NALP: Threat or Menace?

Do you occasionally despair of changing the status quo, no matter how irrational it has exposed itself to be, simply because of the vast inertia associated with "the way it is," not to mention the vehemently self-protective behavior of any organization whose importance would be diminished--or, quelle horreur, whose very reason for being would be destroyed--by a move to a new reality?

First of all, despair is a remarkably unproductive approach to most problems.  An optimist at heart, I resist succumbing at all costs, regardless of the odds.

Be that as it may,  I believe the odds have just shifted--dramatically--in favor of ringing the death knell for what has become a toxic, market-poisoning, and increasingly archaic institution:  One which may be a walking antitrust violation to boot.  That would be?

NALP.

Here's how the stars are aligning.

In late December of last year, I decided to write about the defects and vices inherent in the NALP-dictated law student hiring process.  Most of you presumably have not seen my column on this topic, since it appeared in the Adam Smith, Esq. monthly subscriber-only newsletter. 

[If you're wondering what our monthly subscriber-only newsletter is all about, it's quite simple:

The newsletter, distributed by email monthly and archived permanently online at a password-protected site, contains material which has not appeared on this site, the Adam Smith, Esq. online publication, which of course remains free.  By contrast, the newsletter's premium content includes several articles each month which have not been published here and will not be published here.  Annual subscriptions are available at modest rates, including rates for individuals and firms of various sizes.  Firm-wide subscriptions are quite economical on a per capita basis.  You can subscribe here]

Since my views on NALP have not materially changed in the few short weeks since I wrote my original article, permit me to reproduce some of its highlights.

The "Great Reset," as I call it, exposed many latent flaws in the BigLaw business model, which happier, more oblivious, and more affluent times forgave and excused us from having to recognize. (Indeed, many did not recognize them as "flaws" at all; they were simply the honorable traditions of a profession that had always done things the way they were done.)

One of the most irrational was the excruciatingly long lead time between committing to hiring what would, de facto, be incoming associates, and knowing what the actual marketplace demand for additional young lawyers at your firm would be when they finally joined, years later.

Consider the timeline:

• Can you project the demand for new starting lawyers three years hence? Well, that's precisely what you were expected to do. And for long enough, it didn't really matter. But here's how it works:
• Given the highly significant datum of first year law school grades (sorry, lost my head), your firm interviews these 1L's late in the summer before they start their second year, making them offers to be summer associates one year hence.
• After they become summer associates, it is of course one more year before they'll start.
• Unless they clerk for a year--and we like people who clerk!--in which case add a year.

So when you were projecting the demand you'd have for new lawyers in September 2009, you had all the data you needed--given that it was summer 2007 and not Ben Bernanke, not Hank Paulson, not Warren Buffett, not anyone in sight, knew what was coming.

Clearly, this works splendidly:  Assuming, that is, that your firm and law students alike enjoy canceled and postponed offers, the prospect of a "pileup" next year as this year's deferred grads run into the new crop, the drastic measure of some firms' simply "taking a year off" recruitment altogether, and the manifestly open question of whether deferred start dates may not turn into canceled start dates.

While corporate America has moved relentlessly towards "just in time" supply chains, we seem to be stuck in the prehistoric past. Are MBA's hired this way? (No, to state the obvious--if they were, they'd be hired before they even started business school.) BA's? No. Ph.D.'s? No. So why JD's?

One word: NALP.

NALP was founded in 1971 and, like many organizations well past their first generation, it's showing signs of having lost sight of its mission.

What are the symptoms of this?

For starters, organizations tend to become more and more self-referential as they enter senescence. Exhibit A: The NALP"History" page devotes a good three-quarters of its space to recounting the original members present at the 1971 founding, the locations of every annual meeting, and all the past presidents. Not a word about changes in the legal marketplace over the past half-century and how NALP has responded.

Exhibit B: It has five-year strategic plans.

Exhibit C: It has a "Mission" (bad initial sign), the introductory paragraph to which reads in full:

"NALP is dedicated to facilitating legal career counseling and planning, recruitment and retention, and the professional development of law students and lawyers."

What's wrong with that?

Simply that I have never, in a lifetime of working in law firms, in-house, and now as an analyst of and consultant to the industry, ever heard a single soul mention NALP in connection with any of those activities. They may think that's their mission but, to be charitable, they are flying under everyone's radar.

But all this is really unfair, because it's too easy.

Here's the real horror about NALP: Its reaction to this seismic shock our industry has been going through for 18 months (with no convincing signs that we're out of the woods).

Faced with:

• The highest level of layoffs since reporting began was in 2009. Worse than that, actually: More layoffs occurred in 2009 than in all prior years combined.
• Numerous failures of "name-brand" firms with, I predict, more to come.
• Soup-to-nuts re-evaluations of associate career paths.
• Soup-to-nuts re-evaluations of alternative billing.
• Soup-to-nuts re-evaluations of outsourcing, "staff" and "contract" lawyers.
• Widespread firings of non-equity partners and de-equitizations of full partners

Yes, faced with all this, once-in-a-career events each and every one, NALP's response was? This past July, to reaffirm its principles absolutely without change, amendment, or even sober relaxation of them in a time of crisis.

Here, specifically, is what they said:

Nevertheless, after weighing a variety of options, the Board is convinced that this is not the time to abandon or change the ethical guidelines that direct our professional expectations and behavior, and we urge all NALP members to adhere to the Principles and Standards.

These are the unmistakable indicia of an organization utterly out of touch with reality and resolutely determined to elevate the sanctity of its own pronouncements above the well-being of those it supposedly serves.

One thing has changed since I wrote those words, namely that on January 7, 2010 the NALP "Commission on Recruiting in the Legal Profession" released a report containing recommendations for changes to the annual recruiting season, the core of which is to prohibit any offers of employment to 2L's until sometime in January, the so-called "Offer Kick-Off Day."  Further, offers extended on the OKOD would remain open for 14 days.   Bear in mind that interviewing would still occur in August, but that firms would be forbidden from "signalling" their interest in any individual student for nearly the next six months until OKOD.

All of this to be enforced by an elaborate and draconian system of law schools' concertedly threatening to boycott offending firms--charmingly called "cheaters," and tagged as engaging in "unethical" conduct.

While I am only an armchair and not remotely an expert antitrust practitioner, Jones Day recently submitted Comments to NALP (the 8-page letter available here, which I commend to you in its entirety) not only attacking the logic, fairness, and even feasibility of the revised NALP proposals, but also making a compelling prima facie case that the proposal is deeply suspect as a matter of law, constituting a concerted refusal to deal or group boycott.  Greg Shumaker, Jones Day's hiring partner, who authored the letter--and who I was able to interview on the phone about this--writes:

In any other industry, this would immediately be perceived as suspect under the antitrust laws.  Efforts by associations and professional organizations to "regulate" competition among themselves have been found to violate the antitrust laws in numerous contexts.  [Citations omitted.] 

Given the adverse effects on competition and on law students, the Report's proposals, if agreed to by law schools and firms and challenged by an appropriate plaintiff, could well be found to be an illegal restraint of trade. [Page 6 of the cited letter.]

While Greg told me, as of the time of our conversation (a few days ago), that no other large firms had expressly offered support, I have to believe more will get onboard as they think through the actual ramifications of the proposed NALP rules.

Indeed, in an opinion piece published today in The National Law Journal, Peter Kalis, the chairman and global managing partner of K&L/Gates, characteristically minces no words in his denunciation of NALP:  Indeed, the title of Pete's column is the pungent and terse, "Abolish NALP Now."  (Disclosure:  I consider Pete a friend.)

NALP is, and for some time has been, a market imperfection -- no more and no less. For the common good, it should be abolished, and we should start from scratch.

Consider some elements of the NALP-enabled hiring regime:

• Employers meet on campus with law students for 20 to 30 minutes. What can you learn about a candidate in a 20- to 30-minute interview except whether he or she drools? What can you learn about a law firm except whether the interviewer is an imbecile?

• At many law schools, employers can't prescreen their interviewees. In some instances, employers are not permitted to see transcripts in advance. At times, employers are required to interview students who don't even rate the employer as a likely destination.

• Because of the importance of law firm summer programs, interviews and hiring decisions are essentially made two years in advance of a start date and after two semesters of legal education.

• Offers are required to be open for 45 days. Employers interview law students in August, invite them to visit, extend an offer after the visit and then keep the offer open until November or December. The 45-day requirement deadens a market that should be dynamic and highly interactive.

• From the students' standpoint, the system allows stars to hoard offers, freezes employers in place and deprives the market of the fluidity necessary to operate efficiently.

In the past couple of years, the Great Recession impeded the orderly flow of law students into the profession. Law firms scrutinized their business models, including their hiring assumptions. It was a time for nimbleness on all sides if the interests of law students and employers were to be served. Yet the NALP-enabled system -- including, inexplicably, rigid adherence to the 45-day requirement -- plodded woodenly along in fall 2009 to the detriment of all concerned.

Pete writes that he "earlier passed on [his thoughts] to NALP," and discusses further irrational elements of the new NALP proposal:

• Although no formal offers could issue before the January date, firms could give "winks and nods" to their top choices starting with interviews the prior August. Law students would have a sense of which firms will extend offers to them, unless, of course, law firms wink and nod indiscriminately to keep options open.

• This would create an intensely competitive but sloppy and confusing recruitment atmosphere resulting in weeks and even months of wining and dining and follow-up visits, a substantial increase in the cost of recruiting and more disruption to legal education and students' personal lives. To what end? Competition for jobs and talent should focus on finding where the merits and aspirations of the student and employer intersect, not on shock-and-awe campaigns. There should be a rational relationship between energy expended and insights gained on both sides.

• Students would be distracted by the longer time period in which to sort through employment choices for the following summer. Can it be good for law schools and law students that the entire first semester through examinations would be spent in the recruitment orgy?

• The most stellar candidates would await and receive offers from multiple firms, and, with no contrary incentive, those students would be unlikely to withdraw from consideration before the January date or to release a single offer after the January date.

• Prior to the 14-day acceptance deadline, candidates could accept offers and then withdraw their acceptances when they have an offer they desire more. This would cause an administrative nightmare and would hamper firms' efforts to achieve the appropriate class sizes and yield.

From the perspective of a simple economist, the most profound flaw in NALP's unilaterally imposed scheme is precisely the one Pete identifies, and which Greg Shumaker also discusses:  The sheer unreality, given human nature and the essence of competitive markets for talent, of expecting there to be no signalling between August and January.

But of course there will be signalling.  Not only will there be signalling, there should be every reason to encourage it.

Of course, once one admits that signalling in this artificially constrained timeframe makes perfect economic and competitive sense, then taking the next step is both trivial and inevitable:  Why resort to the imperfect mechanism of signalling (sometimes signals are misinterpreted, after all, not to mention that they require inordinate investments of time, energy, and funds in utterly unproductive activity, a deadweight loss all the way around)?  Why not just make the offer?

My own suggestion is that firms do just this.

As I wrote in December:

So what's to be done?

It's actually quite simple: Starting tomorrow, ignore any and all NALP guidelines and so-called "principles."

Clearly, NALP has become a toxic organization that:

• Straitjackets law firms into economically unworkable timelines;
• Forces law school career centers and deans to toe an unrealistic line which only discredits their opportunity to be of real service in a dynamic economy; and
• Most shameful of all, puts defenseless law students in absolutely untenable positions.

Hard to do, you say?

I ask: Who elected these guys, anyway? Who on earth do they think they are?

In one of our recent First Lady's immortal words, "Just say no!"

And what, then, of next recruiting season?

Simple:

Where: Rent a hotel suite just off-campus at schools you want to target, or simpler still, invite students straight to your offices if you have a location in the same city as a school you're recruiting at.

When: Whenever you are good and ready, and the market will tell you as much.

Why: To retake control over the indispensable pipeline of supply--talent--that is all you have to offer your clients in the future.

When an organization has manifestly outlived its usefulness, when it arrogates to itself the single-handed power to attempt to subvert the orderly workings of a critical marketplace for talent, and when it evinces not the remotest understanding of the folly of its proposals, that organization must die.

My December article had the same title as this column, but Pete's title is pithier:

Abolish NALP.  Now.