Productivity Race Within the Legal Industry
Innovation and the legal industry, at first sight, do not seem to go hand in hand. Legal professionals are known to be risk-averse when it comes to the adoption of a new strategy or business model. An enterprises’ success hinges largely upon the expertise of the professionals and the ties cultivated over years by its c-suite.
The legal industry has seen a constant shift in approach by c-suites, gravitating towards technological implementation and hiring innovative talent, even after being hit by the pandemic and great resignation.
Nonchalance for innovation
It is often said in light humour that the only certainty in life is death and taxes and third, it seems, is the high demand for legal services.
Ben Allgrove, Partner of Global IP & Tech Group and Chief Innovation Officer, Baker McKenzie, while talking to Sifted stated “We’re talking about a business model and a sector that’s been wildly successful for more than 50 years.” He added, “You had law firms posting consecutive double-digit year-on-year growth, and all you had to do to fuel this was add more people. There was just a firehouse of work coming through, and in that environment, you don’t tend to see innovation.”
“But post-financial crisis [2007-08], and really starting to become acute around five or six years ago, price pressure became significant. Simply, the market said ‘we’re not willing to pay any more’, introducing caps [maximum fee limits] and demanding more creative and value-based approaches to pricing than the traditional (and cost-centric) billable hour.”
The clients started pushing back on fees, looking for a return on every penny spent on legal services. At the same time, costs have been rising. The cost rise was visible by the hike in starting salaries for junior lawyers – a trend followed by the UK, Europe, and Australasia after the US.
While the legal industry sees constant growth amidst adversities, be it recessions of a global pandemic, the willingness to compensate innovation for the inclusion of the workforce has been the industry practice. Industries rope in for boarding highly paid personnel and war for talent becomes inevitable in such a scenario.
Innovation: Legal industry dilemma
While talking to Sifted, Ben Allgrove also stated that conversation on legal innovation initially was often seen as an unnecessary distraction and a waste of resources. He pointed at the restraint partners who often weighed down hiring the best lawyers to compensate for anything. Putting money on human resources is what has worked for several generations of the legal industry, making the innovation regressive.
Ben pointed that “Throughout that time, I resisted the chief innovation officer title. And I resisted calling what we were doing an innovation strategy. The reality is I’ve relented because that’s where the market’s gone.”
The market, which talks in great depths about innovation, deems it as counterproductive to most conversations, and innovation as debased of most meaning these days.
Gartner's study on the legal industry, however, states the most essential function for firms is digital disruption, which should be followed by talent acquisition, resulting in innovative ways to provide services to the clients. Digital transformation in recent times has led to the growth of the alternative legal business, leading to the democratisation of law.
While there is resistance to adopting innovation and it is often taken counterproductive to include in the legal industry, the future disruption of digital innovation is inevitable, leading to efficient, client-centric legal services based on technology.
The way for the breed
Both talent and innovation in the legal industry go shoulder to shoulder. While there is no dearth of talent and it has been the most sought after by firms in past, digital implementation is the way forward.
Client-centric firms are going the extra mile to implement the right technology along with the right personnel. This indeed is the age of innovative talent that not only caters to the client but also keeps abreast with the innovations to simplify the solutions, creating value for the client and saving resources for the firms.
The direct impact on the existing law firm of the digital disruption coupled with fee limits set by clients manifests in the form of breakthrough solutions by the legal industry, which is on the cusp of large-scale implementation of digital client-centric solutions.
Also read top viewed Ai Legal article: The Role of AI in Legal Research.
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