To The Readers of The Metropolitan Corporate Counsel:
Sharper competition is challenging law firms, law schools, and bar associations.
The legal market has changed fundamentally since 2008. Many factors have contributed to this evolution and the economic recession has certainly accelerated that pace of change.
The most obvious change is increased competition and its ramifications for the legal profession. We can see this competitive intensity and how it has played out in at least four areas of our business - large law firms, smaller firms and solos, law schools, and bar associations. How we respond to these challenges is significant because, as Charles Darwin said, "It is not the strongest nor the most intelligent who survive, it's those that are most adaptable."
The Georgetown Law Center for the Study of the Legal Profession and Peer Monitor recently published its 2014 Report on the State of the Legal Market. The authors conducted a number of surveys of corporate counsel and large law firm managing partners to uncover dominant trends affecting the legal market.
The report concludes that the "supply of legal services has significantly exceeded demand, as reflected in the ongoing struggle of (large law) firms to maintain prior levels of productivity." It is well documented that the overall budget for outside legal counsel has shrunk over the last five years, meaning that most firms cannot increase or even maintain their revenue from current clients.
To increase revenue, firms must either beat out other firms for existing business or acquire lateral partners who bring different clients into the firm. This has resulted in a very competitive market.
That extremely competitive climate has also fueled the shift from a seller's to a buyer's market. Prior to 2008, outside counsel generally directed how a client matter would be run, staffed, and billed. As companies sought to maintain profits during the recession, CEOs tightened budgets and asked their in-house counsel to spend less on outside legal expenses and to forecast what the costs would be. In turn, corporate counsel started asking for more efficiency and greater predictability from their outside counsel.
Most law firms were, at first, slow to accept this change and even slower to package their services for a price. With supply of legal services exceeding demand, the market quickly moved to give clients the controlling hand. Over the last five years, clients have increasingly asked for value, which has come to mean "efficiency, predictability and cost effectiveness in the delivery of legal services."
One of the slowest institutions to change is the legal academy. In their defense, law schools have to deal with restrictions of tenure and outside regulators, but the economic reality of the marketplace has now caught up to them. As legal jobs for recent graduates have evaporated, law school applications have dropped from 602,300 to 385,400 in the last three years according to the Law School Admission Council. And at the same time applications and admissions are dropping, the cost of attending law school and student loan debt is rising.
More academic institutions recognize they must reduce their costs while adding skills-based courses encompassing technology, client responsiveness, and everyday practice issues. But to do so, accreditation standards like physical library space and faculty scholarship requirements must evolve. And schools must revamp their curriculum and the persons who teach those courses.
Of course, bar associations are not immune to these changes in the legal market. They face increasing competition from smaller affinity lawyer groups and online CLE vendors and challenges posed by financial pressures and changing demographics.
Our research shows us that younger people don't join organizations in the same numbers as earlier generations. There is a smaller pool of prospective members as jobs and law graduate numbers decline. As lawyers and human beings, we face greater time challenges as technology keeps us connected and accessible 24/7.
The Illinois State Bar Association has worked hard this year to recognize and meet these challenges. We have defined the value we provide to members with free online CLE, free Fastcase legal research, free E-Clips daily briefings, and access to affordable risk management through our ISBA Mutual Insurance Company.
Last year at this time, the ISBA was at a crossroads. But we made solid, and sometimes controversial, moves to articulate our value, identify our priorities and align our budget to reflect those values and priorities. At this juncture, the ISBA is not only surviving but thriving. To remain successful, any organization must constantly re-examine itself and adapt to insure its continued relevancy in the future.
A longer version of this article originally appeared in the Illinois Bar Journal.
Paula H. Holderman