The BigHand Legal Report: More Trouble For Ostriches – Above the Law

The recently reported on the findings of one Deloitte Legal Survey that revealed the continuing sizable gap between where legal departments are in relation to AI versus their own law firms. Broadly speaking, legal departments are way ahead of their firms when it comes to the use and expectations of AI. Representatives of the legal department believe that a good part of the work done by external lawyers will be outsourced and the use of AI will increase. It was Deloitte’s view that law firms in general are not ready.

Shortly after my post, I came across another study, this time from a vendor, suggesting the same thing, albeit from a slightly different perspective. The study and report, titled Legal Workflow Leadership Report is made of BigHanda legal technology vendor that focuses on the business side of legal practice. It drew on the knowledge of over 800 law firm executives and legal professionals.

From reading BigHand’s report, it is clear that the purpose of the study was to help convince law firms to purchase BigHand’s products. As such, I always take these types of polls with a grain of salt. But with Deloitte Legal’s findings from the legal department’s side, the credibility of the BigHand study increases. And taken together, the photos are not pretty for law firms.

A scary consistency

Indeed, some of BigHand’s conclusions were accurate as they were so consistent with what Deloitte Legal found when it came to law firms. BigHand says:

This year’s findings…reveal a growing gap in operational readiness for the age of AI. While nearly all firms are now using AI across support services in some capacity, far fewer are redesigning the workflow, delegation models, roles, and skill structures needed to support it effectively.

The survey, of course, focused on support services. These are services on the business side of law firms and not the client-side legal work that Deloitte Legal focused on. But if law firms are trying to get it right on the support side that can lower their internal costs, what can they hope to do on the legal work side where AI tends to reduce revenue?

Consider this finding from BigHand: “The use of the support team often remains unclear, and firms struggle to measure the true impact of AI on productivity, profitability and customer service.” The Deloitte Legal report noted much the same thing: AI is forcing a change in how legal services are priced and valued, but many law firms have no idea how to make that change. Nor the skill.

Customers will vote with their feet

The current findings paint a bleak picture for law firms unwilling to change the way they receive and use AI. Ninety-five percent of surveyed firms already report increased consumption. Almost half say their customers are wondering why rates haven’t come down despite the availability of AI. Forty-two percent say customers are looking for alternative rate arrangements.

And like Deloitte Legal, BigHand concludes that client expectations are rising, more work will be brought in-house and in-house legal is reducing the number of panel advisers. Customers want faster turnaround, more transparency and higher quality delivery. Firms that fail to meet these growing desires and expectations will find themselves replaced, often without warning.

Current use of support staff

BigHand believes that meeting customer expectations in the age of AI depends largely on the management and delegation of support staff. It makes sense: in my experience, you can’t provide top-notch service at a good price with a poor support staff.

However, almost half of respondents say they expect to lose anywhere between 21 and 50% of their support staff in the near future. And they recognize that this decline will have a direct impact on billable hours, revenue and, perhaps most importantly, will disrupt customer relationships. Customer relationships that are difficult to repair once broken. This disruption can have long-term financial and even survival consequences.

Despite these expected losses to support staff, only 21% are using what BigHand calls structured workflow technology to better distribute tasks and improve delegation. BigHand puts it bluntly:

Without a clear, empirical understanding of workload, capacity and performance, it’s difficult to ensure the right work is being handled by the right resource—and AI’s true impact on productivity and profitability is nearly impossible to measure.

Another interesting finding: 43% of respondents say that additional time is now required to check and verify AI results. In other words, because firms haven’t found a way to efficiently and accurately verify results, most of the time savings from using AI, savings that can be passed on to customers, is compensated. Of course, verification is critical. But BigHand’s point is a good one. Many firms have yet to figure out how to do this efficiently.

Finally, only 23% are developing reporting techniques to explain how AI efficiencies are being applied to client work. No wonder only 4% of respondents from Deloitte Legal say their firms have shown them any sort of benefit from using AI. Frankly, the firms are clueless.

And how are firms coping with disruption?

Short answer: they are not. Plan close to 20% salary increase for existing staff of less than 5%; The less than 40% plan only increases in the 5-10% range. Only 27% think it is important to prioritize how lawyers delegate work to support staff. Only 64% use technology to track support staff productivity and efficiency. Without data, how in the world can firms determine what staffing they really need and how to deploy it, says BigHand. Only 29% have made changes to their support teams to include new skill sets.

And get this: only 41% have reviewed support staff tasks to determine where automation and AI can deliver the greatest impact.

Why so gloomy?

Why are the numbers so dismal? BigHand doesn’t express opinion, but I will. Based on experience, it’s lawyerly arrogance, pure and simple. Lawyers look down on what they call “non-lawyers” who work in a firm. Many people still think, albeit secretly, that only lawyers can effectively run and manage the firm. That only equity partners can make business and support staff decisions. After all, the partners say, we own the firm, we run the firm, and you, the support staff, work for us. Which means the legal professionals on the support staff are ignored and undervalued.

Undoubtedly, strides have been made. Many law firms now have COOs and CFOs rather than the firm being run by the partner with the largest book of business. But old habits die hard, especially with a based on consensus the decision model that many firms still have.

So where are we?

Ordinarily, I would be wary of placing a lot of stock in a vendor’s survey that happens to indicate the needs of the law firm that the vendors’ products happen to meet. But in this case, where the findings are so consistent with those of Deloitte Legal, the numbers reveal a persistent and alarming culture of “burying your head in the sand”. A culture that is all the more troubling since, both between clients and lawyers, “the balance of power has shifted,” says BigHand. This is a trend observed by Deloitte Legal and which I reported further ahead.

The end? Ostrich law firms that stick their heads in the sand will lose business. Deloitte Legal sees it. BigHand sees it. And after over 30 years in Biglaw, I see it.

Get your head out of the sand.

Stephen Embry is an attorney, speaker, blogger and writer. He publishes TechLaw Crossroadsa blog dedicated to examining the tension between technology, law and the practice of law.