​​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

• Data availability: the sheer amount of accessible data and information is exponentially increasing

• Tools and resources: newly developed systems, machines, programs 

• Automation: use of robotic and programming inventions to automate manual tasks currently performed by humans

• Artificial intelligence: computer systems that can perform tasks that typically require human intelligence, including learning and decision-making

Labor

• Availability of technological resources: productivity and efficiency increases facilitated and supported by technological development as outlined above

• 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:

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

Employee productivity increases as they get more done in less time and machines take on manual tasks. Both efficiency and accuracy improve.

Billing Model

The billable hour will sooner or later get under attack. As a productivity metric, it is weak since it only measures volume, not effectiveness or efficiency. Clients are now looking for case efficiency to get results quickly at an affordable rate. Additionally, some practice areas are becoming increasingly commodified (e.g., in the insurance defense space, carriers are focused on minimizing average payouts instead of fighting every case).

Compensation

To address the aforementioned developments in terms of pay structures, incentives should aim more at results than volume. Additionally, macro-economic pressures will impact compensation in the law firm space: Over time, the pay per hour will have to increase as worked hours decrease, but salaries remain at the same level or go up, the reasons being: 

1. Employees get more results in less time.

2. As machines take on more labor on a macroeconomic level, pay levels must remain stable (at reduced working hours) to ensure economic stability.

It is also worth mentioning that, as machines take on more simple tasks, pay levels among different job types will get narrower.

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.

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