Introduction
The fast pace of current changes, from pandemics to social issues, has forced legal organizations to transform how they work, aiming for efficiency with fewer resources. Leaders need to sustain this change for growth and prepare for future challenges. The 2023 Legal Lab event focused on reshaping the collective approach, shifting from individual mindsets to a more collaborative "we" mindset. The event was successful in generating valuable insights and ideas for the future of the legal industry.
Industry trends: Where were we—and where are we going?
In 2021 and 2022, the legal industry experienced growth, improved connectivity, and embraced technology due to the pandemic. Legal teams focused on talent development and digital solutions.
Now in 2023, the legal climate has changed. Economic uncertainty is affecting legal demand differently across industries. Some firms are cutting staff while dealing with complex global regulations. Challenges include managing talent in hybrid work settings and making strategic investments in a transforming landscape.
Recently, we surveyed law department and law firm leaders to understand their current situations and future priorities.
Over a third are changing budgets to focus on essential roles, a quarter are cutting budgets and stopping planned activities. Fifteen percent are thinking about saving money, while only a fifth plan to invest more.
Law departments had two main goals: offering value-centered services and adopting more technology and data. They were less concerned about building agile teams and culture or establishing legal operations as a foundational catalyst.
Most law firm operations leaders (71%) are concerned about declining demand for legal services. Others focus on talent retention (12%) and managing costs, operations, and strategy alignment (6% each).
Around a third of law firm leaders want to change service delivery models, and another third aim to use technology and analytics. Improving operational capabilities is also important. Retaining top talent is the least prioritized, chosen by only seven percent.
The findings highlight the need for a comprehensive approach to legal industry transformation, including strategic alignment, value focus, data and technology use, and agile talent development.
Talent: Engaging lawyers and legal professionals and meeting market demands
We surveyed leaders of law departments and law firms just before Legal Lab to find out about their current and future priorities regarding talent.
Leaders in law department operations have the same priorities now and in the near future (2024+). They aim to achieve more with fewer resources while avoiding burnout. They are also dedicated to promoting diversity, equity, and inclusion both within and outside the department. Due to increased demand for legal services, they are not currently considering reducing staff or compensation.
Leaders of law firms (general counsel, chief legal officers) have slightly different priorities compared to law departments, and their rankings of priorities vary between the present and the future. Currently, firms are concentrating on recruiting and retaining talent, assessing how well individual lawyers and practices align with their models. They are also prioritizing diversity, equity, and inclusion (DEI) to meet the expectations of clients and new lawyers. Enhancing productivity and reducing staff count are not their primary focus.
In the future, these priorities will change somewhat. Law firms will continue to seek and retain talent next year, but they anticipate placing less emphasis on individual lawyer fit and instead concentrating more on aligning their total staff count.
Developing and retaining talent
Law firms and corporate legal departments are grappling with high associate turnover and the challenges of hybrid work. They must engage lawyers effectively.
Discussions at Legal Lab highlighted the need to bridge the gap between law firms' offerings and in-house lawyers' needs. Law firms must evolve from delivering basic legal services to becoming strategic partners that provide valuable solutions. The expansion of roles within law firms is crucial, but concerns about compensation models persist. To manage attrition, some departments encourage turnover for career progression. Performance management in remote work settings also poses challenges. Data and analytics are gaining importance, particularly in engagement analytics to support junior attorneys and address implicit bias. Some companies conduct regular engagement surveys to identify trends and areas for improvement. Measuring employee exit data can offer insights into preventing future issues.
Meeting the market
The 2022 Law Department Survey reveals a rising demand for legal services, yet many face budget constraints, pushing for efficiency. Law firms adjust practices due to budget cuts and associate market conditions. Pressure on law departments to meet demands with fewer staff risks burnout. Innovation can help, but needs investment. Firms with strong innovation teams can aid law departments.
Technology, like generative AI, poses challenges and opportunities. Organizations must plan for tech impacts on team sizes and training, especially for younger lawyers. Law firms and departments should prepare for managing teams amid technological advancements.
Breakout sessions
After discussing talents, participants formed groups to brainstorm practical solutions. They highlighted the need for more collaboration between law departments and firms. Ideas included exchange programs to enhance understanding and alignment. Senior lawyers could join exchanges for better insight into priorities. Champions are needed to overcome cultural resistance. Proposed initiatives are:
- Better secondments for consistent gains
- Legal operations secondments for efficiency
- Junior talent retention through associate exchanges
- Improved career paths for development and retention
- Law firm insights via "day in the life" experiences
- Shifting towards collective success and collaboration
- Real-time feedback for law departments through performance questions in billing
Preparing for how AI will transform legal services
Daniel W. Linna Jr. discussed how AI, particularly ChatGPT, is changing legal services. ChatGPT, a large language model, can do tasks like generating text, summarizing, and answering questions. It had over 100 million users within two months of launch. Linna highlighted limitations, including incorrect answers and bias issues detailed by OpenAI.
Linna challenged claims that ChatGPT has human-like intelligence, emphasizing its limits. He suggested AI's safe use requires legal professionals to understand capabilities. Linna listed legal applications for ChatGPT, including summarizing, drafting contracts, improving writing, generating questions, and conducting research.
Linna advised a cautious approach to AI in law due to its challenges. He contrasted law's lack of evidence-based practices and standards with medicine. Linna stressed starting with problems before tech solutions. He noted issues in using AI for contracts due to bias and misalignment with business goals. Linna remained optimistic about AI's potential in law but highlighted the need for foundational work to reap its benefits.
Linna addressed the debate on AI replacing lawyers, suggesting the focus should shift to how AI automates tasks and changes legal roles. Studies predict AI could automate 44% of legal tasks, even unstructured ones. Linna argued that law's lack of structure hinders automation, advocating for a shift from viewing legal services as an art to a science. He recommended adding structure through process improvement. Linna stressed that technology, processes, and data are all essential. Attendees noted technology may not eliminate jobs; an AI-adopting firm grew in sophistication while maintaining staff. Linna emphasized a need for expertise beyond legal skills, like project management and technology, to deliver future legal services.
Technology: Implementing the tools of the future today
Similar to the talent session, the discussion about technology began with an overview of current tech priorities for law departments and law firms.
Law departments currently focus on tools for workflow, productivity, and user adoption of existing tech, data visualization, collaboration, and AI like ChatGPT. Effective workflow and user adoption boost oversight and success. Aligning tech strategy with business and measuring work are crucial. Future priorities shift towards data visualization, workflow tools, user adoption, AI, and collaboration. Data insights will stem from earlier investments, and workflow automation offers ongoing improvement chances. Some existing tech initiatives might face decisions on adoption or replacement.
Law firms share similar priorities but in a slightly different order. They currently focus on tools for workflow, collaboration, data visualization, user adoption, cloud strategy, and AI. Firms use tech for talent utilization, mobile workforce, and enhancing the client experience. Cloud adoption is driven by vendors, while AI needs proven efficacy for prioritization. In the future, collaboration becomes top priority, followed by AI, data visualization, workflow tools, cloud strategy, and user adoption. Technology aids talent retention, business growth, remote work, and client experience.
Uncovering the why behind the priorities
The group discussed what drives tech priorities for law departments and firms. Factors include rapid growth, change, and the need to adapt legal services. Economic challenges, cost-cutting, and compliance were highlighted. Technology helps when reducing staff and aids risk management. Automation's value was emphasized, focusing on creating time for higher-level thinking and augmenting tasks to enhance senior-level input.
Artificial intelligence and ChatGPT
AI was a major focus in the tech discussion. They even had a safe word ("cinnamon") to prevent excessive debate on the topic.
Legal leaders have mixed reactions to ChatGPT's rapid adoption by consumers. Discussions focused on AI's role in legal services and its value. Some were caught off guard by the technology, while others questioned its relevance given existing expertise. Establishing AI's worth and ROI for lawyers was also debated. Overall, the group agreed that ChatGPT is a tool whose purpose should be aligned with objectives amidst the dynamic AI landscape.
Tech planning and investments
The 2022 Law Department Survey explored legal tech usage in four categories: core legal, practice area-related, enterprise, and emerging. Core tech was most adopted (75%), followed by practice area solutions (63%). A third of law departments embraced emerging technology (29%).
Implementing new technology hinges on aligning it with business needs. Platforms alone aren't a solution. User adoption is a top priority, affected by technology's alignment with processes. Tech variety complicates adoption, particularly with platforms and features. For example, document management systems (DMSs) can be functional but face resistance. Technology's success requires broad usage and bridging the gap between tech and practice. Participants highlighted challenges of choice overload and preferences for familiar tools like Teams.
Breakout sessions
Cohorts discussed tech solutions for current and future challenges. Collaboration, especially between law firms and departments, was a key theme. Tech adoption was another focus, with ideas on embedding tools in practice and managing change. Proposed solutions include creating tech discussion frameworks, building transparency for efficient collaboration, experimenting with AI-powered platforms, employing change management experts, and forming top-down task forces for tech buy-in.
Historic moments—how the public sector is rising to meet new challenges
Lane Dilg, previously with the U.S. Department of Energy, discussed public sector challenges similar to Legal Lab's themes. She shared insights from Global Trends 2040 report on intensified global challenges. Dilg's experience as City Manager during the pandemic revealed the importance of legal advice for decision-making. Management and operations differ from legal goals. Pandemic, vaccine uncertainty, essential services, and managing crises were key challenges. Despite being a tech city, Santa Monica needed infrastructure improvement. Instant setup of a 311 system and handling protests post-George Floyd's murder were part of her role.
Public institutions face challenges that resonate with Legal Lab discussions. Lane Dilg compared the work to Legal Lab's themes:
- Talent: Recruiting and retaining the best talent.
- Technology: Utilizing technology to enhance staff capabilities.
- Decision-making: Navigating bureaucracy for effective decision-making.
- Tech challenges: Overcoming user adoption, ethics, and public trust issues.
- Resource alignment: Optimizing resource usage.
- Collaboration: Internal and external collaboration for better outcomes.
Dilg emphasized communication's importance to align actions and objectives. She discussed challenges in D.C., including strategic industrial strategy and the right people in government. Questions from Legal Lab apply to both sectors about collaboration, tech adoption, AI, ethics, and trust. Dilg suggested law's value lies in ethics, judgment, relationships, and trust, and explored how tools can accelerate these qualities.
Service delivery: Transforming and optimizing legal services
Law firms and departments are focusing on improving service delivery to handle complex legal practice and better serve business clients.
Sounding Board survey highlights law departments' priorities: expanding capacity, attorney development, metrics utilization. Currently, emphasis on resource allocation, tracking work status, legal spend, and metrics for strategy. Future focus will shift toward data-driven decisions.
Law firm survey respondents prioritize service improvements: client experience, attorney development, competitive distinction. Economic factors drive efforts to enhance underperforming areas for profitability. Investments in data-enabled solutions for innovative legal services are rising. Future focus includes more data-enabled solutions, client experience, and innovative work delivery beyond 2023.
Unpacking the priorities
Both law departments and law firms aim to demonstrate value. Law firms want to show their impact on business, while some believe the data isn't entirely realistic due to fluctuations in demand. Law firms seek ways to prove their value, with discussions around data, outcomes, and assistance offered.
However, there's a disconnect between law firms and in-house teams in terms of how value is communicated. Law firms may need to proactively propose creative service offerings rather than relying solely on client input. Effective communication between junior lawyers and relationship heads is key to shifting the firm-client relationship from transactional to strategic. Proactive communication and education before engagement are suggested to enhance understanding and collaboration.
Understanding the client experience: What really matters?
The group discussed enhancing client experience for law departments and law firms. Key questions were raised about improving business client experiences, supporting law departments' efforts, and aligning priorities. Strengthening enterprise-to-enterprise relationships is crucial, with an emphasis on providing value and overcoming power dynamics. Proactive engagement, process-oriented programs, and effective communication are valued by law departments. Challenges for law firms include territorialism and relationship dynamics, which may hinder proactive efforts to align with law departments' needs.
Creating processes that strengthen relationships
Law firms should establish formal processes to ensure proactive outreach and relationship-building with new clients. Training exercises and clear role definitions are essential to guide relationship partners in their interactions. Regular communication, work discussions, diversity considerations, and leveraging internal data are vital aspects of maintaining strong client relationships. Collaboration between law departments and outside counsel, including involving associates in client engagement and providing billing credit, enhances relationships and ensures value delivery. The goal is to foster a strong and impermeable bond, creating a "zipper" relationship.
Breakout sessions
During the final small group activity, participants discussed service delivery solutions focusing on client engagement. Law firms should better understand clients' business strategies and priorities by involving relevant people and sharing appropriate information. Suggestions included forming matter engagement teams, conducting yearly knowledge exchanges, and establishing know-your-customer programs.
Implementing these ideas might involve setting thresholds for client investments and coordinating efforts among various stakeholders. The proposed solutions include building internal networks, defining playbooks for annual exchanges, creating client-centric dashboards, enhancing engagement teams, and using fixed-fee models for efficiency and alignment.
To read the full report, download the PDF.
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