The Talent

December 9, 2009 5:50 PM

A Class for Change

Posted by Ed Shanahan

By Silvia Hodges

We are painfully familiar with client complaints that large law firms charge too much for new associates who know too little about the practice of law to be worth it. The clients may have a broader complaint. For all their glittering academic records, these young lawyers not only don't know much about the realities of the practice, they know even less about the business world.

The economic crisis gives us the opportunity to fix that. But what is the proper educational forum? Should we leave it to law firms? Or should law schools step into the breach? I prefer the latter, and not only because I teach a combined business and management course at Fordham Law School.

At the moment, law firms have their hands full training newcomers to be lawyers. Some firms recently initiated changes to associate structures that include apprenticeship programs at lower salaries and less pressure to bill, designed to accelerate competence. In many ways, this bold step is a reversion to traditional apprenticeship under the wings of a seasoned professional.

Law schools have also started down this road. Some have long offered joint J.D. and MBA programs but as a practical matter that effort is too long and too expensive to attract all but the most obsessed. Instead, by my count, at least 17 schools have created courses that purport to teach basic practice management concepts.

As consultant David Maister sees it, the real need is "to understand some basic business concepts as they apply to clients, and [pick up on] some clues about the economic and political structures of law firms so that students understand the world they are entering."

What would a model "law business" survey course include? Many things, from a taste of business concepts and strategy to finance and economic indicators, from firm governance and organization to firm ownership. Students also need basic knowledge about law firm economics, client relationship management, marketing and business development, as well as human resources. (All this in 14 weeks.)

To give future lawyers an idea of their future clients' and future law firms' points of view, the course needs to be a blend of business and management. Students should learn how legal decisions fit into the larger business framework that clients are confronted with every day. They need to understand that businesses face many challenges, legal problems being one of them, but certainly not the only one. They need to develop a level of common business sense: Is it a good idea to initiate litigation that will potentially cost the client over $100,000 in legal fees on an issue worth $75,000? Obviously, not.

The lessons could begin with business concepts such as value and competitive advantage, as well as business strategy and planning. The students would learn how businesses work, including lessons on financing, marketing, and operations. And the students would explore the necessary processes for commercial success, to think critically about business trends, strategies, and tactics.

In regards to law firm management, the course should discuss governance, organization, and ownership issues as well as law firm economics and lawyer compensation. How do firms make money, and what does a 10 percent discount do to the firm's bottom line?

Students should also be introduced to human resources aspects, such as managing the legal staff. (A few partners might benefit from taking this class as well, but I digress.) Last but not least, they should learn about marketing and business development, from keeping and developing existing clients to finding new ones. They should understand which metrics are important indicators of long-term success and which ones are just short-term signs. (The mere fact that they know to ask for metrics will put them ahead of their peers and some of their masters.)

Granted, this tall order means the course would not be much more than a basic introduction. The idea is to deepen this introduction later with additional law school or business school courses, with training from law firms, and with further personal study.

The financial collapse of 2008 has given this discussion new urgency, and a do-or-die burden on legal practitioners. The young generation is called to take a fresh look at their profession and how they approach client needs, because, to vary the cliché, it's the business model, stupid. And no one wants a stupid lawyer.

Silvia Hodges, Ph.D., is a full-time faculty member at Emerson College in Boston, where she teaches professional/legal services marketing. She is also an adjunct associate professor of law at Fordham University in New York. In the spring of 2010, she will begin teaching the course "Law Firm as a Business: Managing Lawyers, Clients, and Careers."

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I couldn't agree more. As a new associate I feel ill prepared to face a lot of the challenges in the legal/business world. Im sure I will learn as I go, but that will be at the cost of the client.

The suggestion you offer is along the lines of the training offered by UK firms, and the English Legal education system.

A 3 years legal undergraduate degree, followed by a one year PCL course, followed by a 2 years 'traineeship' on the job at a law firm but where you are being trained and are not a first year associate.

Another important component to a fully competent attorney is knowledge of computers. The answer to the complaint that there is not enough time in law school to teach all this stuff: require knowledge as a condition to admission. Med school students must know biology, right?

I have always stated that legal education should include as part of the mandatory program, in addition to the courses that you mention: (i) marketing for legal services (ii) leadership/skills reinforcement (iii) negotiation and (iv) corporate finance (valuation, etc).

Gastón Bilder
International Legal Counsel, Community Relationships

I also heartily agree. Law schools need to improve their efforts to produce practicing lawyers, and spend less time on grooming a few students for possible careers as law professors. Another point Dr. Hodges doesn't make is the increasing irrelevance of academic legal research to the real-world practice of law.

Only an academic would make a suggestion like this.

Learning the ins and outs of business is not done in the classroom, in an MBA program, which may culminate in the only degree worth less than my JD. Rather, it is done on the ground floor, working for, and learning from, those with experience. You want law students to be more prepared for the business world, more prepared to originate and maintain business relationships, require them to take years off between their undergraduate studies and law school.

As to the suggestion of an "apprenticeship program at [a] lower salary" that would only work if the overall cost of law school were not sky-rocketing. Tuition continues to increase, while according to your article, students, and the law firms that hire them, receive little as an immediate return on their investment.

Finally, if a law student does not understand the futility of spending $100K to get back $75K (unless of course your client is motivated by something other than money) maybe they should find a different profession.

Thanks for initiating a dialogue on this critical issue. In my book, Unbound, I indicate that in addition to the items listed in this article, students should be trained in project management and process efficiencies as they are the two key business skills necessary to succeed in the legal industry in the coming years. 2010 will see dramatic transformation in the industry and I hope we also see it in legal education.

Dr. Hodges's suggestions are a timely (well, for law firms and law schools, who are always decades behind the rest of the world) prod to the industry.

It's important to distinguish between "education" and "training." The former imparts information and raises conceptual awareness; the latter imparts skill. If, as the research Malcolm Gladwell cites in "Outliers" concludes, for one to become expert at anything takes 10,000 hours of focused practice with coaching and feedback, then law schools cannot step into the current breach without completely rethinking their mission, strategy and tactics. Likewise, law firms can't do it either without scuttling a hopelessly outdated business model that precludes real innovation.

Trying to prepare market-ready lawyers through these two dinosaur institutions is akin to rearranging deck chairs on the Titanic.

A good first step would be for AmLaw firms to reallocate some of their obscene partner profits to developing a sustainable future that's more attractive than the one they now offer -- one that, according to NALP figures, results in an "attrition rate for associates last year in private law firms [of] 78% for those who had worked at firms for about five years," up from 60 percent in 2000.

If young lawyers, the "products" that drive firms' economic engines, find the profession to which they aspired and the firm for whom they toil so unattractive that 4 out of 5 can't stay there after five years, something is beyond broken. I know, firms will say that a goodly % of that attrition is at firms' behest, not associates'. Doesn't matter. If 78% of lawyers you choose either can't cut it or no longer want to, it's broken beyond repair.

A couple of tweaks in the law school curriculum or Y1 regime is merely applying a pathetically small Band-Aid to a hemorrhaging compound fracture.

It's time for major surgery. Who will show sufficient courage to be first, to innovate, rather than waiting for someone else to make it safe for the timid?

My prediction: the timid and the reluctant will go out of business within five years. If you think this radical, compare the lists of Fortune 500 companies over a handful of 20-, 30- and 50-year spans. You'll see how few remain on the list, much less at the top, over long spans. Big law firms have been relatively protected by a surge in demand for roughly 20 years, during which they got massive. A huge % of that demand is gone forever; cost structures based on it have no chance to survive. No one is too big or too rich to fail.

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