October 23, 2012

Q&A with David Lat: The Complete Interview

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Q&A with David Lat: The Complete Interview


Jamie Diaferia (JD): The site you started in 2006, Above the Law, seems to have changed the way law firms operate vis-à-vis the media. Was that something you set out to do when you launched?

David Lat (DL): No, it wasn’t what I had in mind when I started the site. But Above the Law has definitely exceeded our expectations vastly, in terms of the traffic it would generate and the influence it would have. When I initially started it, I did have the intention of it serving as a kind of virtual watercooler for the legal profession. But I didn’t have a sense of just how popular it was going to become and how much of an influence it would have on the profession.

JD: I was having a conversation with one law firm recently that had struck a deal with you to release some negative news about the firm because, as they put it, “They’re going to get it anyway. They always do.”

DL: [Laughter] Well, I do think that law firms are being more forthcoming about their bad news because now they know they can’t just sweep it under the rug. And we’re happy to work with firms that are interested in communicating their message. Of course, if a firm doesn’t work with us, it doesn’t mean we’re not going to write about it—we’ll just go about doing it with our own sources.

JD: Have you seen changes in the way the legal industry has been covered in the media in the past few years?

DL: There are a couple of trends. First, for some reason people have become more interested in the business of law firms, so there is a bit more attention being paid to this area even in the general media.

Second, the coverage itself is becoming more hard-hitting. It’s not just puff pieces anymore, partly because people realize the truth is going to get out there one way or another with so many venues on the Web.

When I first started Above the Law, it was actually very difficult to get firms to comment. They would just ignore us, perhaps hoping that we would eventually go away. But here we are three years later—and, by traffic measures, certainly as strong as ever. So most firms nowadays are willing to cooperate and give us comment because they want to manage the message a little more. They know we’re going to write about a given development, and they want the opportunity to communicate their side of the story.

JD: In considering the way law firms have gone about announcing layoffs, do you feel like there’s a right way and wrong way to do it? And how does that get reflected in the media coverage?

DL: I think it is in a firm’s interest to be honest because the firms that are honest about layoffs in some ways take less of a PR hit than the firms that are duplicitous about it. Those firms get attacked primarily not for the economic difficulty they may be suffering, but more for not being up front about it. A lot of firms are affected by the economy. The honest ones are saying, “Yes, we’re affected by the economy and unfortunately we’re in danger of going through personnel reductions,” while some of the more disingenuous ones basically try to spin it by saying, ‘Well, we are getting rid of a lot of underperforming people,” although many of those people had been receiving positive performance reviews. At a basic level, it’s just not right.

I realize there is a little game of semantics here because when you do pick people for reductions, you often pick those who may not have been your top performers. But it is strange for some of these firms to get rid of all of these people and say that they were all subpar performers, when for years many of those “underperformers” had received very positive performance reviews and the firms and clients said that they were happy with them.

So firms really should be honest about what they’re doing. The firms that have gotten themselves in trouble usually have not been.

JD: Do you feel law firm leaders are taking a close enough look at the business of law, or has it been an afterthought?

DL: Historically that has been the case—that business considerations have been an afterthought. Law firms have not really focused on business issues because lawyers are trying to be lawyers, not managers. That, arguably, is one of the reasons so many law firms find themselves in difficulties now—because they did not have an effective business model. On the other hand, there are a lot of businesspeople who have been caught up in this economic crisis as well.

One good thing that might emerge out of this crisis is that law firms are now, belatedly, starting to take a long hard look at how they operate as businesses. So we are seeing a lot of experimentation and a lot of innovation from firms in terms of their personnel models, their staffing models, and their models for charging clients for their services. This could be a transformational period for the large law firm especially—and it might not be all bad.

JD: Gazing ahead a bit—say, to five years from now—what do you think the future of the large firm looks like?

DL: Law is a profession that changes slowly. One thing about sites like ours, though, is that they do accelerate the pace of change, as the hiring partner of one firm told me. Trends spread a lot more quickly, whether those trends are pay raises or layoffs. Still, I think that in five years the profession will look somewhat similar to the way it looks now. However, I predict that the billable hour will have less of a stranglehold as a method of charging clients. You may see more flat-fee arrangements and other alternative billing schemes, including more use of success fees. You may also see more flexibility in terms of how associates and partners are compensated, with a breakdown in lockstep compensation systems and the rise of systems that are more flexible, to recognize how different people are progressing or not progressing in their professional development.

You may also see a change in recruiting timetables. It’s possible that firms may try to figure out their hiring closer to the time that people actually graduate from law school, as opposed to this model now where essentially you “hire” people two years out, when you bring them in as summer associates with the understanding that the vast majority of them will get offers to return after graduation—which may be a cause of the deferrals we’re now seeing.

JD: What would you say to young lawyers who have lost their jobs or, perhaps fresh out of law school, have never had a job at all? What are their options in today’s climate?

DL: We’ve been doing a series on the blog called “Career Alternatives for Attorneys,” looking at a lot of different things that people with law degrees can do and where the skills they’ve learned might translate. We’ve talked about such things as business development, communications and public relations, journalism and academia. But one of the challenges is that, unfortunately, some of those areas have been hit by their own problems as well. Not to sound too depressing, but it really is a grim job market.

One trend that we may see in the legal profession generally is people looking to create their own opportunities, as opposed to waiting for some outside employer or firm to serve it up to them on a silver platter. Lawyers of the future will have to be a lot more entrepreneurial about their careers. It’s not just a matter of finding some large firm, getting into it, and staying with it for 20 or more years.

It’s a trend being seen in the economy generally, where there is all this talk about the rise of a freelance nation, but I think we’re definitely going to see it in the law. I would urge people to network a lot and to hustle a lot—even though that’s a skill set that’s a bit alien to lawyers because many of them believe, or just hope, that their work will speak for itself. However, in this day and age, you have to be aggressive and seek out people and opportunities.

JD: Do you think law schools have to adapt as well? Is there a possibility that they could change the way they prepare their students?

DL: Law schools definitely need to adapt, to change the way they prepare their students for the real world. Law schools should become more practical perhaps in their orientation. Most of the time you learn a lot of theory and not as much about actual practice. If you were to redesign the system from scratch, you could imagine a system where a law degree would take only two years to obtain. Northwestern recently instituted a two-year J.D. program. A lot of people will say there’s a limited amount of value that is gained by that third year of law school, so you could certainly imagine a system of two years of law school where people would be charged commensurately less, and you wouldn’t be emerging from law school with quite as crushing a debt load.

And then you could go to a law firm where for your first year or two, the firm would focus more on training you—more of an apprenticeship model, as opposed to trying to get you to do client-billable work. And perhaps firms would pay the associates less. So it might be a system more similar to the articling system that we see in Canada, or the legal practical training system that we see in the United Kingdom.

I believe that we really should be thinking about a lot of different models. The challenge is to get the law schools to go along with that because law schools for many universities are cash cows, and they wouldn’t want to see their revenue reduced by a third if we moved to some kind of two-year program. But it’s really hard for today’s students because they are leaving law school with six-figure debt loads and now these salaries that they thought were going to be $160,000 have been pushed off into the indefinite future. So I think the current model of law school education is beginning to collapse in on itself.

JD: Do you think that it’s safe to say the $160,000 staring salary might be a thing of the past?

DL: It’s quite possible. But one thing that’s sort of interesting is that it will be a thing of the past at many, but not all, law firms. I think the very elite New York firms will still preserve that salary.

When the $160,000 salary raise was announced in New York City and then spread to the rest of the country, a lot of people thought, “Well, New York really didn’t achieve its goal in that pay raise because its goal was to separate itself from the rest of the country,” and when other parts of the country matched that rate, New York lost its advantage. In a way, however, now it looks like New York has had the last laugh, at least at the very, very elite New York firms, because the rest of the country is where we are now seeing the salary cuts—but the top, top New York firms, say top five or ten, have not yet moved away from that $160,000 starting salary. So, in a way, a pay raise that they thought wasn’t going to distinguish those firms still has, since everyone thought they could keep up with New York but then they got winded.

JD: One thing many people are seeing is that the midsize and smaller firms seem to be doing well right now. Do you envision a time when the midsize firms might assume some dominance in this market?

DL: My guess is that in the future midsize firms will probably play a bigger role in the legal economy in general, especially for large American corporations. A lot of general counsels are realizing that with midsize firms they can receive legal services of a very high quality, sometimes from people who are refugees from these large law firms, but at a much reduced price. To the extent that this economic crisis is forcing companies to look more closely at their legal costs, they are going to seek out somewhat lower-cost providers, so midsize firms and smaller firms—boutiques that are specialized in a particular practice area—are going to be receiving more sophisticated work, and a lot of that work is going to come at the expense of large law firms. That’s just my guess; it remains to be seen, of course, how this all works out in the end.

JD: What’s your best prediction on when you think this downturn’s really going to end for the legal industry and when we might see a return to some normalcy?

DL: Oh goodness! If I knew that [laughs]…. My guess—and I tend to be a pessimist on these things—is that the legal economy may not return to normal until 2011 or 2012, and it’s not clear even then whether normal will look like what it did before this or if it will be some different kind of normal. So I think that maybe 2011 or 2012 is when you might expect to see some sort of stabilization, but the new equilibrium could be very different from what we enjoyed prior to this recession.