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Should we invest in AI? Priorities and threats to the high street firm

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Joe Reevy offers his personal perspective on why law firms need to keep their focus commercial and to avoid getting distracted by the next big thing.

I’m often asked by partners in law firms about whether they should be adopting this or that technology. The current flavour-of-the-month question is whether they should be investing in artificial intelligence (AI). I see this question as symptomatic of several issues with the way many legal practices work. 

Of course, many law firms are very well run, however, in this article I argue that a combination of lack of specialist expertise, hierarchical structure and diffused responsibility creates a culture in many firms that is inherently less commercial than that of their clients – and this is the biggest threat currently facing traditional practice.

What’s wrong with the question?

There are two key issues with the AI question. As with many of these technology dilemmas, it is important to ask where it originated. You or a colleague may have attended a talk by someone with a vested interest in promoting a certain piece of tech – and left scared that if your firm sits on its hands your competitors will steal a march on you. Regrettably, a lot of things are sold to the profession this way.

This is the biggest threat currently facing traditional practice

Now, there’s nothing wrong with being aware of new technologies (in fact, it wouldn’t be a bad idea to employ someone specifically to look for new products and services which could improve efficiency in the firm). This needs to be systematic, rather than driven by this or that event speaker’s next book topic, and of course, you need a good process in place to harvest the fruits of any research.

The second point is about setting priorities: letting the latest big thing drive your decisions will produce sub-optimal results. This is true for firms of all sizes. Once a firm buys into an issue, it can quickly gain a momentum of its own and shoot up to the top of your to-do list. A classic example is re-branding: this is rarely necessary, seldom produces any tangible benefit and always costs a small fortune, absorbing resources while easier (and often more substantial) opportunities for the firm are relegated down the list.

In virtually every firm I have seen, the big issue is that too much professional time is spent on tasks other than profitable client work. In my 40 years in practice, the latest big thing has never proven to be the most important issue for firms to tackle. Yet all over the UK, firms are trying at be at the front of the AI revolution or talking about mergers (as if mere scale ever solved any problems) and outlining business development plans that involve fee-earners spending even less time on income-producing activities. It’s an issue with prioritisation.

How many people are involved in decisions?

Why do firms fail to prioritise well? Usually there are too many decision-makers, but with smaller numbers it also can be hard to get the right balance of expertise at the top or to set up appropriate measures that ensure senior people comply.

Firms with too many decision-makers can lose the ability to make decisions – even very easy ones – quickly. Decisions can also prove incredibly costly and are often not as well informed as they should be. Outside the legal profession this would be fatal. The bad news is this is becoming increasingly dangerous within the sector, as competition grows from the likes of Excello Law, quietly nibbling away more and more market share.

Research needs to be systematic, rather than driven by this or that event speaker’s next book topic

Here’s an example from my own experience. On multiple occasions I have presented our business proposition to a room full of partners. Imagine the cost of their combined billable time for that hour: how is it justifiable to waste, for instance, £5,000 of partners’ time on a decision which the firm could reverse after spending only a couple of hundred pounds? And that’s just the cost that is immediately visible. Given that the average law firm takes 10-14 months to take their decision, the real-time cost must be much higher. Not only is this financially inefficient, but it actively discourages experiment and creative thinking because the decision-making processes are so longwinded and expensive. (To compare, commercial firms usually take between two and five weeks to decide, if they don’t order on the spot.)

I have found that law firms rarely like to be the first to adopt new technology, so tend to pay insufficient attention to products that are not yet well-established in their market. Or if they don’t see a product that meets their exact needs they want to develop the process inhouse, rather than asking whether they should review their own procedures in order to make a lasting gain. There is some wonderful software out there (particularly in customer relationship management) that is excellent, cheap and easy to use, but which firms aren’t using.

Without a robust framework, powerful partners’ pet projects tend to be over-promoted 

When power is too concentrated, firms can quickly become fair game for anyone with undue influence among the decision-makers. When the management team is unbalanced in terms of power and skill-base (eg if legal skills are over-prioritised), the results are often sub-optimal. There needs to be a robust system of aligning individual performance with strategy from bottom to top, through an objectives and key results (OKR) framework (or similar). Without this, powerful partners’ pet projects tend to be over-promoted in terms of resource and attention.

My experience is that commercial boards don’t experience these problems to the same extent. I think this may be because they are used to making decisions in much shorter time scales and having OKRs with real teeth, founded on a robust budgeting process. The use of corporate or LLP structures can give firms the illusion that they operate like commercial enterprises, but what makes any organisation effective is the culture it adopts, not the legal form.

My advice?

Having basically thrown the book at the profession’s management, I would like to suggest what firms can do to help make smart commercial decisions about technological strategy.

  1. Get specialists in, with proven expertise in their fields for key appointments: finance, IT, business development are all key skills. Get the best people you can find. For many firms, this may mean paying more than they have been used to.
  2. Flatten your structure and give your experts authority as well as responsibility. Quality people whose decisions are constantly second-guessed by non-experts are unlikely to stick around for long.
  3. Lead by example: use pragmatic techniques, such as the use of OKRs, for people in management roles and enforce them for everybody.
  4. When any strategic procurement need is identified, assign someone to research the market and evaluate the best fit for your practice. What works well for others may not be the right choice for your firm.

To go back to where I started, what I say to lawyers who ask me about AI is that it should be at the top of their to-do list – once the tech has settled down and there are established suppliers. I reckon that will be about 2022. AI will be a ‘bet the farm’ decision for most firms and I don’t see a lot of benefit in being heavily committed to any one supplier at this stage. 

Joe Reevy is a retired partner in a leading regional chartered accounting firm and sorter-out of underperforming law practices (joe@bestpracticeonline.com , 01392 423607).

For the last 15 years he has concentrated on building technology and content products designed to deliver quick and lasting improvements to the business performance of law firms: legalrss.uk , crosselerator.com and words4business.com.

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