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Changing the law firm recipe

Fox Williams partner Daniel Sutherland considers how technology could become the third essential element of a successful law firm.

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The traditional ingredients for a great law firm sound simple enough: have great people and great clients. Firms that have these have been richly rewarded, but many are now betting that this recipe is approaching its sell-by date and great technology needs to be added into the mix.

The evidence for this changing perspective is plentiful. In the week since we launched our report ´From Recruitment to Robots,´ which examined law firm growth strategies, Slaughter & May have announced they are to invest in artificial intelligence to ‘free solicitors' from the drudgery of due diligence, while Norton Rose Fulbright has announced a multi-million pound investment in SAP’s enterprise management software and Travers Smith have signed up to a deal with AI specialists RAVN. 

Law firms are not complete strangers to technological change. Document management systems, cloud computing and remote working solutions have all helped to optimise how lawyers spend their time. Predictive coding (i.e. where computers rather than lawyers sift through documents) has been around for many years and in May of this year the High Court ruled in favour of the use of predictive coding in electronic disclosure in a contested case.

The difference between what has gone before and what is set to come is that the software is getting close to replacing lawyers entirely in a range of aspects. It is no longer inconceivable that a technology-led solution with zero solicitor input could provide a client with adequate legal advice on a moderately complex matter. London has a healthy legal technology start-up scene and we have probably yet to see the limits of what the current crop of legal technology developments can do for firms. If law firms are able to embrace technology and make a success of its implementation (which is far from certain), the possibilities are exciting.

However, managing partners thinking of jumping with their firm onto the tech bandwagon may find themselves faced with cultural and financial obstacles. Any strategy that doesn´t emphasise the value of lawyers in favour of technology may encounter resistance, given that lawyers also happen to comprise the firm’s owners and managers. Cash may also be an issue, particularly for mid-size firms.  Law firms typically distribute all of their profits each year and so rarely have large reserves on hand to invest. Taking on large debts or making a capital call to fund investment is not particularly palatable for partners, particularly if (as is often the case) the fruits of the investment in technology are unevenly distributed around the firm.

Despite the roadblocks, many firms are proceeding down a technology-led path to growth, which begs the question, what will happen to those firms that choose not to invest in technology? As some firms choose to spend their resources on technology, others may continue with the tried and true growth strategy of getting great people, perhaps by cherry-picking teams of lawyers. But will having great people without great technology be a handicap?

Investing in people should require less up-front investment than bespoke software and, if the new recruits are chosen wisely, can bring an immediate benefit to the hiring firm. Unsurprisingly, our report found team moves to be very popular, competing with technology for being seen as the most profitable growth strategy.  In the short and medium term, focusing on getting the right team of lawyers will remain key and may provide returns which are better than technology. 

In the long-term, though, those firms that stay focused purely on people may find that technology, along with the rise of paralegals and other non-qualified staff, has disrupted the traditional career path of the aspiring solicitor to the extent that potential recruits simply will not exist in the numbers they do today. Clifford Chance has announced a 20 per cent reduction in the number of training contracts it will offer in 2018 and other firms seem more likely to follow suit than to make up for the loss of those contracts.

The types of work that a large number of junior lawyers at commercial law firms are often tasked with are areas in which technology has the potential to take over. Slaughter and May’s trainees and junior lawyers may welcome that technology has freed them from some unpleasant tasks, but they may also find there are fewer of them around to celebrate this.

As business owners, dwindling opportunities for junior lawyers will inevitably come second to the need to make sure that a law firm is competitive and profitable. The future is going to taste quite different.

Daniel Sutherland is a partner in Fox Williams’s professional practices team. ´From Recruitment to Robots´, a report on law firm growth strategies, is available at www.foxwilliams.com

Posted by:

Daniel
Sutherland

07 October 2016

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