Interview with Jim Leipold, executive director at NALP
Chambers Associate: 2015 saw the first significant upturn in legal recruitment since the dark days of 2007/8. Has this upturn continued?
James Leipold: What we see in the data reflects a leveling or flattening-out of the market at the high-end. We saw the recession, this big pull-back that lasted a few years, then two years (2014, 2015) of significant growth. What we saw this year was a leveling out – the numbers were flat. Some firms pulled forward, some pulled back, but it was a flat environment. I think the reasons for that are obvious. First, the demand for law firm legal services continues to be flat to soft, and there are lots of reasons for that. Corporate legal departments continue to change the way they seek to solve legal problems and purchase legal services. They're looking for cuts across the board and the continuously rising cost of outside law firms continues to be a challenge. I think over the longer arc law firms in the US will still have to find ways to be more efficient.
Second, we are seeing rapid technological changes and for the first time AI is really beginning to occupy people's thinking in the profession. Law firm leaders are asking things like: What is the right bodycount of people needed to balance financial and professional efficiency? How many lawyers do you need to run a law firm these days? At the same time, some clients that seek BigLaw services have concluded that they don't want to be paying for junior lawyers, and quite frankly, technology has automated some of the things that junior lawyers used to do.
CA: What will the Trump administration mean for the legal profession?
JL: I think compliance work will continue to grow and the data certainly reflects that with regards to hiring. I think what's happening politically, especially with regards to deregulation, is an anomaly. I think talk of a deregulatory thrust is largely overstated. We live in a highly-regulated global economy. Even if US federal regulations take a dip, corporations operate in many jurisdictions and have to comply with many regulatory frameworks – I think that will continue regardless. There may be specific industries: environment, finance, healthcare, that will see the most change. It might be different regulations – but it won't be none. The world will continue to be highly regulated and the changes that may come with this administration are not going to reduce the overall regulatory burden. Rules change, the way that people do business has to change. I don't see that as a downward pressure at all.
CA: Despite all the initiatives, why does diversity remain so poor in BigLaw?
JL: Industry-wide, law firms continue to make very slow incremental growth towards greater diversity. The direction of growth tends to be positive but the fact is that during the recession junior lawyers were the ones to suffer the most in terms of layoffs and they are disproportionately more diverse than their senior counterparts. So it's taken a while to redress that imbalance. Law firms have for the most part bounced back, and diversity numbers have eclipsed what they were before the recession. Minority females in particular continue to be the least well represented. And there are some wrinkles in the recent upturn – the recouped losses have almost exclusively been with Asian associates. African American numbers have actually gone down and are actually lower than they were before the recession. It's a real problem in this country and everyone realizes it's an important thing that needs changing.
"Our secondary school system has fundamentally failed African Americans."
That's why it's such a hard question. Law firms are putting a lot of resources and a lot of good faith into solving the problem and yet, power structures being what they are, and the BigLaw culture being what it is – it's hard to make meaningful gains. As well as all this, clients continue to put pressure on firms to improve figures.
We know from the outset that African Americans enter private practice at the lowest rate of any other group. The reasons are complicated. Our secondary school system has fundamentally failed African Americans. And there continues to be discrimination, so some folks are at a disadvantage from the very start.
That said, minorities are over-represented in law firms at entry-level, so it's retention that's the big problem. People go in-house, because corporations are environments that have often have more inclusive workplaces. BigLaw is tough. I think it's a complicated thing – it's not that they're failing in the profession, but that this particular pathway is not yielding the right numbers.
CA: In terms of salaries, is the law becoming a two-tiered profession – with BigLaw, and then everybody else?
JL: I would say that it's been a two-tiered profession really since 2001, and that distance continues to grow. We have seen salary growth in other areas but the basic bi-modal salary distribution continues to be the norm.
We see more than half the class making $45-65k and then a trough and then another large group, as many as a quarter of the class, making $160-180k without very many salaries in the middle. But we are seeing accounting firms and corporate compliance jobs, and some of these new paths come in with salaries in that valley, between $90,000 and $120,000, so over the longer arc we may see something of the restoration of the bell curve. But with regards to the first-year increase this year [to $180,000], I think it made sense – the salaries had been flat for more than seven years so it made sense that they went up.
"The cost of living in places like New York, DC and San Francisco continues to be huge. And this, coupled with mountains of debt, means that though junior associates can live comfortably, they are by no means 'rich'."
We do our associate survey every two years and it was clear with the most recent survey that not every large law firm office went up to $180k, but many did. Arguably, from an economic standpoint, the bimodal salary distribution suggest that BigLaw pays too much for entry-level talent. But then again, the cost of living in places like New York, DC and San Francisco continues to be huge. And this, coupled with mountains of debt, means that though junior associates can live comfortably, they are by no means 'rich'. Conversely, if you are getting $65k in a major market and you have $180,000 in student loan debt, you are in a difficult position. But that debt position is being moderated as well.
Because interest in law school has gone down so quickly – applications are down something like 40% over a five-year period – one of the things that has happened is that people are paying less for their degrees. There are still schools that are able to set their price, largely at the top and bottom of the pecking order, but everyone else is discounting tuition significantly. In the long term that's a disaster for the law school business model, but because of supply and demand, the net cost for students has gone down.
There was a recent article by Bill Henderson writing about Harvard's decision to switch to the GRE for recruitment. He argues that the change is about more than just looking for additional applicants. He argues that with the changes in the way that law is practiced and will be practiced, law schools need different sorts of students, and he sees Harvard leading the way. The article explains that undergraduates with a tech background are more likely to take the GRE than the LSE. It's incredibly insightful, you should give it a read.
CA: Do you think there'll be a rethink in terms of salaries e.g. pay less and require fewer billables?
JL: The fact is that law firms still aren't going to pay their partnership track associates less. But they are creating new entry points in terms of staff attorney roles with lower billables. Sometimes it's practice-specific, but we are seeing some real growth even at big brand name law firms – people are coming in at $100k instead of $180k on lower billables. Sometimes stars will emerge from this system, and they will cross over to an associate track and bill out at the higher rate, but it's rare.
We are likely to see the proliferation of these differentiated roles. It doesn't really make sense that everyone makes the same money anymore – there needs to be some diversification. Law firms are becoming more like corporations with more career paths and more differentiated roles and I think that will continue.
CA: Will remote working/telecommuting become the norm in the near future?
JL: I think it will be a big factor everywhere. We have had a big announcement recently by a few firms about allowing associates to work up to two days a week remotely. I think this staffing model is kind of built to allow work from anywhere, and I think it will continue to evolve.
Firms are really rethinking their office footprints – law firms’ two big costs are the human bodies and real estate. Having trimmed headcount during the recession, they are now rethinking their space, looking to more shared spaces and smaller offices with an eye to the way young people do their work.
"You're not going to get work from a partner if they don't know you."
Of course, a counter balancing threat is the increased security risks that come with remote working. Data privacy and security are two of the greatest risks facing law firms. I went to the ILTA conference recently and it was really a topic of great concern – how far can you extend the law firm’s metaphorical fire wall?
With regards to working remotely, the problem for your career is that you're not going to get work from a partner if they don't know you. However, we have a generation of young lawyers who want to leave work when they need to leave to tend to family obligations, maybe leave at 5:00 and spend time with their kids and then plug back in later in the evening after the kids are in bed and work some more. It's not so much that they don't want to come in, just that they don't want to come in and stay until nine.
CA: Do you have any advice for our student readers?
JL: That's a really hard question. Look, law firms still hire in very traditional and some would say ancient ways. Despite all I've just said, it's still a credential and prestige-driven market. Despite all the thinking law firms do around hiring, most often it still depends on what school you went to, your GPA and whether you were on the journal. Those credentials are the given. Then, maybe the next most important thing is that you're a fully-formed adult. Law firms do want candidates with some maturity, and some experience. If a candidate has never worked before it’s tough. To the extent that this generation has a weakness, it's that they're sometimes more comfortable communicating digitally. To succeed at a law firm you have to be able to communicate well face to face. Students should do mock interviews more than they do. Law firms want to hire adults that they can put in a room with other adults. When people fail despite their credentials, it's usually a failure with regards to adulthood in the interview setting.
Making the most of summer and term time work is important while you get your legal education, so that you at least get as much of that professional work exposure as you can. Someone who interacts with dignity, gravitas and warmth is someone who has that background. Can they work with you? Can you fit in? Law firms are businesses and students are being hired to be part of that business. They are being hired to help the firm make money. Sometimes students don’t realize that. Students should try to think of it through the lens of the partners they will work for. How can they add value to the law firm?
"To the extent that this generation has a weakness, it's that they're sometimes more comfortable communicating digitally."