A recent panel of legal leaders looked at what the future holds for law firms, and what it is going to take to get them there
NEW YORK — As the legal profession grapples with technologies, like generative AI (GenAI), that promise to bring seismic shifts to law firm operations and billing practices, a panel of industry experts at the Thomson Reuters Institute’s 23rd Annual Law Firm COO & CFO Forum pondered how these very technologies may change the way firms do business.
While admitting there were many unanswered practical questions about implementing emerging technologies and how the market would shift as a result, the discussion focused mostly on what seemed inevitable: Within the next 10 years, law firms are going to be a different beast. And for firms to make it through to the other side, they were going to have to start adapting sooner rather than later. Indeed, the panel asserted, AI is no longer a shiny new toy but rather the inevitable train rolling down the tracks.
Redefining legal roles and education
The panel began with an observation that while firms seem to be getting bigger, the largest ones are cutting back, especially on hiring summer associates. This trend was largely attributed to the transformative potential of GenAI, which could make the law firm of 2034 feel drastically different from today’s firms in structure, size, and operations. It was suggested that instead of large law firms, we might see the rise of smaller, more profitable ones.
As AI systems become more adept at performing tasks previously done by junior associates, there also was growing concern expressed by the panel about the future employment prospects for new law school graduates, as fewer associates are hired in the largest firms. However, rather than predicting a desolation of the talent base, the panel’s consensus was that this would in fact lead to more solo practitioners and smaller law firms, which, in turn could generate even more demand for legal services and greatly diversifying the legal landscape.
The panelists unanimously agreed that GenAI’s impact on traditional roles would necessitate changes in how the next generation of lawyers is trained. Indeed, AI was going to transform lawyers in two ways, one panelist explained: First, it was going to automate grunt work, the goal of legal technology for the last 20 years; and second, it would also shift how lawyers generate new ideas and plan legal action by acting as a sparring partner to promote creativity. Want to test a legal argument? Have the AI produce ideas that the lawyer can use to accept, reject, or refine their own ideas. Enabling AI to spar at the highest level and help lawyers produce the best ideas in this way, however, would be another new skill to learn — one that currently has little educational foundation.
Enabling AI to spar at the highest level and help lawyers produce the best ideas in this way would be another new skill to learn — one that currently has little educational foundation.
With traditional first-year tasks and summer programs potentially becoming obsolete, law schools must adapt to ensure that new graduates have the necessary skills to thrive in an AI-augmented environment. Yet such a shift in the educational foundation of young attorneys didn’t seem to be on the imminent horizon, in great contrast to the need for those very skills. Without traditional training pathways, new lawyers would then require hands-on experience with advanced legal technologies and AI tools, a new wave of mentorship, and even greater attention and nurturing from the law firm that hires them. In other words, firms were going to have to step up to buy the universities time to rebuild legal education in a way that had never been done before.
Evaluating lawyer performance in the age of AI
The rise of GenAI also calls for a rethinking of how lawyer performance is evaluated, the panel suggested, explaining that current metrics, such as billable hours, may become less relevant as AI takes on a greater share of the workload. Indeed, if firms continued to rank lawyers by the standard metrics of the industry as they exist today — hours billed, revenue generated — a terrifying disconnect could lead to firms incentivizing the wrong behavior, making their lawyers less efficient and skilled.
Part of the solution suggested was for law firms to embed an AI focus into their core competency reviews that would ensure that lawyers are proficient in both traditional legal skills and AI-enhanced practices, actively adjusting the compensation equation to account for AI skills. Yet this might not be enough, as the panel worried about whether there would be enough work to go around if AI could handle a significant portion of legal tasks. Unless the formula was adjusted constantly to account for the impact of GenAI, entirely new metrics may be required to enhance our outright replacement of traditional systems of evaluating lawyer performance.
Further, the panel argued that here is where the classic issue of economics in law firms rears its head: Law firms measure inputs to gauge productivity, while corporations focus on measuring outputs. For a technology to drastically change the input side of the equation, something was going to have to give, and a little bit of tuning to the current system may not be enough.
The impact on client relationships
As GenAI transforms the way legal services are delivered, the nature of client relationships will also evolve, the panel said, adding that such a shift was already underway.
About 60% of the attendees polled said that their firm was actively experimenting with a GenAI product and thus was having to sketch out what its practical use may look like for their firm. Opportunities were already starting to open as a result, with work actively being won because of the new technology. For example, one attendee said their firm had a single day to process 1,500 pages of data and offer a strategic analysis of the contents. Without using advanced tech, the firm couldn’t have done the work.
In many ways, the panel shed light on what seemed like a microcosm of the broader implementation discussion around GenAI: The legal profession stands on the brink of a transformative era, one in which AI could redefine the very essence of legal practice.
At the same time, the panelists and many in the audience stated that they’d received intense instructions from clients on the use of GenAI and that it was a constant topic of discussion. Indeed, the feeling from panelist and attendees was that some clients were already incredibly sophisticated in GenAI use and were driving their outside firms to utilize it as well. Other clients seemed completely out of their depth, writing guidance documents that went so far in barring the use of AI that decades-old innovations like spell check were being caught in the blast. In some cases, two divisions of the company could be at completely different ends of the spectrum, one setting AI usage objectives as the other is clamping down and forbidding its use.
Many law firm leaders said they hoped to avoid long battle with clients or having their arms twisted on AI use, by instead engaging in a series of ongoing discussions with clients across the knowledge spectrum.
In many ways, the panel shed light on what seemed like a microcosm of the broader implementation discussion around GenAI, illustrating both the immense potential and the significant challenges that lie ahead. The legal profession stands on the brink of a transformative era, one in which AI could redefine the very essence of legal practice. However, as with any profound change, the journey will be marked by trial and error, adaptation, and continuous dialogue.
Indeed, the need for new metrics, updated training, and evolving client relationships underscores the complexity of integrating GenAI into the legal field. And law firms and educational institutions must collaborate closely, embracing innovation while ensuring that the human element of legal practice remains at the forefront.
In other words, to prepare to become the law firm of 2034, the firms in 2024 have a lot of work ahead of them.
For more on what you might have missed at the Thomson Reuters Institute’s 23rd Annual Law Firm COO & CFO Forum, click here.
