What’s your career ROI (return on investment)?

9 03 2011

A couple of interesting articles on the Careerist recently about law schools and their responsibility to law students. In particular there is a debate about the responsibility schools have to accept students (and their fees) when, in the current climate, job prospects can be slim.

Paying back the law school fees was never easy

Here in the UK, there is another dynamic that has come into play. With the advent of a serious hike in tuition fees, particularly at the top-end universities (that will undoubtedly attract a high percentage of aspiring lawyers), I think it is time to take another look at the cost of entering the profession, and see whether the end justifies the outlay.

The corporate world has shown me the value of pulling together a business case for any serious capital expenditure – the sums might not turn out to be 100% accurate, but the discipline of going through the process forces you to ask some sensible questions and can stop you wasting serious money.

But aside from my current struggles with the Spousal Budget Approval Committee (required in my house for gadget purchases), this rigour rarely makes an appearance in home life.

But should it?

While fees this side of the Atlantic remain below those in the U.S. a three year law degree will soon cost just shy of £30,000, with a year at law school costing £10,000, plus living costs, gives an overall investment of well North of £50,000.

In my book, that’s certainly the sort of money I’d want to stop and think about before spending.

In assessing the value of the education, there are many more factors than simply the straight forward ROI (return on investment), but the basic maths can’t be ignored. If you assume that you are going to come out and join a solid City firm, then chances are you’re on a salary of around £35,000, shifting to say £55,000 when you qualify two years later.

The traditional City law firm career sees salary then increasing every year (subject of course to the economy) with bonuses and perks thrown in, suggesting that it may take a while, but the debt for the not-insubstantial investment will be paid off in relatively short order (subject to any extravagant lifestyle choices!) and the investment then moves into the black and produces serious returns in the long term, especially if partnership in a profitable firm is achieved.

There is of course a “but”. These projections of profitability and a solid, predictable career path, a very much based on some assumptions about the legal market place. Assumptions which have been challenged over the last few years. Profitability at many firms has tanked and the annual salary rise was predicated not just on nice fat profit margins, but on a rise in the price of the lawyer based on higher levels of PQE (post-qualification experience). But if the hourly rate model is dying, and firms can no longer simply hike up fees because a lawyer has another year of experience (and arguably, it’s time served, rather than actual meaningful experience), then where does the annual rise come from? More chargeable hours anyone? In the efficiency-focussed law firm of the future, that might not be an option either.

Speaking of chargeable hours, the lifestyle is also something to factor into your decision. Lawyers in the firms that pay serious money work hard. Really hard. If you’re driven, motivated and enjoy the job, that might not be a problem. But while when my generation (qualified late 1990s) expected to clock serious hours in pursuit of partnership, conversations I’ve had with many partners these days suggest the current generation of trainees and newly qualified lawyers have very different expectations of work/life balance, which can lead to some firing the ejector seat early.

If that’s the case, then the return on investment is not looking quite so straightforward.

For time immemorial there has also been the question of what happens to those who don’t make it. Every year there are plenty who make the financial commitment, and either don’t make it through, or do get the qualifications and can’t find a training contract. Clearly this is particularly relevant in the current environment. If things take a while to pick up, and the graduates haven’t managed to build other experience and contacts in the meantime, then there is a real risk they’ll be passed over for fresher blood when the economy picks up again. Another situation when the initial investment is not looking so sound.

On the positive side, there are other ways of making a return which don’t involve the long game of partnership. As a lawyer, you’ll build up some great transferable skills. Because the profession can be quite insular, it can often be difficult for lawyers to identify these, but trust me, they are there and they are valued in many different arenas (one of the books I found most useful in assessing my skills when looking to career change 10 years after I qualified was “what colour is your parachute“). That said, it’s through the practice of law you will build these skills, rather than the academic training, so I don’t think it’s a question of a law degree opening a huge variety of doors, but in the medium term, other options become available.

Finally, the profession is changing. Big time. This will have implications for all of us in the profession, both the grey hair and the young blood. Given these changes, it also adds another angle to consider when assessing the law as a career. Some may see it as risky, others may see a wealth of opportunity. Much like any other investment, your tolerance for risk will play a part in your decisions, and is just one more component to factor in.

So, no answers, but hopefully some things to think about for both aspiring lawyers and any current or former lawyers feeling reflective. If you’ve just started on the path, I wish you all the best!

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3 responses

11 03 2011
The drill instructor

I really enjoyed this article. I think that your comment about “the profession is changing. Big Time” is absolutely right.

The issue is that I think a lot of people in the profession either:

(a) don’t believe the profession will change that much;
(b) don’t want to believe the profession will change that much; or
(c) understand that a change is coming but don’t know what that change might look like and don’t know how to deal with it either now or in the future

Two key points seem to be that:

1. some lawyers talk about change as if it will happen at a point in time in the future (so they can plan for it), rather than realising that it is happening right now and right in front of their noses

2. what you often find is that some lawyers will talk about the symptoms of this major change (hourly rates going down, PEP going down, trainees not being retained, staff overheads being cut via outsourcing etc. etc.). It is not often that people talk about what the root cause of all of this change is – what is actually happening that is causing things to change like this and how do law firms plan for this ?

7 10 2011
The legal market place – carnage or opportunity? « The Intelligent Challenge

[...] them are a generation of students who have made a huge financial and personal commitment to enter the profession, and are finding training contracts like gold dust. Those that are lucky [...]

5 12 2011
The end of the beginning « The Intelligent Challenge

[...] Irrespective of whether lawyers were working in the world of business or consumer legal services, traditional career paths were breaking down and new options were emerging. This in turn has triggered a debate about how fit for purpose current legal training is – and, in particular, against the current economic backdrop, whether training as a lawyer is a sensible career choice. [...]

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