Friday, July 18, 2008

Bright Knight

From the National Law Journal and the ABA Journal comes news that legal academia should take to heart in its own domain.

Holland & Knight
Holland & Knight is a big firm. It operates 22 offices throughout the United States and in China and Mexico. Its 1100 lawyers make Holland & Knight the 18th largest law firm in the country.

But Holland hasn't been wholly profitable of late. In 2007 it was only one of three firms in The American Lawyer's list of the 100 highest-grossing law firms to show a decline in profits. This setback came after layoffs in 2002 and 2005 that snared 110 lawyers and 240 staffers.

Relative to many other megafirms, Holland pays lower associate salaries and nets lower profits per partner. The tradeoff, according to firm tradition, is a pleasant work environment.

Steven SonbergNewly elected managing partner Steven Sonberg is responding to client demands for lower fees and increasingly accessible partners with two initiatives.

First, Holland & Knight will discount its fees for some clients in exchange for success fees. Successful cases would yield more revenue for Holland. The new fee structure responds to concerns expressed by midsized, entrepreneurial companies.

[Hushed whispers rush through MoneyLaw's audience. "Imagine that," remarks one stunned reader. "Accountability. Performance-based compensation."]

Second, Holland has pledged to change expectations regarding partners and their performance. Steven Sonberg intends to increase partner productivity in response to clients' demands for instant responses and on-call lawyering. Partners who can’t meet billable hour requirements may be fired:

"The days of partners 50 and older playing golf on Wednesdays are long gone. There is no tenure here."


Blogger Clyde said...

OK, I'll bite. You say, here "comes news that legal academia should take to heart in its own domain." That news, I guess, is a big firm responding to declining profitability and client demands by adopting new billing structures and imposing more constraints on partners, like billable hours and "no tenure here."

Let's put aside patent irrelevancies, like new billing practices (unless you are expanding MoneyLaw to suggest variable tuition, like refunds if a student doesn't pass the bar). And let's ignore the questionable relationship between billable hour minimums and responsiveness to clients -- and the surmise that the minimums have a lot more to do with increasing partner profits than improving client services. While here, let's also put aside the obvious hazards this and the other reforms create for client services (minimum bills, anyone?) and governance indirectly affecting services (take a guess, though, about the ease of securing continued partner assistance with recruiting committees, conflicts checking, and management now that billables are ratcheted up).

The question remaining is how this situation compares to academia, other than the superficial similarity suggested by use of "tenure." In either situation, immunizing job-holders has a risk: they may shirk. Law firms experience this via declining revenues and pay; the risk that partners will flee disciplines them to take action, which actions may or may not help clients. Law schools experience shirking more indirectly; if professors are the equivalent of partners, they suffer less than do students or the general administration, not the least because they are salaried. What is the source of economic pressure that produces rational, well-calibrated, easily administered changes involving the loss of tenure in law schools? How do law schools compete, and what kinds of innovations are responsive to that competition? Then, last but not least, are these innovations normatively appealing?

As I have indicated before, MoneyLaw (as I understand it) needs to worry about establishing a field of competition, and measures of success, rather than jumping to adopt innovations from fields. Otherwise, this is simply a blog about good (and bad) ideas for reforming law schools that merit consideration (or dismissal) independent of any MoneyLaw perspective.

7/18/2008 4:29 PM  
Blogger Jim Chen said...

Thanks for the thorough and thoughtful response, Clyde. Herewith further thoughts:

1. What you call "patent irrelevancies" aren't. Billing practices are more directly related to something law schools only tangentially address (but should perhaps more directly engage): cash flow. With a few exceptions most of us aren't interested in emulating, law schools aren't for-profit businesses. But that doesn't mean we shouldn't be run like businesses. Quite the contrary.

2. Holland & Knight may well make more money with these changes. If so, good for them. And good for everyone else who is paying attention. We might actually learn something useful.

3. The suggestion that "partner profits" have any connection to "responsiveness to clients" is no more outrageous than the suggestion that academic tenure promotes cutting-edge scholarship and engaged pedagogy.

4. Speaking of tenure, I agree wholeheartedly that "immunizing job-holders," in any setting, carries substantial risks. The question, as you suggest, is whether the risks outweigh the benefits, which (as I said in ¶ 3) purportedly flow from the pens and podiums of tenured professors. It is worth noting that university professors and federal judges are the exception rather than the norm: virtually everyone else works without lifelong job guarantees.

5. You appear to embrace some sort of presumption favoring current practices. You ask whether "innovations are normatively appealing," as though novelty should bear the burden of proof. Along those same lines, you criticize the notion of "jumping to adopt innovations from [other] fields" (my emphasis, not yours), as though academia could generate all the answers it needs without consulting extrinsic sources of wisdom and experience. Imagine a world in which current practices are just that, and innovation is not to be feared, but rather embraced. Just imagine. It's easy if you try.

6. Finally, I agree that the MoneyLaw concept includes attention to "establishing a field of competition, and measures of success." But there's more to it than that. You write as though there this blog falls short to the extent that it serves "simply" as a forum "about good (and bad) ideas for reforming law schools that merit consideration (or dismissal)." That is a fine mission, and we're pleased to embrace it.

7/18/2008 5:57 PM  
Blogger Trey said...

Thanks very much for the thoughtful response. FWIW:

1. As to the relevance of billing practices, mine was an overstatement -- I really meant that it was irrelevant to the tenure issue. Certainly cash flow is relevant to both law firms and law schools. I guess what I am pursuing is a more fine-grained comparison between the innovation and what might be pursued for law schools. Organizations everywhere adapt, change; Tasmanian devils, too. The trick is extracting tangible lessons, and being as specific as possible.

2. As to making money, my point was that what we might learn is very different from what I take to be the prevailing ethic here -- which I have inferred to be the promotion of student welfare and the public weal. It's all fine if H&K makes more money while serving its analog, the client. I was saying that billing requirements might be antagonistic to client interests. This antagonism might not be present if minimum hours were enforced in a law school setting (since professors don't directly bill students per hour), but that just points to the hazard in extracting lessons from the law firm setting.

3. I don't think degree of outrageousness is fruitful. Tenure works or it doesn't. The issue on the table, as I understood it, was whether reducing partner security, and making retention turn on these various performance measures, was constructive. Perhaps so for law firms. Tenure may also be vulnerable, because of the risks it poses and the limited returns, but the trick is to think about evaluation. I have considered hunches in this regard, among the least controversial of which is that it's not fruitful to consider minimum billing requirements as a model.

4. We agree about this one.

5. As to the presumption, fair point -- I'm inadvertently Burkean. Note, though, that your point here is in slight tension with your point in #4: not clear why we should view the tradition of non-tenure elsewhere (outside of federal judgeships) as cutting one way or another.

6. I do not mean to be limiting the blog's compass -- that's your call. My only point is that MoneyLaw purports to be a somewhat more distinctive approach. I think it's fair to distinguish between MoneyLaw ideas (as I understand them) and good governance ideas -- which may or may not have competitiveness, or fairness-related dimensions -- in no small part because it helps clarify what a MoneyLaw approach is in the first place. The general sense I have -- please do not take this the wrong way -- is that blog's drift is toward thinking creatively about redressing law school pathologies, or at least about exposing them with a soupcon of despair, such that "MoneyBall" methods have relatively little to do with anything. Nothing wrong with that, save perhaps in losing an opportunity for more targeted and constructive commentary. Why not, for example, think about the lessons about new law schools from league expansion?

Thanks again for your indulgence, and sorry for the handles.

7/19/2008 1:43 PM  
Blogger Jim Chen said...

Hi Trey and Clyde:

Glad to keep the conversation going. How oppressed you must be to feel that you need to invent multiple handles just to post pseudonymous comments! Perhaps this explains the evident difference between you and me in levels of risk aversion.

The tenure tradition in academia (and, for that matter, the federal judiciary) appears to have ossified a long time ago, certainly no later than the American founding in the judicial case and perhaps as far back as the Middle Ages in the case of academia. Businesses have tinkered with all sorts of models regarding job protection for employees. In the public sector and in certain industries dominated by traditional labor unions, there have been mechanisms for sheltering incumbents' jobs. By and large those employers have either died out, faded in economic power, or remain in place by virtue of the state's monopoly on violence. I don't regard this to be a strong case for tenure as a naturally emergent, self-sustaining adaptive mechanism.

A true Burkean, eh? Someday, perhaps over drinks at AALS, you'll shed your disguises and tell me what that must feel like. I haven't a clue :-)

Best wishes,

7/19/2008 4:57 PM  

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