Notes from all over

Email sent by professor at well-ranked law school to colleagues, regarding an impending vote on a lateral hire (Reprinted with permission, with redactions):

Dear Colleagues:

Forgive me for writing a very long email about an unhappy topic, but I think the situation justifies it. I also apologize for what might appear to be an untimely message, but I have only recently become firmly convinced of my position which is—due to the precarious, unprecedented state of legal education in the U.S., we should refrain from hiring permanent faculty unless and until it becomes more clear that [     ] will not in the future need to substantially reduce its size or cut tuition.  It is certainly bizarre for a business to rush to buy a long-lived asset (such as a tenured or tenure-track faculty member) immediately after its customer base has precipitously contracted.  Applications to law school were down 15 percent last year and, making matters worse, the biggest declines were among the precise students we hope to matriculate (e.g., 18.5% declines among LSATs between 160 and 169).  Furthermore, I think it’s safe to say that the most recent [  ] grads (e.g., classes of 2010, 2011, and 2012) and the next graduating class have faced or will face the worst employment prospects of any graduating class in the modern history of the law school and also have paid or will pay by far the most money (even in inflation-adjusted dollars) of any graduating class for those results.  I personally don’t think it’s a sustainable model when your customers pay more and more for worse and worse results.

Many of our peer schools are reconsidering their class sizes in reaction to the apocalyptic events of the last few years by substantially decreasing their first year classes (whether this is permanent or not is unclear).  Those that have decreased their classes have avoided reducing the credentials of their in-coming classes by as much as they otherwise would have.  Consider, for example, similarly situated schools like Texas (enrollment down 19%; LSATs down 1); Minnesota (enrollment down 11%; LSATs up 1); Indiana-Bloomington (enrollment down 16%; LSATs down 2); Iowa (enrollment down 14%; LSATs up 1); Georgia (enrollment down 16%; LSATs down 1); William & Mary (enrollment down 10%; LSATs down 1); Wisconsin (enrollment down 11%; LSATs down 1); Ohio State (enrollment down 18%; LSATs even); George Mason (enrollment down 20%; LSATs down 1); and Wake Forest (enrollment down 32%; LSATs even).  In short, about half of the schools ranked between 14 and 46 in the USNews cut their class by roughly 10% or more last year, as shown by this chart:  https://docs.google.com/spreadsheet/lv?key=0Agfr5qu6TB3AdHhoTEFrVThFa1hXWlh5Nkc1Q0ZnUnc

 The important question for us is whether we will, in the future, feel it necessary to at least consider substantially dropping our class size and/or tuition price to account for both the drop in acceptable applicants and also the reduction of satisfactory employment outcomes for our graduates (satisfactory after taking into account the cost of the education).  If we do feel it necessary to drop class size or cut tuition, having fewer tenured and tenure-track faculty will make the process less painful.  We would all presumably have to do more (perhaps for less pay) to pick up the slack, but that is something that nearly everyone else in the legal community (practitioners and students) have been doing for the past several years.

On the important question of whether will need to consider significant structural changes, there are two variables:  (i) whether the law school crisis is a permanent structural change or whether it is merely cyclical or even an anomaly; and (ii) whether, for various reasons (e.g., lower cost relative to peers or any unique strength of our regional market), [   ] is particularly well-suited to survive the crisis without significant and painful restructuring.  On (i), my strong belief is that this is the new normal.  On (ii), I am skeptical that we are in a sufficiently unique position to withstand these very strong economic forces that have appeared to already influence many of our similarly situation competitors.  But I am not sure, nor can anyone confidently predict what the future holds. 

In the face of substantial uncertainty, there is a significant option value to waiting.  Waiting would mean patching the roof rather than replacing it.  Patching the roof in this case might mean hiring visitors or paying people to temporarily teach overloads.  Or having everyone teach more until it becomes more clear that the storm has passed us by; we have asked our students to pay more and to suffer bleaker employment prospects (i.e., to do more with less), so it does not strike me as unreasonable to likewise ask the faculty to do more with less.  (For what it’s worth, I will be the first volunteer to teach more.)  The benefit of the “patch the roof” approach is that, should we decide that we need to move to a smaller house, it will be easier and less painful to do so.

I recognize that there may be costs to patching the roof.  Students and faculty could suffer by having less permanent faculty (though this could be mitigated somewhat by hiring visitors), and we could miss out on attractive candidates that end up going elsewhere.  However, in my view, these costs are much smaller than the benefit of waiting.  There will always be attractive candidates willing to come to  [  ]; there is no reason to suspect that this year’s candidates are any stronger than next year’s or any other year’s.  In fact, at least on the entry level, my opinion from having been to the meat market every year for the past 5 years (except the very latest one) is that the supply of candidates actually gets stronger every year.

If we wait and things turn around (or [  ] manages to evade the crisis), then we can make our long-term investments in new faculty.  If we wait and the law school crisis continues and affects [  ], we will be in a far better position to consider restructuring to adapt to the situation.

In short, I am proposing that [  ]behave like any business would in light of these facts and what our competitors are doing.  I believe that this is the time to rent, not to buy.  I remember having the same thought about the housing market in 2006.  I never did go on record with my bearish view (nor, unfortunately, did I get Goldman Sachs to help me create derivatives to allow me to bet against the housing market), though I did sell my house that year.  I am going on record now, though I suspect that many or most or even all of you will disagree with me.

Regards,

 Meanwhile at the other end of the law school hierarchy, the Job Creators who run the Phoenix School of Law (a for-profit venture that's owned by the same private equity firm that owns Charlotte and Florida Coastal) had to spend money on a market survey to figure out that the name they chose for their school would lead people to assume it was somehow associated with the University of Phoenix:

5. What initiated PhoenixLaw to look at changing the name of the school?
The feedback that was received from students, graduates, and those considering attending PhoenixLaw, was that the name of our school was often confused with University of Phoenix, which did not reflect positively on the professional nature of our program.

I'm tempted to hold a contest to help the good folks at Sterling Partners pick a new name for their increasingly wobbly venture (Among other things the "town hall" memo to students quoted above explains why they don't have access to two floors of the school's new building -- the entering class was smaller than anticipated so it hasn't been built out -- and reveals the school has decided to run its own bar review course, which will cost graduates $3000).

Of course re-naming a dubious product is a time-honored strategery in more respectable lines of work than using tax money to run bottom-feeding for-profit law schools.