Page 8 - JulyAugust24 Report

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2010
That Was Then,This Is Now
Some of our predictions may continue to alter the future. These include the following:
PUBLICLY-HELD LAW FIRMS:
The trend for publicly-held law firms, which we expected to accelerate through the years, hasn’t gained momentum in the US. While it is allowed in the UK, Australia, and other jurisdictions, the ABA prohibited public
40% increase. The stagnation of the lawyer ranks is due partly to the competition that makes law a less lucrative field relative to other professions. Although first-year compensation in the leading firms is $250,000+ with bonus, many lawyers in the US earn an average of $80,000. This is not a competitive salary compared to recent grads in specialized fields like cybersecurity, software engineering, and investment banking, even without a grad- uate degree.
This leads us to the two most critical issues we identified in 1989. Arti- ficial intelligence and talent will have the greatest impact on how firms deliver services in the future.
Artificial Intelligence
Artificial intelligence gained signif- icant traction in law firms in the 2010s, which we called back in 1989. In the past, the scope was narrow and limited to tasks
ownership in the US under the Model Rules of Professional Conduct. However, some states like Utah and Arizona are pushing the boundaries and exploring regulatory changes. The jury is still out on where this will ulti- mately lead.
A Harvard Business School and BCG consultants study involving the University of Minnesota Law School, found students using AI complete work faster with similar or higher quality and they may even earn higher grades.
like e-discovery and legal research. This was no small advance since traditional approaches to discovery involved extracting data from multiple points and converting it to usable formats before large teams of lawyers and parale- gals manually reviewed the data. The investment of time, labor, and rate of
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THE REPORT | July/August 2024 | CincyBar.org
COMPETITION: Although the antic- ipated competition from publicly-held law firms has not impacted Big Law, what did occur was the emergence of the afore- mentioned ALSPs. This caught some firms off guard and scrambling to adopt a strategic response. They have responded in various ways including competing through their own brand of innovation and efficiency initiatives, sometimes in the form of a captive ALSP. These approaches to competition may include the imple- mentation of legal project management, process improvement, or investments in technology. Many law firms have also identified opportunities to collaborate with ALSPs to reduce their costs. Even more important is the competition with other law firms. Increasingly, the largest firms ( the “AmLaw 100” and within that the top 50) are pulling away in terms of profitability and rankings from the rest of the AmLaw 200. As was predicted by some industry pundits in the mid-80s.
GROWTH AND STRUCTURE OF LAW FIRMS: In 2023 there were over 1.3 million US lawyers. Yet, that number has grown only 5% in the past decade. Compare this to the explosive growth between 1979 when there were roughly 500,000 lawyers and 1989 at 700,000 when the original article was written. That’s a
Large firms, on the other hand, have grown dramatically in size and prof- itability, and we foresee continued consolidation. Mid-sized and smaller firms, as a group, have experienced flat or declining growth in the last few decades, managing to keep up with inflation but nothing more.
DECLINE IN PRODUCTIVITY:
With the implementation of new tech- nologies in 1989, we predicted a positive impact on productivity. If law firms were to preserve profitability, produc- tivity had to improve to keep pace with higher labor costs. While lawyers have increased productivity as measured in a real economic sense, the legal industry measure of productivity (i.e., how many hours are being billed,) declined starting in the early 2000s and has continued its general downward trend ever since. We don’t know how much can be attributed to generational differences, a lack of engagement, increased scrutiny of hours by clients, or perhaps fewer partnership opportunities (and a smaller percentage of a firm’s lawyers are partners). We do know, however, that productivity (i.e., billing more hours), while a good thing for law firm profitability, shouldn’t come at the expense of quality and employee well- being, which is increasingly important to today’s young lawyers.
human error in these now-obsolete prac- tices made discovery a costly process. E-discovery, using earlier forms of artifi- cial intelligence, changed the preparation for litigation and the types of matters that could be cost-effective. Other uses of tech- nology reduced the need for lawyer time, perhaps another reason for the slowing growth in the profession.
Today, AI can generate new content. This content mimics human creativity and intelligence, thus saving lawyers time and reducing client bills. AI may not replace lawyers, but it does have the ability to transform the legal industry and replace tasks handled by lawyers or other legal professionals. Lawyers will be needed less for research and review and more for their deep, nuanced understanding of the law, client advocacy, and ethical judg- ment. What that will mean for the future of lawyer formation we don’t know, but it likely is not good news for the younger members of the profession.
Rather than replacing lawyers in the near term, AI will supplement their work, making them more efficient. It’s what we see in practice today. A Harvard Busi- ness School and BCG consultants study involving the University of Minnesota Law School, found students using AI complete work faster with similar or higher quality and they may even earn higher grades. Of course, it is still important to have a solid