“[Ladies and] Gentlemen, we have run out of money. It’s time to start thinking.” This quote by Sir Ernest Rutherford was a central theme of Columbia Law School's Wednesday event: "It's a New Year, How's the Market?"
With all of the negativity swirling around the legal industry, I was eager to hear the perspective of the guest of honor, James Jones. Co-managing Director of the legal consulting firm Hildebrandt Baker Robbins, former Arnold & Porter partner and former General Counsel of APCO Worldwide, Jones has seen the legal industry from many angles. Charismatic and engaging, Jones offered the following takeaways to a classroom brimming with law students: the legal job market’s recovery is going to take a while, but now is actually an exciting time to enter the legal field.
Armed with law-firm data from Citibank and Peer Monitor, Jones presented depressing information that we all know too well: this downturn, the most serious in fifty years, has seen demand, productivity, revenues, and profits for law firms plummet. AmLaw 1-50 firms and bank-centered firms were hit particularly hard, and companies have been keeping more legal work in-house. But the bad news isn't over—reports of 2010 law-firm profits may seem positive, but these earnings may be based mostly on savings from layoffs and expense-cutting rather than growth and demand. We are years from recovery, and even then, the landscape of the legal field will be different.
Jones then suggested that while the economic crisis accelerated the process, the legal field would have undergone a metamorphosis regardless of the recession because of these factors:
•Information: Ratings, rankings and reporting on law firms over the past 30 years have brought information to the market and sparked more competition among firms.
•Commoditization: There is a pull from custom work to more systemized and (eventually) commoditized services. Firms should have a range of prices applying to this spectrum, but they tend to price everything the same.
•Technology: There is a rise in enabling technology.
•Outsourcing and Contract work: Through new models of delivering legal services, new providers are taking law-firm business.
•Rates: Yearly increases of 6-8% to billing rates created unsustainable costs.
So what now? Jones' final thoughts echo Rutherfords' words: it's time to think. The market is shifting to a more competitive buyer's market. Firms will have to get creative and rethink their practices on pricing, efficiency, outsourcing, attrition, and infrastructure. There will be more of a divide between successful and unsuccessful firms, with the winners meeting clients' demands, developing "compelling value propositions" and taking competitors’ business. Firms will be smaller, strategic, and cost-conscious. They'll be more willing to outsource and offer alternative billing arrangements. In short, successful firms will become innovators.
And while in the short-term we’re in for a down legal job market, "this is actually a great time to be entering the profession." There will be a need for new lawyers as the baby boomer generation moves out, there are more diverse job options now than before (especially with new service providers and in-house positions), and this generation will have the opportunity to reshape the practice of law. While the immediate picture is dreary, Jones' outlook for new opportunities in the future is positive.
I was impressed with Jones’ presentation and give kudos to Columbia Law for opening this discussion with its students. Jones focused on innovation going forward, and I think he's exactly right. We need to understand the past and start getting creative about how to redefine the legal industry in this changing time. What better place to start the discussion than with our future attorneys?
Is your law school hosting an event that you'd like to see on Vault's Law blog? We're always interested in hearing about events and news. Email Mary Kate at email@example.com.
Hildebrandt Baker Robbins site
James Jones’ profile
Columbia Law School site
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