Supply-Demand Gap in Lawyers When Boomers Retire

Most of the news these days focuses on the alleged over-supply of lawyers.  I say "alleged" because the market considered by these journalists does not cover the needs of our rural populations or anyone who can not afford legal services at current prices. But, I'll leave that topic for another post.

Today, I want to focus on the potentially odd likelihood that we will have a lawyer shortage in another five to ten years.  Here's why.

The Washington state bar surveyed its lawyers asking about retirement plans.  The survey found that nearly one-quarter of the state's lawyers planned to retire in the next five years or about 1,440 per year.  Another 32 percent of its surveyed lawyers planned to leave the profession or cut back their practices.  See story here.

The Washington bar report noted that a whopping 71 percent of the state's lawyers were aged 50 or older, with 21 percent being 61 or older.

On the other hand, admissions to the state bar had not kept pace with retirement projections.  Admissions dropped by 13 percent between 2007 to 2011, with about 1,200 new lawyers added each year to the rolls during that time.

I sent the report to friends that work in the administration of the Virginia Supreme Court and to friends in leadership positions in the two state bar associations.  I asked whether Virginia should be doing a similar survey of its lawyers.

The data suggests that the need for lawyers will outstrip supply in the next decade, but few incentives exist in the current legal market to encourage college graduates to pursue a career in law.  Data shows that, on average, about 50 percent of recent law grads will find jobs in traditional law firms.  At the same time, many law grads accumulate over $100,000 of debt.  The high cost of the education coupled with poor current job prospects has reduced applications to law schools by another whopping number: about 50 percent since 2004.   See story here.

As noted in earlier posts here and here, changes in the legal market are propelling changes in law firm staffing models, first-year hiring, and technology use.  Law firms are considering other deeply structural changes in the way they offer legal services to clients.

Oddly enough, if the current generation of law students and recent grads can tough it through the current market downturn, their mid-career options could be diverse and plentiful.  However, the overall situation screams for strategic planning of your own legal career.  On top of everything else that new grads must master, they must also understand the changes happening at a macro level in our profession.   We are calling the situation the "New Normal."  

9/19/13 Update:   The National Jurist covered this story in greater depth here.

The Perfect Storm for Reform: An Overview

You'll have to read Richard Susskind's Tomorrow's Lawyers(2013) or his more in-depth book, The End of Lawyers (2008).  Both books are very good and essential reading.   He argues that the shifts in the legal market are permanent, accelerated by the 2008 market collapse, and reflect several things. 

First, corporations and in-house lawyers are demanding more-for-less from outside law firms.  This demand undercuts the ability of traditional law firms  to use new lawyers to do document review and due diligence reviews.  My earlier posting in this series talks about my experience as a young lawyer doing exactly these tasks.  In addition, law firms will no longer be able to expect clients to pay for a new lawyer's on-the-job training.  Hence, law firms are hiring associates with some practice experience, de-leveraging the number of associates per partner, and farming out the document review to tech based reviewers.  They are also farming our legal research to Asian common-law lawyers, who produce high-quality work at affordable prices.

Second, in many parts of the world, legislators are changing the structure of the delivery of legal services by allowing banks, accounting firms, and other entities to provide legal services, as well as allowing greater use of para-professionals.  Susskind calls this "liberalization."  The U.S. is lagging on this dimension, but the ABA's 20/20 Commission is looking into many of the same issues.

Third, information technology can do what new lawyers once did.  It can analyze a bunch of data for a host of themes, patterns, and words.  Now a computer program can do document-based discovery in litigation  at lower cost and with greater accuracy.  Soon, artificial intelligence will allow a client to answer questions (like on Tax Cut) and get a computer (or online program) to create a basic corporate document, a will, or other legal document.  That legal service will be much more available and cheaper than the same service offered by a traditional lawyer.  The middle class and some poor folks will meet their legal needs through this channel. 

Susskind lists the following sources for legal services: in-house counsel or in-sourcing; de-lawyering; relocating; off-shoring; outsourcing; subcontracting; co-sourcing; near-shoring; leasing; home-sourcing; open-sourcing; crowd-sourcing; computerizing; solo-sourcing; and no-sourcing.  He explains each concept, but I won't. 

He predicts that new types of legal services will emerge (and some of our grads are doing them).  Future lawyers will fall into the following categories: the expert trusted adviser (increasingly rare); the enhanced practitioner; the legal knowledge engineer; the legal technologist; the legal hybrid; the legal process analyst; the legal project manager; the on-line dispute resolution practitioner; the legal management consultant; and the legal risk manager.   He describes them in much detail. 

In the end, the legal landscape will change so dramatically by 2030, this old barnacle (I'll be 76 then) won't recognize it.  But, our graduates will need to work in it.  

A Perfect Storm for Reform, Part 1

Richard Susskind, in his new book, Tomorrow's Lawyers: An Introduction to Your Future (2013), describes the fundamental shift occurring in the legal field.  The 2008 economic downturn accelerated that shift.

His theme is simple: To respond to client needs when they seek more value for the money; when technology can perform routine tasks more cheaply, quickly, and accurately than attorneys; when well-trained lawyers live in Asia and can work globally; when most people still have no access to affordable legal services, the legal profession will "dispense with much of our current cottage industry and re-invent the way legal services are delivered."  He calls the situation a "perfect storm" for reform.  

He begins by discussing the business model based on hourly billing.  Typically, a firm uses a large number of associates per partner on an assigned project.  Those associates, in earlier times, worked months on document reviews for litigation and due diligence projects for acquisitions and mergers.  Susskind describes this work as "requir[ing] more process than judgment, procedure instead of strategy or creativity."  

As an associate at Skadden Arps in the mid-1980s,  I worked months on both types of projects.  Even in those ancient times, the firm billed my time at $200 per hour, as I recall.   Was my time worth that?  Let me say, I thought that billing rate astronomical then.  

Now, a tech-based company can do the same job using computer analytic tools to achieve more efficient, arguably more accurate, and certainly less costly e-discovery.  But, who works at those jobs now?  Companies fill them with leased or contract attorneys, who typically accept lower status, fewer benefits, and no path to promotion within the traditional law firm.  Even so, a new graduate can earn $52,000 per year or about $25/per hour in these positions. 

When I joined Skadden Arps in 1985, I made about $65,000 per year in salary.  To stay even with inflation, in 2012, I would need to make (as a three year associate) $136,506 per year.   These numbers alone should indicate the savings clients get from moving this type of routinized work to more cost-effective providers.  However, what the client gains in savings, the associate loses in salary and the firm loses in profit.   In addition, law firms arguably need fewer of these entry level associates. 

Increasingly, corporate clients are seeking and getting billing arrangements that jettison the hourly fee for a fixed-cost/project-based fee or a capped fee.  Law firms, in turn, hire financial experts who can prepare a fee responding to this client demand while ensuring the firm's profitability.  Based on my experience, you would need an expert to help you balance the tensions in that billing model.   

But clearly, a change in billing practices was long overdue.  The hourly billing model had built-in incentives to be less efficient in delivering legal services, not more efficient.   Projects expanded to fill the time available, and each new hour of time billed fattened an equity partner's purse.  

To trim fees to clients, law firms increasingly outsource back-office functions, like technology, marketing, and human resources. Alternatively, clients in similar industries are coming together in collaborative ways to get their legal needs met more efficiently and at lower cost.  He cites regulatory compliance in the banking industry as ripe for this approach to legal services.  Companies could also develop an online service, like one called Rulefinder, that helps clients discover and apply rules relating to international shareholder disclosure.   Similarly, a group of Virginia towns -- or small businesses, or individuals -- could come together and share the costs of common legal work.  

I'll discuss other shifts he predicts in future posts.  

Empathy and Future Lawyers Looking for New Clients

This week, ASL hosted a Solo Practice workshop for its students.  I spoke on marketing a law practice.  For a very long time, I have enjoyed marketing in the law or mediation context.  It gives me an opportunity to describe the joy I feel when I can serve a client competently, efficiently, and at an affordable cost.  It gives me the opportunity to describe the skills, training, experience, and values I can offer potential clients.  It gives me the chance to talk with the folks I'd like to help.

It also gives me a platform for writing about substantive topics that interest me, while -- I hope -- showing I am thoughtful, ethical, and competent.  It also allows me to learn more about people, their concerns, their stressors, and their businesses.  

Recently, I started an online business coaching program called, UpLevel Your Business, offered by Christine Kane.  Last summer, I took her personal coaching program and found it very helpful.  In the first week of her new program, Christine made a comment that really hit home for me.  I am roughly paraphrasing: "Marketing your business, is your business.  It allows you to then apply your skills in a way that helps people." 

She also suggests that my personal story is part of my message to my potential clients.  What I offer the world radiates from me and my marketing message should radiate from that same source of "light."  My message should be a seamless expression of myself and what I want for the world.  She asked me to list 10 cool (or unique) aspects of myself that would help me craft my marketing message.  She also asked me to list the values and beliefs that shaped how I wanted to help people.   

I shared this concept this past week with students.  Earlier this week, I attended the meeting of our new Toastmasters club.  I was "table topics master."  I asked students questions not too distant from the ones I later asked students at the solo practice workshop:  What is your purpose in life?  What motivated you to go to law school?  Who do you want to serve?  Who is your ideal client?  

In an attempt to illustrate how you might use the answers to those questions to begin crafting a marketing message, I wrote: 

As an award winning mediator, I help people:

• Handle conflict with more power, skill, and wisdom;
• Protect themselves and the people they love and support; and 
• Make smarter decisions at times of conflict and transition. 

I also built my talk around the concepts from Seth Godin's books, The Icarus Deception and Tribes.  If we are moving quickly into the connected-era he identifies, how do we adapt marketing techniques to this connected world.   The Law Practice Management Section of the ABA and other advisers to solo practitioners suggest the following ways to find potential clients:  Formal announcements of firm events and changes; business cards; yellow page ads; billboards; TV commercials; public speaking; memberships in organizations, both trade and law; firm brochures; newsletters; published writings; and birthday cards.

In the connected-era, tech savvy lawyers will supplement or supplant these approaches with some of these tools:  Facebook and Link-in postings; business cards with e-commerce components built right in; webpages; search engine strategies; on-line ads; YouTube videos; podcasts; list serve discussions; blogs; FB "likes" and birthday wishes; and automated generation of contact lists. Many of these tech-dependent tools allow lawyers to market to a much broader group of people at much lower cost.  They also allow the lawyer to connect with a very specific "tribe" or ideal client. 

Interestingly, some of my other reading suggests that personal interaction will still matter most in this connected-era.  Traditional marketing approaches always supported this level of interaction.   For instance, in a very compelling book by Richard Susskind called Tomorrow's Lawyers: An Introduction to Your Future (2013), Susskind argues that despite all the "disruption" the legal field will experience over the next decades: "Tomorrow's lawyers will need to acquire various softer skills if they are to win new clients and keep them happy.  In-house lawyers of the future will not only be more demanding on costs, they will be more discerning about the relationships they choose to cultivate with external firms. This will place pressures on law firms to make the most of face-to-face interactions and use social networking systems to maintain regular contact."  

Later, he argues that law firms currently take insufficient time to "immerse themselves in their clients' environments and get a feel for what it is actually like to work in their businesses . . . . [M]ost firms do not grasp, in any given client, the tolerance and appetite for risk, the amount of administration and bureaucracy, the significance and extent and tone of internal communication, and, vitally, the broader strategic and business contexts of the deals and disputes upon which they advise . . . . In other words, law firms lack empathy . . . . This lack of empathy and the inability to listen could be deeply prejudicial to long-term relationships between firms and clients in the future." 

Earlier, Daniel Pink, in A Whole New Mind: Why Right-Brainers Will Rule the Future (2008), suggested that the future lies with our ability to engage in high concept, high touch enterprises that reflect and respond to our level of abundance, automation, and the competition from highly competent, more affordable, Asian employees engaged in left-brained work.  

High concept enterprises display the ability to create artistic and emotional beauty, to direct patterns and opportunities, to craft a satisfying narrative, and to combine seemingly unrelated ideas into a novel invention.

High touch enterprises display the ability to empathize, to understand the subtleties of human interaction, to find joy in one’s self, to elicit joy in others, and to pursue purpose and meaning in work and play.   

In what Pink calls the Conceptual Age, we will need to master six right-brained aptitudes:

1.                  Not just function, but also DESIGN.

2.                  Not just argument, but also STORY.

3.                  Not just focus, but also SYMPHONY (seeing the big picture, crossing boundaries, and combining disparate pieces into an arresting new whole).

4.                  Not just logic, but also EMPATHY.

5.                  Not just seriousness, but also PLAY.

6.                  Not just accumulation (of stuff), but also finding MEANING.

I'll apply these concepts in the context of law and mediation in a future blog.