Author: Brani Andreev, MBA, is an expert in nationwide management of process service, consultant, speaker, and developer of the breakthrough Management Model of the 4Ps™ that ensures the consistent quality of process service.
The judicial system did not escape the debilitating effects of the current challenging times. Courts shut down or moved to a virtual environment. Remote work became the norm and members of the legal community are fighting to find a stable footing. During these difficult times it has become crucial to rely on legal technology for everything from electronic filings to digital depositions to virtual hearings. Legal experts are providing insights and predictions as to the future of the legal industry and the direction in which it will continue to share. Few people in the legal industry have the experience and knowledge to weigh in the way Karl Harris, CEO of Lex Machina, can. In a recent interview with John Goodnow from Above the Law, Harris shared his insights on the changes to come and the factors that will allow law firms to succeed in the new legal world.
Law Firms on the Cusp of a Fundamental Revolution
According to Karl Harris the legal industry will experience changes in the way they deliver their services. "The stakeholder that’s going to be driving the change is clients", Harris shared. He sees part of this revolution to involve a continuing shift away from the traditional billable hour model. “The billable hour, it’s just got to go away, right? Nobody likes it. Clients don’t like it, the associate that’s got the little timer on their screen doesn’t like it, nobody likes it.” Harris further explains that under the billable hour, “there can often be an adversarial relationship with a client and its outside counsel, as you’re kind of wondering, ‘Are we really in alignment? Are our incentives aligned? Are they doing the right thing?’ ”
To Harris, law firms that succeed and will continue to be change agents for the legal industry are the ones that lead their firms to become active partners in promoting their clients’ business goals. From a necessary evil and a line on an expense sheet, clients now take on a central role in the legal industry process. Harris believes that by sharing risk and aligning a law firm's success with that of its customer, firms will become more efficient with their own resources. Being efficient and moving toward fixed-fee work does not necessarily mean that a law firm's revenue will go down. “It’s okay if a fixed-fee arrangement actually results in a higher fee than what a billable arrangement would, because what the client is paying for is reduced risk, and people are willing to pay to reduce risk", Harris adds.
Agile Enough to Meet Clients' Evolving Needs
According to Harris, the question is which law firms are going to be able to meet that change. In conversations with law firm leaders and partners, the number one question on their minds is if the firm is agile enough to meet the changing and evolving needs of their clients. Unfortunately, the answer to this question among paralegals, attorneys and legal assistants is negative. Law firms do not feel generally agile enough to meet the new and fast changing needs of their clients.
Harris said he sees this as a deeply untenable state of affairs, especially for law firms that employ a traditional fiscal system. “There’s a lot of risk, year to year, in the law firm model. At the end of the year, you pay out all the profits to partners and you start with zero. You finance the firm for three quarters of the year with loans from a bank. You’re not even in the black until the last few months of the year, and then you make all your profits. Like, if you make one mistake, it can bring down an entire firm.”
One of the most important questions a law firm can be asking itself, according to Harris, is about its leadership team. “What’s the profile of the ultimate decision-makers at these large law firms? Are they nimble, technology-savvy? Where are they at in generational turnover, and what’s their willingness to take risk and make changes?” In the months and years ahead we see competition growing stronger and more sharp-elbowed. Law firms that are not ready to pivot quickly as circumstances merit could find themselves pushed right out of business.
Leveling The Field
Based on fast technological advances in the legal industry, small and midsized law firms are quickly embracing new tools and applications. Technology is becoming a great equalizer in the legal field, one that allows small and midsized firms to punch above their level. These changes lead to an increase in competition, that challenges the status quo for large, highly leveraged law firms. As more attorneys have the tools to service their clients, the level of competition and customer service goes up, and the legal industry begins catching up on the ground it has lost to the broader business world.
Harris gave the example of trying to decide whether to file a motion for summary judgment in a major case. The traditional method of making that decision might be to email blast the firm for insights on the judge or opposing counsel, and then trying to use whatever anecdotes arrive to supplement the attorney’s legal reasoning and judgment. With Lex Machina, however, an attorney can click a few buttons to pull statistics on:
“What AI is doing right now is massive pattern matching at scale", according to Harris, "That’s what machine learning, natural language processing does: it makes sense of patterns that may be too hard for the human to hold all the data in their mind … . It’s great at processing lots of data at scale, but it’s just matching patterns. There is no intelligence that’s replacing your judgment, so don’t be afraid of AI. Embrace it. Leverage it to your advantage.”
Software can quickly pull the 10 most recent successful and unsuccessful MSJs a given judge has ruled on, or calculate what percentage of cases of a certain type succeed or fail in a given jury pool. And software does it faster, and for pennies on the dollar compared to what it would cost an associate or partner to generate the same data. That data helps attorneys make better litigation decisions and helps them communicate more effectively to their clients on why a given recommendation is the right one.
Winners And Losers among Law Firms
“Law firms are going to need to change, and there will be winners and losers,” Harris noted. When asked about the one factor that, above all, will determine which firms succeed and which do not, Harris answers, “Law firm leaders need to make sure they’ve got that customer-centric product management approach. At the end of the day, the firm is your product. Be listening to your clients. Watch what they’re doing. Be aware of the data. Look how they’re evaluating your performance, and don’t fight that. Embrace it, because you’ve got to be in line with your customers.”
Similar to factors that influence other type of businesses, the success or failure among law firms will always come down to how well we serve our customers. We live in a time where there are plenty of technological and innovative companies and leaders who give law firms the tools, know-how and actionable tools that would help them do what the legal industry already does but better. Tools like Lex Machina or PROServer List are just a couple of the many great solutions available to law firms, both large and small, to embrace the changing needs of their clients and truly get on the path of becoming winners.
Source: Above the Law