Georgetown report on legal profession: everyone should read

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NYstate
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Georgetown report on legal profession: everyone should read

Postby NYstate » Sun Feb 24, 2013 4:43 pm

https://www.law.georgetown.edu/continui ... report.pdf

Everyone should read this. It reinforces and explains the dramatic changes in the legal market in the US.

I'm probably one of the most cautious posters on this forum, often outright telling people not to go. I am extremely debt averse after seeing people burdened by debt who lost their jobs, according to calculations by other posters, I am overly negative on the outcomes for grads of top schools. This report makes me think I have an overly optimistic view of the next few years of the legal profession, which is saying something.

The overcapacity of lawyers and the continuing pressures on law are not going away. These fundamental structural problems are being resolved by firms changing hiring practices among other things.

(It has plenty of graphs for people like kappycaft1 who like their data in pictorial form. )
~sunynp

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stillwater
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Re: Georgetown report on legal profession: everyone should read

Postby stillwater » Sun Feb 24, 2013 4:50 pm

you'd think georgetown would cut its class size then... what a TTT diploma mill

rad lulz
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Re: Georgetown report on legal profession: everyone should read

Postby rad lulz » Sun Feb 24, 2013 4:55 pm

: (

NYstate
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Re: Georgetown report on legal profession: everyone should read

Postby NYstate » Sun Feb 24, 2013 5:37 pm

Yeah. Phrases like " collapse of an unsustainable economic model that fueled firm growth for a decade" and "55% [ of the 238 firms in the survey] believe smaller first year class sizes are permanent ( up from 40% in the 2011 survey) and " looking 5 years ahead respondents expect more reductions in partner-track associates ( the ones with the highest salaries) than non-partner track associates or paralegals" and "80% plan to maintain or increase their use of contract lawyers or paralegals" shouldn't be ignored.

Basically they are saying that the current model is broken, has been broken for a long time and firms have to change. The huge oversupply of lawyers works to the benefit of the firms, because they can easily hire people as contract or non- partner track attorneys who would have been partner-track attorneys a few years ago.

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scifiguy
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Re: Georgetown report on legal profession: everyone should read

Postby scifiguy » Sun Feb 24, 2013 5:53 pm

very long, so skimmmed.

Did they say what causes there were for these drops in demand of legal services? I noticed they said Latin America and Asian have high growth, but Europe (I tink) and the U.S. have seen demand for services drop/stay low (since the recession).

But I didn't see any causes listed, so couldn't tell whether we should expect increased demand as/if the economy recovers again...?? I would expect that as the economy sucks that demand would likely suck as clients aren't having business growth themselves and also probably wanting to cut costs of tthings. Much of law sseems tied to the overall economy as it's a service profession offering clients services and not generating/creating any goods by itself.

But what if the econmy grows? ....Is the article saying that even then legal services will not grow in stride?

NYstate
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Re: Georgetown report on legal profession: everyone should read

Postby NYstate » Sun Feb 24, 2013 6:24 pm

scifiguy wrote:very long, so skimmmed.

Did they say what causes there were for these drops in demand of legal services? I noticed they said Latin America and Asian have high growth, but Europe (I tink) and the U.S. have seen demand for services drop/stay low (since the recession).

But I didn't see any causes listed, so couldn't tell whether we should expect increased demand as/if the economy recovers again...?? I would expect that as the economy sucks that demand would likely suck as clients aren't having business growth themselves and also probably wanting to cut costs of tthings. Much of law sseems tied to the overall economy as it's a service profession offering clients services and not generating/creating any goods by itself.

But what if the econmy grows? ....Is the article saying that even then legal services will not grow in stride?


Yes. Read the section on a changed market reality stating on page 13. There is a bullet point list of reasons as well as discussion . I don't have time to summarize it all now.

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Ramius
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Re: Georgetown report on legal profession: everyone should read

Postby Ramius » Sun Feb 24, 2013 6:57 pm

After reading this, the question that sticks in my head is how long will it take the major players in the legal market (Amlaw 200, NLJ 250, etc.) to go beyond acknowledging the necessity for a changed business model and show real, positive implementation and coinciding results? They have already begun in some respects by decreasing the sizes of their associate classes and changing the way legal work is distributed in their firms, but there are many other important changes that need to occur.

I'm also very interested to see how legal academia continues to respond to the market forces and shifts in the legal market to a hardened buyer's market. Staunch academics speculate that the price of education will not decrease, but how is that sustainable as year after year nearly half of their graduates (and in most cases, many more) end up on the unemployment line? The longer they operate this way, the more they will be exposed due to the growing population of disgruntled graduates. The transparency movement has opened the box, now it's time to see all the shit that flies out of it. And in the end, will hope somehow still remain?

I would say this is all sad news, but isn't this at least partially a good thing? The legal economy was operating under an unsustainable model of growth for a decade or more prior to the economic downturn, so shouldn't there be a new normal that evolves out of it? I believe the legal market will eventually drive law schools to redefine the way they do business as well, and maybe in the end this will be a major market correction that stabilizes the turbulent legal world.

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scifiguy
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Re: Georgetown report on legal profession: everyone should read

Postby scifiguy » Sun Feb 24, 2013 8:47 pm

NYstate wrote:
scifiguy wrote:very long, so skimmmed.

Did they say what causes there were for these drops in demand of legal services? I noticed they said Latin America and Asian have high growth, but Europe (I tink) and the U.S. have seen demand for services drop/stay low (since the recession).

But I didn't see any causes listed, so couldn't tell whether we should expect increased demand as/if the economy recovers again...?? I would expect that as the economy sucks that demand would likely suck as clients aren't having business growth themselves and also probably wanting to cut costs of tthings. Much of law sseems tied to the overall economy as it's a service profession offering clients services and not generating/creating any goods by itself.

But what if the econmy grows? ....Is the article saying that even then legal services will not grow in stride?


Yes. Read the section on a changed market reality stating on page 13. There is a bullet point list of reasons as well as discussion . I don't have time to summarize it all now.



From page 13:

It would be tempting to think that all of the dramatic changes in the legal market over the past four years are attributable solely to the economic downturn that has shaken the developed world since 2008 and that everything will go "back to normal" once
economic stability and growth return. From this point of view, one would argue that the crisis in the legal market has been driven entirely by a precipitous drop in the overall demand for legal services and that we will be able to get back to business as
usual as soon as demand returns, as it surely must. Unfortunately, however, this argument oversimplifies both the causes and the likely effects of the changes we are seeing.

While it is clearly true that the economic downturn has been the proximate cause of much of the disruption we have seen in the legal market, the recession alone does not tell the whole story. Even in the boom years of the decade preceding 2008, other
important market forces were at work gradually building toward an inflection point. The financial crisis of 2008 may well have accelerated those forces – and perhaps even exacerbated them – but these underlying market shifts would sooner or later have
resulted in fundamental changes in the legal industry even absent an economic crisis. Among the underlying market forces that have been most important in driving change, several deserve special mention. These include:

• The growing availability of public information about law firms and their
capabilities, practices, clients, earnings, and profits that has driven an ever
more competitive and efficient market for legal services over the past three
decades;

• The inexorable drive toward the commoditization of legal services that has
impacted the work of lawyers at all levels;

• The growth of enabling technologies that has accelerated the drive toward
commoditization, tended to level the competitive playing field between large
firms and smaller ones, and changed legal staffing patterns by simplifying
tasks that were previously labor intensive;

• The emergence of non-traditional service providers that are creating new
forms of competition in the legal market;

• The changing roles of in-house general counsel and corporate law
departments that have increasingly displaced outside law firms as the
primary "trusted legal advisors" to corporate CEOs, often relegating outside
counsel to specialized advice only;

• The impact of globalization that has resulted in growing challenges for firms
seeking to serve the needs of their clients on a worldwide scale and, over
time, will result in a significant shift in global economic activity; and

• The collapse of an unsustainable economic model that drove law firm growth
for a decade essentially on the ability of firms to raise their rates 6 to 8
percent a year with little regard for the economic impact of their decisions.



So, what does bullet=point #2 mean guys? I have a guess, but am not sure about it.

And what about #4?? Discussion?

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Ramius
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Re: Georgetown report on legal profession: everyone should read

Postby Ramius » Sun Feb 24, 2013 8:54 pm

scifiguy wrote:
NYstate wrote:
scifiguy wrote:very long, so skimmmed.

Did they say what causes there were for these drops in demand of legal services? I noticed they said Latin America and Asian have high growth, but Europe (I tink) and the U.S. have seen demand for services drop/stay low (since the recession).

But I didn't see any causes listed, so couldn't tell whether we should expect increased demand as/if the economy recovers again...?? I would expect that as the economy sucks that demand would likely suck as clients aren't having business growth themselves and also probably wanting to cut costs of tthings. Much of law sseems tied to the overall economy as it's a service profession offering clients services and not generating/creating any goods by itself.

But what if the econmy grows? ....Is the article saying that even then legal services will not grow in stride?


Yes. Read the section on a changed market reality stating on page 13. There is a bullet point list of reasons as well as discussion . I don't have time to summarize it all now.



From page 13:

It would be tempting to think that all of the dramatic changes in the legal market over the past four years are attributable solely to the economic downturn that has shaken the developed world since 2008 and that everything will go "back to normal" once
economic stability and growth return. From this point of view, one would argue that the crisis in the legal market has been driven entirely by a precipitous drop in the overall demand for legal services and that we will be able to get back to business as
usual as soon as demand returns, as it surely must. Unfortunately, however, this argument oversimplifies both the causes and the likely effects of the changes we are seeing.

While it is clearly true that the economic downturn has been the proximate cause of much of the disruption we have seen in the legal market, the recession alone does not tell the whole story. Even in the boom years of the decade preceding 2008, other
important market forces were at work gradually building toward an inflection point. The financial crisis of 2008 may well have accelerated those forces – and perhaps even exacerbated them – but these underlying market shifts would sooner or later have
resulted in fundamental changes in the legal industry even absent an economic crisis. Among the underlying market forces that have been most important in driving change, several deserve special mention. These include:

• The growing availability of public information about law firms and their
capabilities, practices, clients, earnings, and profits that has driven an ever
more competitive and efficient market for legal services over the past three
decades;

• The inexorable drive toward the commoditization of legal services that has
impacted the work of lawyers at all levels;

• The growth of enabling technologies that has accelerated the drive toward
commoditization, tended to level the competitive playing field between large
firms and smaller ones, and changed legal staffing patterns by simplifying
tasks that were previously labor intensive;

• The emergence of non-traditional service providers that are creating new
forms of competition in the legal market;

• The changing roles of in-house general counsel and corporate law
departments that have increasingly displaced outside law firms as the
primary "trusted legal advisors" to corporate CEOs, often relegating outside
counsel to specialized advice only;

• The impact of globalization that has resulted in growing challenges for firms
seeking to serve the needs of their clients on a worldwide scale and, over
time, will result in a significant shift in global economic activity; and

• The collapse of an unsustainable economic model that drove law firm growth
for a decade essentially on the ability of firms to raise their rates 6 to 8
percent a year with little regard for the economic impact of their decisions.



So, what does bullet=point #2 mean guys? I have a guess, but am not sure about it.

And what about #4?? Discussion?


I think #2 and #4 are interrelated. The commodization, as I take it to mean, is the simplification of legal services that were once highly valued. This is achieved through various means, namely the technology boom and businesses like Legalzoom and the like. This leads directly into #4, which is exactly what law firms are competing with these days in maintaining their relevance.

Obviously big firms that are doing complex ventures like M&A and IP Lit won't be falling to basic legal services like that anytime soon (they're more prey to in-house GCs taking on more responsibility for dealings), but when it comes to the basics of legal work, clients just aren't willing to pay expensive fees for this type of work anymore.

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scifiguy
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Re: Georgetown report on legal profession: everyone should read

Postby scifiguy » Sun Feb 24, 2013 9:05 pm

The combination of these factors with the effects of the economic downturn of the last
four years has resulted in at least two critical shifts in the market for legal services. First,
there has been a shift from the seller's market that traditionally dominated the legal industry
to a buyer's market that will likely remain the prevailing model for the foreseeable
future. What this means is that all of the critical decisions related to the structure and
delivery of legal services – including judgments about scheduling, staffing, scope of
work, level of effort, pricing, etc. – are now being made primarily by clients and not by
their outside lawyers. This represents a fundamental shift in the relationship between
lawyers and their clients.

Reflecting the increasing power of clients to define the terms of the attorney/client relationship,
this shift has resulted in a new emphasis on efficiency and cost effectiveness in
the delivery of legal services. Although obviously not true in all cases, clients increasingly
make decisions to hire outside lawyers on the basis of how efficiently, cost effectively, and
predictably they can deliver the services the client requires, with quality being taken as a
given. As a result, to an extent barely imaginable only a few years ago, firms have found
themselves increasingly locked in procurement processes where clients are asking hard
questions about schedules, staffing, work process efficiencies, and cost.


And, finally, what does this last sentence mean in practical terms? I'm not in biglaw, so don't really know about what goes on there that much, but what is meant by qauestions about "staffing" and "work process efficiencies" here?

Is this in regards to how many people it takes to do a project and how fast they work? Does that mean biglaw currently uses too many people to do projects and will have to cut down on them?

NYstate
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Re: Georgetown report on legal profession: everyone should read

Postby NYstate » Sun Feb 24, 2013 11:38 pm

This boring article from 2005 talks about commoditazation:

http://www.legaltechnologyjournal.co.uk ... iew/21/51/
and the author, Susskind refers to this program of Hogan-Lovells as a way of keeping the higher level work in biglaw with giving lower level work to other firms:
Mexican-Wave

The name of the service is based on what is known as the Wave, or Mexican-Wave in some markets, where spectators in a sports stadium briefly stand up and wave their arms before sitting back down again.

Mexican-Wave is Hogan Lovells’ ground-breaking, award-winning outsourcing service that provides the highest quality work at the lowest possible cost. It works like this: Hogan Lovells carries out the more sophisticated or complex work and manages the outsourcing of the more routine work to a select group of law firms, the Legal Service Providers (LSP).

The benefits of using Mexican-Wave include:

Hogan Lovells do the more complex work at current City market rates, while the more routine work is carried out by firms selected and monitored by us
the client deals direct with the LSP firm once a matter has been allocated to them
the LSP and the client have online access to all our standard documentation and to specific documents relating to each transaction
Hogan Lovells do not deduct a management fee, so the client gains the whole cost savings.


The MexNet system is a key feature of the Mexican-Wave concept. This project management software allows Hogan Lovells to control quality and service delivery. It also gives the client 24-hour secure access to:

daily reporting and status narratives for every matter, including complete time/billing records
scanned documents, deeds, manuals, precedents, and standard forms
online, audio-visual webcam meetings and draft-document conference sharing facilities
a benchmarking system to identify cost savings
new functionality through ongoing developments to the system in response to your requirements.



And, finally, what does this last sentence mean in practical terms? I'm not in biglaw, so don't really know about what goes on there that much, but what is meant by qauestions about "staffing" and "work process efficiencies" here?

Is this in regards to how many people it takes to do a project and how fast they work? Does that mean biglaw currently uses too many people to do projects and will have to cut down on them?


Yes, how projects are staffed, who is staffed, how much they will pay, etc. is now being more closely controlled by the client. Clients didn't use to question staffing and costs to the extent they started to do ITE. To control their own costs when the recession hit them, clients were forced to cut law firm costs even in recovery have continued to do so.

So, for example, they might refuse to pay for first years to do basic stuff, limit the number of people on the deal, review resumes of people on the case, etc. It used to simply be up to the firm to determine how to staff transactions or litigation (within reason). Clients were making money and pushing attorneys hard so they paid them without too much complaint . Partners were always cutting down the bill to what they thought was reasonable, but mostly clients left how the work was to be done to the firm. Now, those days are over and firms are having trouble figuring out how to adapt.

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Justin Genious
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Re: Georgetown report on legal profession: everyone should read

Postby Justin Genious » Mon Feb 25, 2013 3:58 pm

I'd like to see an article that relates this info to firms that require more than 1600 billables a year. This doesn't really tell me much but still a good read.
Last edited by Justin Genious on Mon Feb 25, 2013 4:15 pm, edited 2 times in total.

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scifiguy
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Re: Georgetown report on legal profession: everyone should read

Postby scifiguy » Mon Feb 25, 2013 4:10 pm

NYstate wrote:This boring article from 2005 talks about commoditazation:

http://www.legaltechnologyjournal.co.uk ... iew/21/51/
and the author, Susskind refers to this program of Hogan-Lovells as a way of keeping the higher level work in biglaw with giving lower level work to other firms:


What % of biglaw work was of the "low level" sort that this "Mexican-wave" outsourcing has/can take over?

Let's say a biglaw firm has an incoming class of 10 associates. How many of them would have been doing this type of "monkey" work that one experienced TLS poster (thesealocust) as said something like "anyone with a pulse and GED could do." Are we essentially just talking about document review or are there really other parts of biglaw work that is so easy that a high school graduate could also do it?

Just curious as to how much of biglaw work is like this?

Lastly, will this further decrease SA hiring in the future or have we more or less already seen the impacts and are experiencing it now at current levels of SA hiring post-2007/8? Can it get any worse essentially?

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Re: Georgetown report on legal profession: everyone should read

Postby bree » Mon Feb 25, 2013 4:30 pm

Hmmm, all this talk about taking the "higher value" work and leaving the "lower value" work to LPOs (e.g., Axiom, Pangea, etc) sounds a lot like the Innovator's Dilemma. Won't the "lower value" providers simply move upmarket and accept lower margin work, sending the "higher value" law firms further and further upmarket? This doesn't sound like it ends well for many law firms.

Given the innovator's dilemma problem, it makes sense now why so many law firms are creating alternate attorney career tracks (e.g., Orrick's back office in West Virginia). By having lower-cost attorneys, they're engaging in a MOAT strategy. They compete directly with the LPOs of the world with their back offices and so protect their higher-margin businesses. Effectively, the idea is to prevent LPOs from moving upmarket. If you've read Innovator's Dilemma, this is basically how Intel created the cheaper Celeron processors to fend off lower-priced competitors.

If you subscribe to this idea, it really changes how one thinks of a law firm. A law firm is not just a PROVIDER of legal services; a law firm is a MANAGER of legal services. This is really the end game of the view that law firms are businesses (rather than the old model of thinking of lawyers as professionals).

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scifiguy
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Re: Georgetown report on legal profession: everyone should read

Postby scifiguy » Mon Feb 25, 2013 5:17 pm

bree wrote:Hmmm, all this talk about taking the "higher value" work and leaving the "lower value" work to LPOs (e.g., Axiom, Pangea, etc) sounds a lot like the Innovator's Dilemma. Won't the "lower value" providers simply move upmarket and accept lower margin work, sending the "higher value" law firms further and further upmarket? This doesn't sound like it ends well for many law firms.

Given the innovator's dilemma problem, it makes sense now why so many law firms are creating alternate attorney career tracks (e.g., Orrick's back office in West Virginia). By having lower-cost attorneys, they're engaging in a MOAT strategy. They compete directly with the LPOs of the world with their back offices and so protect their higher-margin businesses. Effectively, the idea is to prevent LPOs from moving upmarket. If you've read Innovator's Dilemma, this is basically how Intel created the cheaper Celeron processors to fend off lower-priced competitors.

If you subscribe to this idea, it really changes how one thinks of a law firm. A law firm is not just a PROVIDER of legal services; a law firm is a MANAGER of legal services. This is really the end game of the view that law firms are businesses (rather than the old model of thinking of lawyers as professionals).


I shall now look up the innovator's dilemma. Sounds interesting.

When I was a kid, I still thought of law mostly as government/public interest type of work (like DA's, government regulator's, civil rights lawyers, etc.) and not so much business law services. ...The private sector does seem more susceptible to this stuff with open competition.

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scifiguy
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Re: Georgetown report on legal profession: everyone should read

Postby scifiguy » Mon Feb 25, 2013 5:28 pm

So, after reading briefly a little bit about the innovator's dilemma, this would seem to primarily only apply to low-level document review type of legal work. It wouldn't seem that "higher" levek work could be taken over by "disruptive technologies."......I don't think.

Maybe higher-level work can be improved?....but probably not completely taken over at a super cheap rate right? ...

Nevertheless, my question remains about how much (what %) of biglaw work consists of the lower-level work versus higher-level work?...What will remain of biglaw once these structural changes run tehihr course over the next decade or so?

j.anderson
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Re: Georgetown report on legal profession: everyone should read

Postby j.anderson » Tue Feb 26, 2013 12:52 am

scifiguy wrote:So, after reading briefly a little bit about the innovator's dilemma, this would seem to primarily only apply to low-level document review type of legal work. It wouldn't seem that "higher" levek work could be taken over by "disruptive technologies."......I don't think.

Maybe higher-level work can be improved?....but probably not completely taken over at a super cheap rate right? ...

Nevertheless, my question remains about how much (what %) of biglaw work consists of the lower-level work versus higher-level work?...What will remain of biglaw once these structural changes run tehihr course over the next decade or so?


The low level work has always existed, so you can't really talk of it as a disruptive anything. If you want to talk about disruptive technology in the legal field, you have to start looking at the DIY type legal business, like legalxoom.com or similar.

As for other disruptions, I suppose the internalization of work is a big one. Where I work, we try to internalize as much work as possible before we use biglaw for anything. Considering the cost of external advice, it makes a lot of sense to just put someone on salary to work for you full time.

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Broseidon
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Re: Georgetown report on legal profession: everyone should read

Postby Broseidon » Tue Feb 26, 2013 12:56 am

Well shit.

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dproduct
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Re: Georgetown report on legal profession: everyone should read

Postby dproduct » Tue Feb 26, 2013 1:44 am

Saw Broseidon posted and rushed right over. Now :(




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