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Labor productivity and technology advancements: Future implications for the legal industry
The legal industry is seeing even more rapid developments impact our continuously evolving economic and societal structures on both macro and micro levels. Two of the most significant forces are technological advancements and labor productivity. The key drivers in both areas include the following:
Technology
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Data availability: the sheer amount of accessible data and information is exponentially increasing
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Tools and resources: newly developed systems, machines, programs
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Automation: use of robotic and programming inventions to automate manual tasks currently performed by humans
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Artificial intelligence: computer systems that can perform tasks that typically require human intelligence, including learning and decision-making
Labor
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Availability of technological resources: productivity and efficiency increases facilitated and supported by technological development as outlined above
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Epistemological evolution: growing human knowledge based over time, ability to share information globally and in real-time, as well as new achievements due to the ever-growing results and conclusions of-trial-and-error procedures
Implications for law firms
In the legal industry, the effects of such technology and labor-related developments can be observed in various ways, including the following:
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Case/ Practice Management Software |
Firms can streamline task delegation and completion and enhance collaboration. |
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Document Production |
Automated template generation allows law firms to prepare new files with only a few clicks. |
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Legal Research |
Advanced search functionality and increased case data availability help firms conduct quicker, more precise case analyses. |
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Case Outcome Prediction |
Data cross-referencing and artificial intelligence increase prediction accuracy. |
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Task Automation |
Automating tasks such as timekeeping, bill preparation, journal entries, and document preparation reduces the time firms need to spend on manual administrative work. |
As a result of technology and labor-related advancements in the legal industry, law firms will need to address new dynamics in the following areas:
Work Model
As machines take over manual tasks, employee productivity increases, leading to improved efficiency and accuracy. This results in more work being done in less time.
Billing Model
The traditional billable hour metric is losing its importance as it only measures volume, not effectiveness or efficiency. Clients are now seeking case efficiency, where they can get results quickly at an affordable rate. Moreover, some practice areas, such as insurance defense, are becoming increasingly commoditized, and carriers are focused on minimizing average payouts rather than fighting every case.
Compensation
To adapt to evolving pay structures, incentives should focus on achieving results instead of volume. In addition, the compensation landscape in the law firm industry will be affected by macroeconomic pressures. As the number of hours worked decreases, pay per hour must increase, while salaries remain constant or rise. This is because employees can achieve more results in less time.
On a macroeconomic level, as machines take on more labor, pay levels must remain stable (with reduced working hours) to ensure economic stability.
It's also worth noting that as machines take over more simple tasks, pay levels across different job types will become more similar.
Looking Ahead
Law firm owners and managers should recognize the increasing automation and standardization of work in most practice areas. While we are not there yet, employees working less than 40 hours/per week will eventually become a reality. Lastly, paying them more for the same or fewer work hours (effectively increasing pay per hour) will become a necessary consequence of technology and labor-related developments.
