BY MATT HUTCHINS
The frozen global credit markets and blizzard of bad economic news have cast a snowy winter upon corporate legal work, and with each passing week more firms are announcing cost reduction strategies that signal a tightening legal labor market. The Harvard Law School Office of Career Services recently convened a panel to address the concerns of HLS students, especially 3L’s, and share information about the current downturn in legal employment. According to Professor John C. Coates, a former partner at Wachtell Lipton Rosen & Katz, the data compiled by OCS reveals that 70 of the AmLaw top 100 have undertaken some form of labor cost reduction strategy, which for some has included layoffs of attorneys.
Professor David Wilkins ’80, Director of the Program on the Legal Profession, confirmed that the economic crisis is causing a serious dislocation in legal employment. “This is a major moment in the world economy when things are being fundamentally restructured.” The current crisis comes as a part of a larger historic shift in the structure of legal employment, and the down economy will provide impetus to more rapidly implement changes to the structure of big law firms which would likely have occurred anyway over the course of time. “The going rate [among top law firms] is not going to be nearly as constant and uniform as it has been in the past,” said Wilkins. He also indicated that firms which are currently deleveraging their business model will likely experiment with new, unorthodox strategies like outsourcing and offshoring to keep costs down even after the volume of legal work picks up again.As one might predict, the restructuring is having an even more drastic effect in the investment banking world than in law firms. The financial labor market is “catatonic,” says Ashish Nanda, Robert Braucher Professor of Practice. “The legal services market is not as pro-cyclical as some of the other professional services.” There will be greater pressure on the consulting market due to the influx of MBA graduates to that market, and the only silver lining in financial services will be private equity firms and small, boutique investment banks. If a public-private partnership is organized to purchase toxic assets from financial institutions, some private equity firms will be significantly involved and will be looking for people with commercial interests and a mind for regulatory matters.
The situation in the public interest and government sector is also unfavorable but considerably more difficult to evaluate due to the lack of clear data in the field. Alexa Shabecoff, Assistant Dean for Public Service, noted that although the public sector traditionally trails the private sector in legal market downturns, the impact has already been felt. The crisis has had a particularly jarring impact for some of the key public interest funding organizations whose financial resources were tied up in the Bernard Madoff ponzi scheme, such as the JEHT Foundation. In addition, the falling volume of legal work is causing a reduction in lawyer trust accounts, the interest on which is a significant source of revenue for public interest lawyers.Although hiring freezes at state level organizations are making government work look difficult, Shabecoff says, “The Federal Government is looking like a growth industry.” Other areas that appear to be doing well are plaintiff’s litigation firms that handle employment discrimination and consumer protection cases, as well as grant funding work and acyclical areas of the law such as domestic violence representation. For those students who have been offered a fellowship to wait a year before starting at a large firm, Shabecoff says the best step is to come talk to an OPIA advisor about finding a position where the time can be spent developing skills. “I would clearly not take the money and go lie on the beach.” She assured students that there are plenty of government organizations that would be glad to have a free attorney for a year.
The good news for students at HLS is that while law firms are reducing the size of their existing staff, hiring is unlikely to be brought to a standstill, particularly for graduates of top law schools. Firms looking at law graduates are thinking, “These people are relatively cheap, and they are flexible,” said Nanda. As non-equity partners and senior associates are laid off, new associates will be brought in to take care of the counter-cyclical and acyclical work firms are taking on.
Coates elaborated, saying, “You are more flexible because you haven’t spent time learning a practice, and so you can redeployed to areas like bankruptcy, litigation, and regulation.” “If you get a job, you will be relatively better off than someone in their fifties,” said Nanda. This is because with associates being pushed out and smaller starting classes being brought in, those who arrive now will find that they are immediately put to work on important matters and quickly given a chance to rise into positions of responsibility. In the short-term, HLS should see some mitigation of the downturn because those firms that are hiring will feel more pressure to recruit only the best graduates available, and with downward pressure keeping salaries flat, even some smaller firms will be coming to recruit.
To capitalize on these opportunities, Nanda said students will need to do their homework about the firms they interview with and work to demonstrate an earnest interest in employment regardless of the size of the firm or the geographic market they service. Wilkins noted that Canada’s legal market is doing well and that students should keep their minds open to opportunities everywhere from India to Indiana. “The farther you get away from Cambridge, the fewer HLS grads there are and the more valuable the degree becomes.”
In addition, Nanda noted that 2L students should work hard during the summer to make a good first impression that they are capable, trustworthy, and reliable. Despite the value of the HLS degree, he emphasized that students should be inclusive and humble. “Be the first to say hello to people.” An open social attitude and an awareness of how to appropriately talk about Harvard will make it easier to form positive relationships with senior associates who have seen people laid off.
Coates drew attention to the importance of doing research on the internal working of firms before deciding to accept an offer of employment. “You should understand the business fundamentals of these law firms.” If a firm works as a genuine partnership, its leaders will take a hit to maintain the firm. At other firms, partners expect a certain level of compensation and will leave to a different firm if their expectations cannot be met. If that partner takes away a valuable revenue stream, the partner leaves the firm weaker and makes it more likely others will jump ship. This is why bankruptcies have happened, according to Coates, and layoffs are a preemptive measure against such an exodus. Smaller firms, he said, will be more willing to share the pain. “If you go to a megalith, think about specialized practice groups.” Coates suggested that students should identify a particular area of the law, such as a complex statute, and become a complete expert on that subject. “If you get to know a piece of legislation intimately, you will have a piece of human capital that will pay off hugely over the course of your career.
” He concluded by reassuring students of the value of the coveted Harvard degree, saying, “They really do want you more than the other 99% of lawyers who are about to graduate in this country.”