Must Read: NY Times On the Future of “Big Law”

Tuesday’s Dealbook section of the NY Times is devoted to the legal industry (primarily large law firms, or “Big Law”) and its future.

Check it out here.

To Future Lawyers: “Invest Time Understanding the Intersection Between Law And Technology”

Prof. Bill Henderson from Indiana University Law School wrote an interesting article for the most recent issue of the National Jurist.  He is an expert on the legal industry and writes often about fundamental changes the industry is experiencing and will likely face in the future.

Read the whole thing here

His conclusion:     “Invest time understanding the intersection between law and technology. Read [author and legal futurist Richard] Susskind’s books.  Subscribe (via email or RSS feeds) to the many publications in the network, including the Law Technology News, and the ABA Daily Journal (most content is free).  Some terrific blog include Law21, Strategic Legal Technology, 3 Geeks and a Law Blog, or The Legal Whiteboard (my own blog).  Identify some of the new, innovative companies and ask for informational interviews—don’t be shy.  These companies will be flattered.  And remember the advice followed by countless successful people: ‘luck is when opportunity meets preparation.'”

Update On Legal Market for Large Firms — Q 2

Hildebrandt and Citibank Private Bank both recently issued reports on the large firm legal market as of the end of the second quarter of this year (June 2012).  We regularly blog about their quarterly reports.

The latest reports are not positive. 

Among the key findings:

  • demand for legal services fell slightly (0.2%)
  • law firms’ expenses are continuing to rise faster than their revenues; however the pace of the increase has slightly slowed in Q 2
  • the growth in attorney headcount slowed slightly (the associate replenishment ratio went from 1.4 in Q 1 to 1.3 in Q 2
  • productivity (a measure of the ratio between capacity and demand) fell 2.5% (productivity also fell in the previous 2 quarters)
  • clients continue to exert pressure on pricing

The reports caution that hiring may slow as the year wears on, as firms realize that market demand does not currently justify adding additional capacity.  They predict that the large firm legal market will continue its “sluggish, largely flat trajectory” [Hildebrandt’s language] for the foreseeable future.

Latest On the BIGLAW Legal Market

Demand for large law firm legal services was, on average, up slightly for the first quarter of 2012, according to a recently released report by the well-known legal business consulting firm, the Hildebrandt Institute.  Its quarterly Peer Monitor Index Report contains information about key law firm business metrics.    

We’ve regularly blogged about the Peer Monitor system before, but to refresh you , it is a service that allows law firms to access their peers’ financial data (in the aggregate) in exchange for supplying their own data to the system for others to access (on a normalized and aggregated basis). There are 35 Am Law 100 firms, 35 Am Law 200 firms and 30 NLJ 250 firms in the system. You can find more information about the Peer Monitor system here.

While demand is up, the report sounds several cautionary notes:

First, demand is not up across the board.  Employment and IP litigation are up modestly, but corporate work is slightly down.

Second, firm expenses have increased by a higher percentage than demand, which has an effect on profitability.

Third, the replenishment ratio for associates is up slightly (to 1.4) in anticipation of increased demand that has “not materialized at a pace that fully utilizes the talent that is being added.”

The increase in demand for large firm legal services was highest in Silicon Valley (up 4% as a result of a concentration of IP-related work).  LA was next highest, with a 3% increase in demand (NY and CHicago were up 2%).  

Looking at all these factors together with the lingering uncertainty in the larger economy led the drafters of the report to conclude that “2012 could be one of the most challenging years in recent memory for law firms.”

NALP Report: Last Year’s Recruiting Volumes Slightly Up, Number of Summer Positions The Same

NALP, the Association for Legal Career Professionals, recently completed crunching the numbers from last summer/fall’s recruiting season.  There is a nice summary in the National Law Journal.

Bottom line:  slightly more offers, slightly more callbacks, but overall (nationally) the average size of summer classes at large firms in 2012 is the same as it was for the summer of 2011.

Experts Forecast Continuing Challenges and Uncertainty in the Legal Market

The latest annual Hildebrandt/Citibank Client Advisory is out.  We’ve posted about the Client Advisories before (see here and here). 

You can read the whole report here.

Some highlights:

  • demand for legal services is not likely to grow robustly for the foreseeable future
  • to gain greater efficiencies, firms will continue to seek out new business models based on “redesigned work processes, greater emphasis on project management, and new approaches to expense management and professional development”

Networking Guide for Introverts

Here is some great career advice for introverts.  I remember reading somewhere that while extroverts outnumber introverts in the general population (by a margin of something like 3 to 1), among lawyers, there are actually more introverts than extroverts.

Introverted lawyers/law students may also want to check out a recently published book called “Quiet, Please: The Power of Introverts in a World That Can’t Stop Talking.”   You can read an interview with its author Susan Cain here.

December’s National Jobs Report

According to the Wall Street Journal, the economy added 200,000 jobs in December 2011, but the legal sector lost about 1,800.  From December 2010 to December 2011, the sector lost approximately 2,700.

AmLaw’s Law Firm Leader Survey: Cautious Optimism for 2012

The American Lawyer magazine just published their annual survey of large law firm (AmLaw 200) leaders.   Some key findings:

Despite the economy, 73% are optimistic about their firm’s future in 2012. 

Transactional practices at these firms continue to struggle.  Only about 20% are expecting to see any revenue growth in this area. 

A majority (58%) are expecting only modest (less than 5%) profit increases for 2012.

54% reported that clients refuse to pay for work of first and second year associates. 

75% used contract lawyers in 2011 (up from 55% last year).  37% outsourced work to lawyers managed by third parties (up from 25% last year).  28% outsourced work to non-lawyers managed by third parties, (a two-fold increase over last year).

With a continuing emphasis on greater efficiency, firms are increasingly expecting their lawyers to have project management skills.   One respondent said that, in order to succeed, it is not enough to have excellent legal skills, “you also must be able to manage teams and a budget, interact with people, and anticipate your clients’ needs.”  There is also an increased importance placed on the skill of developing new business (it is no longer enough to just  maintain existing client relationships).     

89% are expecting to add lawyers in 2012 through a combination of lateral and entry-level hiring.  However, only 29% are expecting a larger first-year associate class in 2012 (though that is up from 13% in 2011).  74% are expected to hire lateral corporate partners.  82% are expecting to add lateral litigation partners.    

Only 14% reported deferring starting dates in 2011, compared to 46% in 2010.