Law Firm Strategies for Human Capital: Past, Present, Future

Abstract

Over the last several decades, virtually all large U.S. law firms have adopted a human capital strategy that emphasizes academic performance and the prestige of the law school attended. Although this focus is rooted more in tradition than hard empirical evidence that it produces a competitive advantage, the question is has long been irrelevant for most law firms because of the perennial rise in profits. If the model is not broken, the adage runs, why fix it?

Drawing upon extensive historical and contemporaneous evidence, this essay argues that the limitations of the traditional credentials-based model have been masked by a steady multi-decade surge in the demand for corporate legal services. In addition, various data and trendlines suggest that the growth in demand for corporate legal services is beginning to flatten out. In the coming years, many large corporate law firms will be in the unfamiliar position of competing over market share. Unlike the relative calm and prosperity of the prior era, their survival will likely depend upon a human capital strategy that asks and answers several basic empirical questions regarding the selection and development of lawyers. This process has the potential to dramatically reshape established hierarchies among both law firms and law schools.

Keywords: law firms, human capital, Am Law 100, Am Law 200, selection, recruitment, legal labor markets

JEL Classification: J24, J44, J60, L21, L84, M51