here we have the inevitable collision of two massive movements.

The first is e-discovery, which over the last decade has moved from a subset of discovery to its own umbrella, covering email, IM chats, databases, CAD files, web sites, and any other electronically-stored information that could be relevant evidence in a law suit.

The second is social networking. Facebook, twitter, and myspace may be the best known, but there are also LinkedIn, Xanga, Badoo, Migente, Orkut, Studivz, Bebo, and hundreds if not thousands of more niche specific networks.

The wrinkle with social networking networking sites as they pertain to e-discovery is that they are very transient; pertinent information may only be online for days at a time.

Last week TechnoLawyer featured a product called Cloud Preservation, which is an online e-discovery service that archives and preserves content from Web sites, blogs, and social media.

According to TechnoLawyer:

"The people who work at your company (your clients for those of you who serve as outside counsel) continually add to, delete from, update, and refine your corporate Web sites, blogs, Facebook fan pages, Twitter accounts, and more. Nextpoint designed Cloud Preservation to automatically crawl these online properties at predefined intervals, creating a comprehensive and searchable archive of this content, including HTML source code and images."

While it obviously doesn't archive retroactively (although webarchive.org is an interesting source for websites pre-2009), anyone with a hint of advance notice can specify sites to monitor, thus precluding any possible spoliation.

Also, from the Cloud Preservation site comes the cryptic offer of a preferred customer program for "Corporations, consultants, law firms, and any organization interested in volume pricing with fewer restrictions."

The New York Times Spotlights Legal Services Outsourcing

The New York Times ran an article this week on the continued growth in the legal services outsourcing sector.

Highlights from the piece include:

• "India’s legal outsourcing industry has grown in recent years... to a small but mainstream part of the global business of law. Cash-conscious Wall Street banks, mining giants, insurance firms and industrial conglomerates are hiring lawyers in India for document review, due diligence, contract management and more."

• “This is not a blip, this is a big historical movement,” said David B. Wilkins, director of Harvard Law School’s program on the legal profession. “There is an increasing pressure by clients to reduce costs and increase efficiency,” he added, and with companies already familiar with outsourcing tasks like information technology work to India, legal services is a natural next step."

• "Employees at legal outsourcing companies in India are not allowed by Indian law to give legal advice to clients in the West, no matter their qualifications. Instead, legal outsourcing companies perform a lot of the functions that a junior lawyer might do in a American law firm."

• According to Janine Dascenzo, associate general counsel at General Electric, while G.E. “will continue to go to big firms for lawyers who are experts in subject matter, world-class thought leaders and the best litigators," what G.E. does not need is the “army of associates around them. You don’t need a $500-an-hour associate to do things like document review and basic due diligence,” she said.

• "Thanks to India’s low wages and costs and a big pool of young, English-speaking lawyers, outsourcing firms charge from one-tenth to one-third what a Western law firm bills an hour."

• "The number of legal outsourcing companies has more than tripled in the last five years."

• "Revenue at India’s legal outsourcing firms is expected to grow to $440 million this year, up 38 percent from 2008, and should surpass $1 billion by 2014."

• “It really is the future of legal services,” says Leah Cooper, former managing lawyer for mining giant RioTinto and current director of legal outsourcing for CPA Global.

Support For Solo Practitioners

Last week the ABA rolled out new online support for solo practitioners. They tout their new Smart Soloing Center as "an online resource that is the latest in its growing portfolio of products and services designed for sole practitioners."

The Smart Soloing Center includes:

The Solo Blog Network, featuring posts from some of the most insightful lawyers who are writing about the joys and challenges of solo practice.

• Articles drawn from the ABA’s dozens of substantive law magazines.

• The most popular discussions from SoloSez, the ABA’s free e-mail discussion list for solo practitioners.

• The latest news about solos and small firms from the daily feed of the ABA Journal.

• Links to a wide variety of websites for solos.

ABA President Carolyn Lamm acknowledges that “solos need things other lawyers don’t."

Here at LegalEase, we are also keenly aware that solo practitioners have their own set of needs. Which is why we offer legal support services like document/contract review, deposition summaries, and legal research/writing .

Our legal support is scalable, allowing solo practitioners to navigate heavy loads as well as giving solos the opportunity to accept larger cases they would otherwise have to refer elsewhere.

And our cost structure is designed to be the most efficient alternative for solo practitioners. But don't just take our word for it; read what others have to say.

New Jersey Bar Updates Bona Fide Office Requirements

In a testament to the degree that technology is changing the day-to-day practice of law, the New Jersey State Bar Association is proposing to amend a finding issued last March by a state Supreme Court Committee that seemed rooted in a pre-internet mindset.

As reported in the New Jersey Law Journal:

"Recognizing that technology has fundamentally changed the way lawyers conduct business and responding to a recent state Supreme Court Committee finding that essentially opposes the use of virtual offices, the New Jersey State Bar Association is now suggesting the state Judiciary amend the parameters lawyers must adhere to for establishing a law office.

"We do not at all mean to suggest that the 'traditional' law office is a relic of a bygone era ... But for many attorneys and their clients, mobile telephones, personal digital assistants, e-mail and video conferencing offer opportunities for communication and information-gathering far more suited to their client's needs than a physical office location," states the Bar report."

This is a significant departure from the Bar's position over the last ten years, during which they advocated for the necessity of bricks-and-mortar law offices in the state to ensure the quality of legal representation.

"Even before the March opinion, the state Bar had been examining the bona fide office rule, given the changing nature of the way lawyers conduct business.

After several months of examination, a committee of the association's Professional Responsibility and Unlawful Practice Committee and Solo and Small Firm Section said the time had come for the rule to change.

In the report, which was forwarded to the Supreme Court last month, the groups said attorneys might need to designate physical locations for some things, such as audits and the service of papers. But for day-to-day work with clients, an office might not be necessary, and might even increase the cost of legal services.

It also suggested revising the rule to allow flexibility while stating that accessibility and responsiveness to clients, other lawyers and the courts must remain a top priority."

Here we have yet another example of technology stripping away the vestiges of Old Law and reshaping the way the practice of law is actually executed.

Outsourced and Off-Site

Law.com reports an interesting change in the way contract attorneys are being used.

"In the old model, firms would call a staffing agency and request 20 or so contract attorneys to come to the firms' offices and handle document review for a client. The law firms would then mark up the bill for housing the contract attorneys and having them use their computer systems, and then bill the client.

Under the new system... clients are calling the staffing agencies directly and creating deals on what they will pay for contract attorneys. Those rates typically include discounts or rebates...

The clients then tell the law firms that if they have to use contract lawyers on the clients' matters, they have to use the certain staffing agency at the rates the clients negotiated.

... in response, law firms are starting to ask that these contract attorneys not be placed in the firms' spaces or use their computer systems. The rationale is that the firms are no longer getting any profit from using the contract lawyers and don't have as much control over who is selected, creating security concerns when opening up the firms' computer system to attorneys it didn't hire."

Interestingly, this model is looking more and more like traditional offshoring always has. The attorneys doing the work are sitting in offices off the law firms' premises, and technology has eliminated any distinction between domestically located offices and international offices.

The Mobile Lawyer

Technology continues to tear down the walls of the traditional "office", extending the workplace beyond the horizon.

A recent ABA survey documenting the rise of telecommuting polled more than 850 attorneys and reports:

• 71% of ABA members surveyed telecommute

• Of those, 88% perform remote work from home

• 32% in hotels

• 21% in others’ offices

• 14% in public places such as libraries or courthouses

• 12 % in coffee shops and cafes

• A significant portion of that work being performed remotely is legal research (35%)

This last statistic is consistent with the type of work that is most successfully and efficiently performed remotely.

Attorneys are comfortable undertaking more rudimentary tasks like legal research and legal writing outside the "office" because it is background work that will later be integrated into a larger whole.

For the same reason, these are the types of work that are also most successfully outsourced to project-based, contract attorneys.

The foundation of legal outsourcing is apparent in the types of work attorneys are already comfortable having performed outside the office.

Chicago Gun Control Ordinance Challenged

A group of citizens in Chicago challenged the Chicago gun control ordinance stating that the ordinance violates the constitutional rights of the citizens. The ordinance bans gun shops in Chicago and prohibits gun owners from stepping outside their homes, including porches and garages, with a handgun. The ordinance was passed unanimously by the Chicago city council. It will take effect from July 12. The petitioners contend that the ordinance violates the gun owners' right under U.S. Constitution Second Amendment to bear arms and hence should be declared null and void. The Second Amendment protects the right to possess a handgun in the home for the purpose of self-defense. Recently the U.S. Supreme Court had held that the Second Amendment applies to states and municipalities as well as the federal government. However, a federal court held that the Second Amendment does not prohibit regulation of firearms where that regulation will effectuate the goal of promoting public safety.

Same-Sex Civil Unions Bill of Hawaii Vetoed by Governor

A bill permitting same-sex civil unions in Hawaii was vetoed by the governor stating that it is an issue of societal importance which has to be voted on in a public referendum. The governor indicated that this is an issue that requires the reflection, collective wisdom and consent of the people and the right to directly decide the matter is to be given to them. The state of Hawaii is one of the U.S. states where gay rights movements are very active. The bill, if had become law would have conferred upon homosexual and heterosexual couples rights and benefits equal to those afforded married couples in the state. The state Senate approved the bill in January and it was approved by the House in April. The gay rights activists have declared that they would challenge the decision in court as it violates constitutional rights which prohibit discrimination on the basis of sex. A few states like Washington DC, New Jersey, Oregon and Nevada have recognized same-sex civil unions.

Not So Fast

This time last month the Bureau of Labor Statistics released their preliminary report for May, initially indicating an increase of 300 jobs added to the legal services sector. While not a large increase, any ray of sunshine is more than welcome these days.

Unfortunately, that report turned out not to be accurate. The adjusted numbers in the final report for May actually show a loss of 600 legal services jobs.

And it doesn't get any better, with June's preliminary report showing a decline of another 3,900 jobs last month.

All tallied, the unpleasant math totals more than 22,000 legal sector jobs that have been eliminated over the past twelve months.

This squeeze on legal staffing is also a primary driver for one of the most significant emerging trends identified in the Altman Weil survey we discussed last week.

More than 50% of those surveyed expect the use of external, non-headcount, contract-based attorneys (both domestic and international) to become a permanent part of their business models.

As The Legal Intelligencer noted this week, GC's face "increasing workloads, hiring freezes, and budget crunches that prevent significant use of outside counsel." And the solution for many is the strategic use of lower-cost project-based attorneys.

Increased reliance on contracting with outside attorneys on a project basis may be a timely solution -- born out of current necessity -- but it also seems to be one that will become an ingrained component of many firms' and departments' business models.

Law Firms In Transition

Legal consulting firm Altman Weil's annual survey is appropriately titled "Law Firms in Transition 2010".

The survey reports that law firms are in the process of determining how to institutionalize large scale changes to both how firms are staffed and how work is delivered.

In terms of staffing, the survey found that:

• In 2009, 44 % percent of the firms laid off associates

• 53% reduced or discontinued hiring first-year associates

• 64% shrank their summer associate programs
  

For 2010:

• 10% of the firms plan to cut associates
  

• 38% plan to reduce or discontinue hiring first-year associates

• 54% plan to shrink their summer programs

In terms of how work is executed and delivered:

• 39 percent of the law firms used contract lawyers in 2009, while 53 percent may in 2010, and 52 percent expect that contract lawyers will become a permanent part of their staffing plans.

• Nearly 10% of firms outsourced or offshored legal work in 2009, and 28% of law firms expect outsourcing of legal work to be permanently adopted in the future.

According to the survey, many law firms do still remain skeptical of outsourcing and offshoring and will likely adopt them only when pushed by clients.

But, as the survey itself notes, this level of resistance that some firms feel towards outsourcing is similar in nature to the resistance firms previously felt towards alternative fee structures.

So, how do firms now feel about those alternative fee structures they once opposed? According to the survey:

• 94.5% of law firms offer some alternative fee arrangements (AFAs), and all firms with 150 or more lawyers do so.

Clearly, law firms -- pushed by the demands of clients -- moved past their early resistance to alternative fee arrangements.

Combine that historic precedent with the fact that last year 67 % percent of law firms made cuts in support staff, 43% cut paralegals, and 44% cut associates. Since much of the legal work that is successfully outsourced is associate-level work, additional movement on outsourcing seem likely.

The Under-Reported Story

Law.com recently ran a piece by Frank D'Amore, founder of legal recruiting and consulting firm Attorney Career Catalysts, discussing one of the questions he is asked most:

"Alternative fee arrangements, the decline of hourly billing and rates are being written about frequently. Is a lot of this more hype than substance, and how do you think things may shake out when the market stabilizes?"

According to D'Amore, alternative pricing is here to stay but, at the same time, the billable hour is not going to vanish, either.

"...there are matters that are just too important or otherwise defy being easily wedged into alternative fee arrangements. That's why I think that hourly billing is here to stay, even if its use declines somewhat over time."

But what is more interesting is D'Amore's opinion that the under-reported story here is the reductions law firms have made to their hourly rates in the face of more stringent client demands.

"As the balance of power swung to in-house counsel, they have been able to drive harder bargains on non-alternative fee work.

"Getting those discounts from large firms may prove to a be a watershed development, as it underscored that a new world order may be unfolding that will reward firms with business models that support greater pricing elasticity. These firms may be better positioned to get a broader range of work because they will be more suitable partners for their clients; their challenge will be to maintain a cost structure that keeps this lower end work within profit parameters. Firms that are inflexible or hyper-focused on rates may get hurt as a result."

As D'Amore concludes, it makes sense that firms that are set up to support pricing elasticity may be the long-term winners.

The Vanishing American Lawyer?

The Vanishing American Lawyer is an interesting new book weighing in on the future of the profession.

Authored by George Washington University Law Professor Thomas Morgan, the book discusses -- amongst many topics -- two items that have been frequent fodder in this blog: The the lag time that American law firms are exhibiting in adapting to the changing global legal climate, as well as the irresponsibly slow reaction from law schools to the changing nature of the profession.

Am Law Daily reviewed the book, and said:

Morgan doesn't think that lawyers or legal needs are about to disappear. Rather, he argues, thanks to a combination of technology, global competition, and client demands, today's fairly comfortable landscape will be transformed.

"What this book predicts," he writes, "is that the interaction of law with increasingly complex economic and social issues will make distinctively legal questions less common and make many of the skills now honed in law schools less relevant."

In his view, highly specialized lawyers—often working out of large globe-straddling firms—will serve their clients as one of many agents addressing a problem. Some of the work now done by lawyers will be done by others, and vice versa.

"For better or worse," he writes, "most of tomorrow's lawyers will resemble what we today call business consultants more than they will call to mind Clarence Darrow or Atticus Finch."

The Vanishing American Lawyer seems to be consistent with Richard Suskind's The End of Lawyers? in their shared conclusions that the future of the profession is facing profound changes brought on by technology, the commoditization of legal services, external investment, and legal outsourcing.

The Clients' Revolution, Part II

The Eversheds report we discussed last week is worth a continued look.

The British international law firm commissioned a study that included 130 General Counsel and 80 law firm partners, and one of their primary findings was this:

The legal sector is entering the modern world where, like every other industry other than health care and auto repair, the balance of power favors the client.

"76% of legal clients and 75% of partners say that the current balance of power in the client-lawyer relationship is now with clients. A majority of both groups believe the shift to a client-led market will be permanent."

"Many managing partners have recognised that they are becoming primarily service providers and that their previously dominant role at the centre of the client-lawyer relationship has irrevocably altered."

According to the report, this move into the "modern world" (one which other professions have been embracing -- or forced to embrace -- for years) has some overlapping and concurrent drivers.

• The recession has pushed technological innovation up the agenda.
  

When asked about their greatest challenge over the next ten years, partners rarely (< 10%) cited the effective use of technology in the Eversheds 21st century law firm report in 2008. The recession seems to have changed this: 48% of partners are now offering technological solutions
directly to their clients in order to streamline services and a significant number of managing partners said they were keeping up the investment in IT despite cost reduction pressures.

• Clients are actively outsourcing and using technology.
  

The greatest change over the past two years has been among clients whose appetite to outsource and use technology has increased. Just over a third (38%) of General Counsel were actively implementing or considering outsourcing low-level work to low cost jurisdictions and a further 29% were receptive to the idea of outsourcing provided they had suitable work. 58% of clients are implementing or considering technological solutions to standardise processes. However, their shift in attitude is not equaled by private practice: over half (56%) of clients reported that they had not received offers of alternative resourcing from their external advisers as a result of the recession.

• The recession is driving efficiency.

The drive to better and more efficiently resourced legal work has received a huge boost from the recession. 73% of clients said that they are implementing better and more efficient resourcing of legal work. A majority of law firm managing partners recognised that the need to be more efficient was key to being a sustainable business. Efficiency is the area in which they are driving the most change as a result of the recession.

Technology, outsourcing, and efficiency. It's becoming a familiar mantra.

The Clients' Revolution

Evershed's report on the post recession legal sector for 2010 confirms and expands upon the observation we posted two weeks ago: The recession itself was not the cause of current changes in the business of law as much as it was an accelerator.

The London-based international firm commissioned a study that included 130 General Counsel and 80 law firm partners, and one idea the study explores is:

"When the severity of the recession became apparent at the end of 2008, opinion was divided as to what this meant for the legal market. Would it bring about a new world order, or would the market revert to its pre-recession shape as soon as the cycle swung up again?"

Pursuing that question, the study asked if the participants thought the recession would have a lasting impact on the profession?

A resounding majority (78%) answered “Yes”.

But the study then puts the recession within the context of a greater, inevitable change for which the profession of law was due.

"However, the recession in itself was not thought to be the key driver of change. What it has done is accelerate other significant, long-term drivers of change. Some law firm managers believe that this change has been accelerated by as much as ten years."

Two of the primary drivers the report identifies are globalization and technology. To further underscore the profound effect of the influence of technology, though, it's arguable that the globalization of legal services would not be possible without the technology, making globalization more of a subset of the technology.

One of the key byproducts of these changes, according to the study, is that clients are now taking center stage. The three pillars of this change are seen in:

• Legal sector enters modern world -- 76% of legal clients and 75% of partners say that the current balance of power in the client-lawyer relationship is now with clients. A majority of both groups believe the shift to a client-led market will be permanent.

• Clients drive change in legal services -- Partners and clients said that the increasing power and importance of General Counsel was almost as important a driver of change as globalisation and the shift to the East.

• Fee levels set for long-term decline -- The vast majority (90%) of General Counsel said they were under internal pressure from their Finance Directors or equivalent to provide better value, efficiency and cost reductions. 60% of General Counsel said they had already reduced their overall external legal spend.

It would appear that we're now gaining proper perspective from the fall of 2008 to start talking in terms of "effects" rather than just "causes".

Turning Legalese Into LegalEase

Comes now, the author of this article who, pursuant to said article, for the reasons set forth herein, prays inter alia, for relief from the antiquated expressions, needless Latinisms, and convoluted legalese that plagues most legal writing. Stubbornly clinging to language that they would never use in any other context, many legal writers have an irrational aversion to expressing themselves in plain English. But is it really necessary to "pray" for relief rather than ask for it?

Is it more convincing to argue that the client is entitled to relief "pursuant" to Section 4.16 rather than merely "under" Section 4.16? And, is the Plaintiff really coming now? The general consensus is that the answer to all three questions is a resounding "no," and that legal writing is, in fact, much more effective without the legalese.

The Plain-English Movement

Over the past two decades, the movement away from legalese and toward legalEASE has been palpable and heartening. In his book, "the Winning Brief," legal writing guru Bryan Garner includes chapters on such tips as "eliminate the jargon known as legalese," "strike pursuant to from your vocabulary," and "don't use such as a pronoun." The University of Virginia School of Law alumni page touts its legal research and writing program as helping students "win the battle against legalese." A UCLA professor publishes an online page entitled "eschew, evade, and/or eradicate legalease." We are bombarded by advertisements for CLE writing seminars that promise to teach us to how to write clearly, in plain English. Yet, many attorneys continue to cling to their legalese.

Resistance to Abandoning

It seems evident that confusing jargon is the enemy of clarity and persuasiveness, but the fact that we need to attend seminars or read books to teach us how to write in simple English is a testament to how deeply engrained this strange lawyerly language has become. Why the resistance? One explanation may be that aspiring attorneys spend three years in law school reading cases--decisions that are often centuries old--and assume that 21st century lawyers should write like 19th century judges. They continue to write in this style out of habit, or a misguided sense of tradition. Other lawyers are convinced that legalese is more precise. However in most cases the opposite is true: legalese is less precise, redundant ("cease and desist," "by and through counsel"), and unwieldy reinafter, "unwieldy").

Underlying the resistance may be a vague, insecure sense that lawyers need to write in legalease in order to sound lawyerly and separate themselves from the rest of the population. After all, can't any person of average intelligence draft a contract or an appellate brief in plain English? The answer, of course, is no. Replacing the "parties hereto" with "Jones and Smith" devalues the importance of attorneys no more than calling a megapixel a "millionth of a screen" would render computer technicians obsolete. Lawyers aren't paid for their ability to wield incomprehensible jargon. Rather a unique ability to reason like a lawyer, to weave persuasive arguments from facts and precedent, and to pay exacting attention to detail, separates legal writers from the rest of the population. Of course, there will always be a unique legal lexicon, filled with such terms of art as "fee simple," and "res judicata." Every profession has its jargon. But the legal profession is the only one that has felt the need to have its own pronouns, unique to the English language, and to use same to alter said language.

In Conclusion

WHEREFORE, for the reasons set forth herein, we respectfully request that this honorable reader abandon legalese and start making clear arguments in plain English.

Doug Groene, Esq., Staff Attorney of LegalEase Solutions LLC http://www.legaleasesolutions.com

The Backlash

The Chicago Tribune recently ran an article discussing the "growing skepticism about the value of a law degree."

According to the article:

"Much of the ire is aimed at less prestigious law schools that charge nearly as much of some of the top-ranked schools - where a three-year program costs nearly $150,000, not including room, board or even books. Top schools say they can justify their expensive tuitions because they place a majority of graduates at the nation's elite firms."

However, the article goes on to mention:

"...With law firms cutting salaries and hiring fewer graduates last year because of the economy, Northwestern sent just 55.9 percent of its 2009 graduates to the largest firms, according to the National Law Journal. Yet the school still was No. 1 in the publication's annual ranking of graduates who found jobs at big firms."

Ouch. The very prestigious Northwestern Law -- which typically sends 70% of their graduates to top 250 law firms -- placed only slightly more than 50% of last year's class into Big Law.

And that tally was enough to earn them the top ranking.

But wait, it gets worse. Northwestern Law School Dean David Van Zandt added that "he believes big law firms will never go back to hiring graduates in droves. That means they will recruit from fewer schools."

Mounting reports like these -- both statistical and anecdotal -- seem to be fueling a backlash of embittered law school grads.

Take, for instance:

• The Jobless Juris Doctor, a blog dedicated to venting "about the evils of the legal profession, the law school scam, and being jobless with a JD."
  
  
• Confessions of a Laid Off Lawyer, which documents the adventure of paying off law school debt.

• Exposing The Law School Scam, a site whose mission is to expose "the dramatic oversupply of lawyers."

• Third Tier Reality, a blog to "inform potential law school students and applicants of the ugly realities of attending law school."

Based on the level of frustration emanating from these sites, we may be seeing the early stages of a thinning of the law school herd.

The New Practicality

Since this blog's overarching interest is in the trends that are surfacing and shaping the business of law, on occasion it's helpful to step back and see how some of the individual topics we've been tracking are coalescing as a whole.

Law.com ran a piece the other day by Ari Kaplan which hits on two of the trends we've been watching, and the article not only confirms our observations, but it inspires a new term: The New Practicality.

The two tenets of the New Practicality are:

• The present state of staffing/hiring dynamics are impacting the majority of those entering the profession.

"There is a real awareness that the hiring landscape is forever altered, but it is too soon to determine what the contours of that new normal will be," says James Leipold, NALP's executive director. "Law schools face real challenges because the demand for new graduates is going to be compromised for a while," he adds.

"One sobering statistic about associate employment: In its annual study of associate attrition the NALP Foundation found that 32 percent of associate departures in 2009 were the result of firm downsizing -- compared with 0 percent in 2006."

No matter how you look at it, that is a significant number.

• There is an emerging demand for practical skills.

"The interest in practical skills, such as firm citizenship, professionalism, project management and client development, is being driven by a new culture of efficiency and higher expectations."

"... Chris Simmons, managing partner for the Washington Metro Region of PricewaterhouseCoopers aptly characterized those new duties: "What you think is the hard stuff (technical proficiency) is really the easy stuff, and what you think is the easy stuff (soft skills) is the hard stuff," he said. "Financial pressures in law firms are requiring individuals to prove their relevance," he added."

What is interesting is that the driving force behind the New Practicality is not just the economy; it's really the vertical access to information provided by the internet.

To the layperson, even twenty years ago, the practice of law was something that took place behind closed mahogany doors and drawn velvet curtains. Most people didn't have access to or the understanding of what lawyers were actually doing. Most clients only saw the final product.

The internet changed that by providing access to information that, to some degree, opened a window of transparency into the inner workings of law firms and legal departments.

While the economic turmoil of '08 caused clients to tighten financial demands on their attorneys, clients wouldn't have known to turn the screws if they hadn't become more savvy consumers via the changes brought on by the digital world of the internet.

Previous economic pinches didn't result in a New Practicality, because clients didn't realize there could be any other options.

Another Step Forward for Legal Process Outsourcing

Forbes reported recently on a key executive migration that speaks to the evolutionary advancement of Legal Process Outsourcing on a couple levels.

David Hickey recently left Winston & Strawn, where he was a partner and Vice-Chair of the firm's E-Discovery Practice Group, to join legal outsourcing company American Discovery.

David Steiger of The Globalized Lawyer says of Hickey:

“I have been following and writing about the legal outsourcing industry since its inception. David is well recognized as a leading expert in the legal outsourcing industry. No one has visited or counseled more legal outsourcing providers than David. His move speaks volumes about the industry as a whole...”

As an expert in E-Discovery, Hickey's move signals another step in the solidification of legal outsourcing for tasks -- like E-Discovery -- that can be accomplished via alternative work models with increased efficiencies and cost reductions without sacrificing quality or data security.

But beyond that, what is even more interesting is that this move signals not just a validation of LPO as a business practice, but it hints at a future role that LPO may cultivate, and that is the role of the subject matter expert. The adviser. The collaborator.

If large-scale document-intensive tasks like E-Discovery and legal research become increasingly the domain of LPO, then the LPO becomes more than just a means of execution; they become a tool for peer-based collaboration, as well.

Big Law ex-patriots cross pollinating with LPO would seem to be the next step in LPO becoming woven into the fabric of legal business practices.

Ethics Opinion on Cloud Computing

After a request from a member of their bar association, The North Carolina Bar studied the ethics of using cloud computing -- also known as Software-as-a-Service or SaaS -- in a law firm, and they've finished drafting a proposed Formal Ethics Opinion on the matter.

The American Bar Association's Legal Technology Resource Center describes SaaS computing as the following:

"SaaS is distinguished from traditional software in several ways. Rather than installing the software to your computer or the firm's server, SaaS is accessed via a web browser (like Explorer or Firefox) over the internet. Data is stored on the vendor's data center rather than the firm's computers."

The North Carolina Ethics Opinion clearly states the central question:

"SaaS for law firms may involve the storage of a law firm's data, including client files..., on remote servers rather than on the law firm's own computers and, therefore, outside the direct control of the firm's lawyers. Given the duty to safeguard confidential client information... may a law firm use SaaS?"

The Ethics Opinion concluded that SaaS computing is acceptable by lawyers and law firms, provided that:

1) "Steps are taken effectively to minimize the risk of inadvertent or unauthorized disclosure of confidential client information and to protect client property, including file information, from risk of loss...

Although a lawyer has a professional obligation to protect confidential information from unauthorized disclosure, the Ethics Committee has long held that this duty does not compel any particular mode of handling confidential information nor does it prohibit the employment of vendors whose services may involve the handling of documents or data containing client information. "

2) The law firm should be able to answer a number of questions, including:

• Who has access to the data besides the lawyer?

• Who owns the data -- the lawyer or the SaaS vendor?

• How does the SaaS vendor, or any third party hosting company, safeguard the physical and electronic security and confidentiality of stored data.

• Where is the data hosted? Is it in a country with less rigorous protections against unlawful search and seizure?

• If the SaaS vendor goes out of business, will the lawyer have access to the data and the software or source code?

• How often and on how many geographically distinct servers does the data get backed up?
  

As a Legal Process Outsourcing company with years of experience in data security on third party servers, the North Carolina Bar Association's opinion seems entirely pragmatic.

"...the Ethics Committee concludes that a law firm may use SaaS if reasonable care is taken effectively to minimize the risks to the confidentiality and to the security of client information and client files. However, the law firm is not required to guarantee that the system will be invulnerable to unauthorized access."

ROI for Law School Downgraded

A few months ago we discussed the return on investment for law school tuition. Now, according to U.S. News and World Report, those numbers are looking even worse.

To put it simply, both sets of numbers are going in the wrong direction: Tuitions are increasing to unprecedented heights, while job prospects are both diminishing and paying less.

More money spent for less return can't be a good thing.

The problem starts with tuition, for which U.S. News cites ABA statistics:

• Average tuition at private law schools was up six percent in 2008 to $34,298

• State schools were up nine percent to and average annual cost of $16,836

• At Yale Law School, number one on the most recent U.S News ranking, tuition is $48,340 a year. The lowest tuition for a top 10 law school is at the University of California at Berkeley, which is in seventh place and charges in-state residents $35,907.

Now combine those numbers with dwindling returns, and the equation really goes down hill.

According to a separate U.S. News article, first-year associates at large law firms can expect to make $106,500 to $131,250, down 5.1 percent from last year. At midsize firms, associates can make between $71,500 and $100,750, and at small firms they might make from $49,750 to $73,000.

However, anecdotal reports indicate even those numbers are inaccurate, coming in significantly higher than real-world reports.

Reports from Manhattan, which historically would land at the higher end of the salary scale, say small firms are starting at $42k and midsized firms are offering $55k.

Job postings for small firms in Chicago are reportedly significantly less than that, starting in the mid 30,000 range. And this is without benefits.

However, the discrepancies might be explained by the source of U.S. News's salary statistics: Robert Half Legal, which is an attorney placement firm. If they are basing their statistics on their clients' salary offerings, then it's a safe assumption they are dealing with firms who can afford to pay the additional 20-25% of a first year associate’s annual salary that placement firms typically charge as a placement fee.

And this would argue for the anecdotal reports that those figures are out of step with real world offers.

New Models for Legal Education

The recent trends in the legal world (e.g., an emphasis on project management, a bottle neck for new associates, growing demand for alternative pricing models) all involve not the practice of law, but the business of law.

Responding to those shifts, New York Law School and Harvard Law recently teamed to spearhead an initiative to reevaluate the way future lawyers are educated.

The American Lawyer reported that 75 law school deans, legal educators and lawyers gathered April 9th and 10th for a two-day conference called "Future Ed: New Business Models for U.S. and Global Legal Education".

In general, the two themes that emerged were 1) the need to augment existing curriculum and, 2) the possibilities of creating alternative curriculum.

In terms of augmenting existing curriculum, the consensus was a heightened emphasis on the practical skills clients require.

• Business Management Skills

• Financial Literacy

• Executive Communication

In a forceful concurrence with this idea, Chester Paul Beach, associate general counsel of United Technologies Corporation "hammered home the need for more real-world training. To cut down on legal costs, Beach said, his company absolutely will not pay for first- or second-year associates because "they're worthless." Lawyers need more "skill development" in school because, especially amid the current economic downturn, businesses are "not going to pay for people who can't add value."

The other theme to emerge was alternative education models, which might include:

• Accelerated Programs

• Experiential Learning

• Distance Learning

• Specialized Schools

The collective agreement here was that "there should be "multiple futures" to legal education. Every school can't be Harvard, and every school shouldn't follow the same system, said Joseph Altonji, from consulting firm Hildebrant Baker Robbins. Schools should specialize, he said, "because we need different kinds of practitioners."

"Altonji added that a model based purely on grades and LSATs for all graduating law students embarking into various careers "is just not working today."

Teaching Project Management

Project Management for attorneys seems to be on everybody's mind right now.

We posted last week about Orrick, Herrington & Sutcliffe creating a career track for legal project management.

This past week, Legal Intelligencer reported on a firm-wide initiative undertaken by Dechert LLP in conjunction with legal consultants Altman Weil to train their attorneys in project management.

The article quotes Altman Weil's Pamela Woldow, addressing a number of topics, including:

Initial Trepidation:

• "I think lawyers like to believe that everything they do is unique and complex and the truth is there are some parts of representation that are complex, but there is an awful lot that is rather easily mapped."

• While litigators often get the blame for being the most averse to using project management because cases can take unexpected turns, Woldow said finance attorneys, though "battle wounded" in the recession, have been the most resistant to the training.

Process:

• The training breaks down a matter from the earliest stages of assignment to the end, with an emphasis on a lot of up-front communication with the client about expectations and defining the scope of the project.

• The training sessions for partners included no more than 20 partners at a time, from varied practice groups. They were brought in for four- to six-hour sessions and taught the concepts of project management and tools to implement it. Lawyers visually mapped out matters related to their practice to see how the process works.

The Changing Landscape:

• "I do spend most of my time with GCs and in-house counsel and the message beyond the recession is that they want their law firms to operate more like businesses and deliver their services more efficiently and cost effectively."

• "From a law firm perspective, this type of process is enormously effective when operating on an alternative fee arrangement because, if they are going to be profitable, they cannot operate the way they have in the past."

• The push for efficiency among large law firms has largely been driven by cost concerns from clients and the need to make good on the alternative fee arrangements that are often seen as a solution to these cost concerns.

• While certain matters may prove more challenging than others in terms of implementing project management techniques... there are enough clients out there demanding these types of services that firms have to embrace this.

It certainly seems that project management is not just a fad with a limited shelf life.

Project Management for Attorneys

Following up on last week's post discussing LegalBizDev's survey of AmLaw200 decision makers, Legal Technology News highlights a crucial component in the evolution of alternative billing:

Project Management in the legal profession.

No one would argue that attorneys currently manage projects every single day. But that's not the same as Project Management. Anyone who's dealt with any sort of construction, from home remodeling on up will agree with the following from the LTN article:

"According to the chairman of a firm with more than 800 lawyers, "... in the world of construction, architects, engineers, and contractors have been working on a fixed-price basis ... for a long time ... There is a body of learning ... about how to estimate, how to contract, how to define scope, how to manage changes, allocate risk, how to manage fee disputes, delays, [and] changes in scope [that could] be adapted to the legal profession."

That's Project Management.

One reason it's important to single out Project Management as crucial to the success of alternative billing is because it is a key skill set in which most attorneys have not been trained.

In fact, not only have they not been trained in it, many lawyers have been encouraged to do just the opposite.

"As a CFO of a firm with more than 1,500 lawyers explained, most lawyers have worked their entire careers under the billable hour model, in which "the more hours that got charged, the more money [they] made. And so they've never really had to manage [budgets]."

Crafting accurate estimates, clearly defining changes in scope, and providing timely discussions about change-orders are the keys to success with "fixed price" billing.

Which raises the very interesting idea of a legal career track specifically for Legal Project Managers, such as the initiative being undertaken by Orrick, Herrington & Sutcliffe.

And, short of a fully committed in-house project manager, it would seem to make sense for attorneys to be trained in the fundamentals that many other industries exercise when it comes to bidding and executing fixed-rate services.