The Business of Law
The last issue of the UVA Lawyer included articles discussing the financial crisis and its potential impact on the markets and their regulation. In this issue, we focus on a question more directly and immediately relevant to most of our students and graduates — how will the current recession affect the business of law?
Legal practice has changed over the past 20 years in ways that parallel the broader economy. The largest national firms grew rapidly in lawyers and revenues. The gap in size and profitability between local and national law firms grew as well. Transactional and advisory work on complex financings and new financial products accounted for a growing share of legal billings. Law firms entered an era of free agency, where top talents could maximize earnings by an occasional well-timed move. Starting salaries for associates reached unprecedented levels.
The recession has slowed or reversed each of these trends. But will it result in a permanent change in the market for legal services? One need look no further than the press coverage of law firm layoffs, deferrals, salary cuts, and billing practices to appreciate the attention lawyers and their clients are paying to these structural issues. Many commentators have declared that billing by the hour will not survive the downturn; clients will insist on flat fees for particular types of representation. Clients are also increasingly unwilling to bear the cost of training new associates, leading some to conclude that firms will aggressively reduce the entry-level payroll, either by doing less hiring or paying lower salaries.
Last summer, we surveyed graduates about these and other trends. We discuss the results in this issue. I found two points particularly striking. First, despite the complaints about hourly billing, it remains the dominant pricing model and graduates largely believe it will remain so. Second, firms are paying a great deal of attention to whether the first year of legal practice should be something different in kind and not just in scope from the second, third, and subsequent years.
UVA Law alumni and legal recruiters Martha Ann Sisson ’85 and Amy McCormack ’89 provide a careful look at the trends in legal practice. Their primary message, as I see it, is that individual lawyers need to think of themselves as sellers of legal services, not just a part of a larger organization that sells legal services.The Law School, of course, is also working hard to adjust to a placement market that has changed dramatically and faces an uncertain future. Our first step was to increase staffing in Career Services. Fortunately for us, we were able to persuade Kevin Donovan, a litigation partner at Morgan Lewis, to join us as the head of that office. You will enjoy reading his thoughts on the state of the placement market and the benefits of the Virginia brand in the competition for jobs. Stan Perry ’90 and Randy Urmston ’69, meanwhile, bring a note of optimism by reminding us of the enduring value of the Virginia degree and the special qualities that make our graduates so successful.