Justin Kaplan never disconnected from his office in Florida during his month-long honeymoon in Asia this year. He sketched a settlement in China and drafted a document in Thailand. That mix of time off and e-output “would have been unheard of even 10 years ago,” he says.
In February 2015 Kaplan, 35, left his father’s successful litigation boutique after seven years to open his own firm with two other lawyers. Their general commercial practice has offices in swanky Brickell in downtown Miami and a Gen-X vibe—the Kaplan Young & Moll Parron website lists favorite “jams” and “dream rides”—and already supports six attorneys. Kaplan happily negotiates fee arrangements that cap retainers based on various metrics or trade work product and counsel for a financial stake in a client’s future.
“We’ve seen quite a few firms closing their small foreign offices. Foreign or domestic, it’s hard to make small branch offices profitable if they don’t become heavily integrated right away.” Eric Seeger, Principal of Altman Weil Management Consultants
For him and the profession, it’s not your father’s law practice anymore. Technology dominates as an indispensable aid and marketing clincher as well as via practices that leverage privacy law, cyber challenges, and intellectual property. Lawyers creatively craft deals with and for clients. And business necessity is nudging diversity from aspirational goal to demonstrable fact.
To underscore that point, Hilarie Bass, co-president of powerhouse Greenberg Traurig, cites “the number of Fortune 100 firms that say we want to see your diversity figures, not just in general but on our matters. It is making a difference; I tell them all the time when they ask.”
This year Bass will become the eighth woman president of the American Bar Association. Accounts of her rise to the ABA’s top post focused less on her gender than did the 2013 reports of her ceiling-smashing leadership role at Greenberg Traurig.
Of course, changing demographics is only part of the transformation of the legal business story. Last year, the legal industry made slight progress at recovering from its 2008 downfall. With about 1.3 million lawyers nationwide, the number, while inching upward, is still 55,000 shy of pre-Great Recession levels, according to a recent American Lawyer analysis of government labor statistics.
That still leaves a business model where supply and expenses outpace demand and profits. Fewer millennials choose law school, while those that do battle tougher competition for fewer available slots: 86.7 percent of the class of 2015 found jobs, which is about five percentage points lower than the class of 2007, according to the National Association of Law Placement.
Yet just as in grandad’s day, top graduates command top dollar. When Cravath, Swaine & Moore announced last summer that it was raising first-year associate pay by $20,000 to $180,000, it set off a bidding war that rippled up the associate ranks. Within a week, 118 firms followed Cravath’s lead, Above the Law reported.
The Thomson Reuters Peer Monitor Index for 2016’s second quarter weighed weakening demand against rising headcount and concluded that productivity suffered the biggest drop in more than three years. Despite overhead growth at pre-2008 levels, Thomson Reuters scolded firms for hiking their technology spending to produce greater efficiencies while cutting budgets for proactive marketing and business development.
Eric Seeger, a principal of Altman Weil management consultants, co-wrote a 2016 report based on completed surveys from 356 U.S. law firms. “Demand has returned to prerecession levels in only 38 percent of law firms, so many are experiencing flat or eroding demand for their services. At the same time, they’re not able to command the kind of rate increases they were able to get prerecession,” he said. “So it’s putting a lot of financial strain on many firms.”
Globalization, for decades a source of big guy bragging rights, has lost some charisma. This year DLA Piper announced unspecified cuts to its vast foreign operation: 60 branches staffed by two-thirds of the firm’s 4,300 employees. Markets in London, always the epicenter for U.S. firms with multinational profiles, are roiling from the Brexit vote and uncertainty over Britain’s future relationship with the continent.
“We’ve seen quite a few firms closing their small foreign offices,” Seeger said. “Foreign or domestic, it’s hard to make small branch offices profitable if they don’t become heavily integrated right away.”
Analysts and bar leaders say industry economics can be improved, but that requires letting go of your father’s deeply held assumptions. They say white male lawyers aren’t the only ones who should be rewarded with authority and equity partnership because they bring in business through old boys’ networks. Also, minority lawyers aren’t interested in tokenism, and women don’t inevitably abandon the practice to bear and raise children.
Bass said more women in their 40s and 50s are leaving firms, but often for the same reasons as men: “because of compensation issues or the perception there’s no future path to success.” Men respond by switching firms. “Women feel their lack of success is due to institutional barriers,” she said, so they stop practicing law.
Still, there’s considerable resistance to rethinking the basics. When The Wall Street Journal reported that New York’s Shearman & Sterling would demote equity partners who perform poorly, there was no rush to follow suit by other firms.
John Kiernan appreciates the obstacles. A group he heads, the New York City Bar Association, recently conducted a local survey that shows 19 percent of the partners at 75 midsize and large firms are women and five percent are minorities. He said one big impediment to progress is “the arithmetic of how long it takes to clear out the old partners.”
“There’s no question that, since the financial crisis, it’s been clearer that partners who were not able over a long period to get their careers on track, after extended efforts by the firm to help them get on track, could be subject to getting nudged out,” said Kiernan, of Debevoise & Plimpton. Yet he spoke about the wrenching process of dislodging senior partners, typically after 30-year careers. “When it’s done, it’s done with tremendous regret,” Kiernan said.
Adapting to the new normal requires flexibility and some downsizing of expectations.
Government work employs a steady 12 percent of lawyers, and small firms offer the most opportunities for recent graduates, said James Leipold, executive director of the National Association of Law Placement. A background in a scientific, engineering, or other technical field can only help. “Increasingly that intersection of law and technology is going to be a sweet spot in the job market,” he said.
It’s a sellers’ smart for on- he-move laterals who are team players with portable books of business, according to legal recruiter Amy Levin.
“Mid-career lawyers have to split their time between their own practices and supporting the other attorneys,” said Levin, managing director of The Legal Group in Sunrise, Florida. “The big firms are interested in mid-levels doing pro bono, business development, networking, and community service to get the firm’s name out there. Everybody has to do their part.”
Midsize firms have shown resilience and a greater ability to rebound than the big boys. This year, California-based Nossaman, founded in 1942, joined the AmLaw 200 and appeared on The National Law Journal’s “Midsize Hot List” for the third year in a row.
The 170-employee firm walks and talks diversity, starting with a website that showcases affinity groups for its female, Asian, Hispanic, and LGBT staffers. The philosophy enriches firm culture and attracts business, according to managing partner George Joseph.
“We have, for example, a number of public agency clients, and in the public sector, the procurement process places an emphasis on diversity,” he said.
The starting salary at Nossaman is $145,000—whether the associate works in Orange County, Austin, or Washington, D.C. “We don’t think it’s the road for us,” Joseph said of the move to $180,000. “With increased salaries come expectations about billable hours, and that’s not a model we’re looking to emulate, either.”
He said Nossaman weathered the downturn with an array of services, including public agency infrastructure support and health care, environmental, and water law. “We had areas of the firm that continued to do well, and we’ve been conservative about growing, so there were no layoffs, and we don’t have a lot of debt so we were able to withstand that particular chapter.”
Health care, a dependable growth area, also has been good for Sarah Coyne, the Madison, Wisconsin-based national chair of Quarles & Brady’s 40-lawyer health law group. She said specialization—even subspecialization— is crucial.
“There’s no question that, since the financial crisis, it’s been clearer that partners who were not able over a long period to get their careers on track, after extended efforts by the firm to help them get on track, could be subject to getting nudged out.” John Kiernan of Debevoise & Plimpton
“You can’t be a general run-of-the-mill lawyer anymore,” said Coyne, who guides her mostly small and rural hospital clients through compliance issues. Providing the more esoteric services matches in-house counsels’ cost-driven desire to avoid outsourcing ordinary matters.
Coyne hones her rainmaking skills through an “old girls’ network” that she said is particular to the health care field. “There is something to be said for women connecting with women.”
Mary Kay Furiasse, one of two lawyers in a Wheaton, Illinois elder law practice, operates in another arena. She draws upon her background as a nurse, associate at a big Chicago firm, corporate counsel, and consultant to a small physicians’ group. She takes Thursdays off to babysit her two grandchildren.
Furiasse helps her clients navigate the “gray area” after their working lives. “It’s a holistic approach. We kiddingly say that we do family law, we just don’t do divorce,” she said. “I love my job.”
Not everyone loves the job, but employing flexibility, creativity, and diversity produces rewards.