Legal employment and law practice are changing fast, with new challenges at every turn. Professionals making their way in this climate may encounter unforeseen obstacles—but also enticing opportunities. Consider how the traditional linchpins of law practice and regulation—law firms, bar associations, and the legal academy—are often failing to respond to changing circumstances.
Law firms have a long history of being—or at least viewing themselves as—collegial, collaborative organizations with a list of stable clients whose loyalty they took for granted.
Not anymore. Dramatic changes in the legal business model have flummoxed even the most (supposedly) sophisticated legal industry players, major law firms.
Two classic examples:
A large New York law firm with hundreds of lawyers went belly-up overnight when its only two rainmakers passed away. Today, everyone from the most junior associate up needs to think in terms of business development and retention. Too few firms realize this. Those that do will survive and thrive.
A junior associate at another large East Coast firm took the initiative and brought in a $2 million per-year client. The partners were so incensed that a lowly associate did this that they fired him. He happily took his client with him as he bounced jauntily out the door. They failed to realize that the associate was a gem they should be grooming and encouraging, not belittling or resenting.
Bar associations emerged in the mid-to-late nineteenth century with worthy intentions, namely to develop ethical codes designed to protect the public against unscrupulous lawyers and non-lawyers selling legal services.
Over the last several decades at least, many bar associations have evolved from their original goals to protecting the profession and its own turf from “outsiders”: thus, the inclusion of unauthorized practice of law (UPL) provisions in state laws, ethics codes, and rules of professional conduct. They sometimes go after individuals and organizations that run afoul of these guild restrictions with far more vigor than they do with respect to attorneys who behave outside of ethical boundaries.
The vast majority of law schools still deliver legal education in largely the same way they did over a century ago. The American Bar Association (ABA) severely restricts the number of online credits a law student may earn, despite the fact that (1) both otherwise accredited online law schools, as well as distinguished, fully accredited universities, have proven that distance education is a viable alternative to being present in a classroom; and (2) online courses would make a major dent in student debt. Moreover, ABA law schools still treat career education, job-searching, and career planning as afterthoughts in their curricula. Much of what students are taught has no bearing on legal and law-related careers that are actually available. The market will eventually take care of those law schools that don’t understand that this business model no longer works.
Understanding the Problem
So how do you go about protecting yourself in the midst of all of this turmoil?
The first step is awareness that the profession is changing and that change means both danger and opportunity.
What this means for you is that you have to be both (1) reactive in order to deal with both expected and unexpected changes to the legal world and (2) proactive when creative destruction prompts opportunity to knock loudly on your door.
Awareness of change, and the challenges and opportunities it presents, requires planning for both the short and long term.
Understanding the Challenges
The first step to thriving in a changing legal world is understanding the challenges facing your livelihood. They are many and varied. Law practice has always been subject to outside forces. This is nothing new. What is new are the number and variety of influences outside of your control that can affect your practice and career. What is also new is the speed and suddenness with which these external phenomena can affect you and your livelihood. This is even true of long-time issues that have existed for decades, in some cases ever since the emergence of the legal profession.
The Business Cycle
One key thing to be aware of is that, despite assurance by leaders in business and government in the run-up to the Great Recession, we are far from being in a perpetual growth cycle. The business cycle is still very much with us and likely always will be.
What this means is that economic growth is not a consistent, smooth, seamless upward curve with no bumps along the way. In fact, the bumps are plentiful and often large.
What This Means for You
Much depends on how closely your practice is tied to the business cycle. For example, take real estate. This practice area is affected by three economic phenomena beyond your control, each of which could occur independent of the other two.
- A general economic downturn, such as the Great Recession, invariably impacts a real estate practice. When the economy goes into a negative growth mode, home sales slow down, businesses stop growing and expanding into new space, and real property development grinds to a halt.
- The collapse of a housing bubble specifically. When home prices rise too high and suddenly tank, residential real estate practices dry up.
- Rising interest rates depress real estate transactions. When interest rates go down, real estate activity increases.
Real estate is by no means the only practice area subject to the vagaries of the business cycle. Bankruptcy is another. However, it is very different from real estate, which tracks the business cycle in lockstep. In contrast, bankruptcy is countercyclical. When the economy is in a growth mode, the number of bankruptcies declines. When the economy turns down, bankruptcies go up.
It is not only real estate transactions that plummet during troughs in the business cycle. All transactions, mergers and acquisitions in virtually every industry become fewer and farther between. In addition, the size of deals becomes smaller.
What to Do?
The best defenses against the business cycle are to develop at least one “backup” practice that you can turn to in the event of a downturn or, in the case of a countercyclical practice like bankruptcy, an upturn. Real estate, for example, is really two different practices, depending on the state of the national and/or local economy. In good times, it means development, transactions (closings—both residential and commercial—and leases). In bad times, it means workouts, foreclosures, short sales, and perhaps even litigation.
Note that when the foreclosure market is going strong, the U.S. government, particularly via the Department of Housing and Urban Development (HUD) issues contracts for foreclosure work to firms, primarily small firms, and sole practitioners around the country. Contracts for more than $25,000 are advertised on FedBizOpps. For contracts under $25,000, you should make your qualifications known to the HUD office nearest you.
In addition, bankruptcy is a good fallback for real estate attorneys because so many bankruptcies involve real property. Conversely, real estate practice can serve as a fallback for bankruptcy attorneys when times are good.