Legal Tech Can Make You More Profitable – Wolters Kluwer Report

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Legal Tech Can Make You More Profitable – Wolters Kluwer Report

They said it couldn’t be done, but it looks like the ‘Future Ready Lawyer Survey’ by Wolters Kluwer (WK) has shown that successful legal tech implementation makes law firms more profitable, with 63% of ‘technology leading’ firms reporting profitability increases over the past year, compared to only 46% of other firms that have put less emphasis on tech adoption.

The chunky report, based on a survey of over 750 legal professionals across Europe and the US, concluded that: ‘Legal organisations that fully leverage technology outperform organisations that do not’. (And in fact they say similar results have been shown in previous years, so the consistency of these results does show validity.)

It’s worth saying that not all of this tech was from the very latest startups. Top picks of tech tools were things like document management. So, it makes sense. I.e. if you are not even investing in something as essential and that is obviously going to make it easier to serve your clients and focus on more high value work (rather than searching through Peter’s old email chain from last year to find a contract the firm did once), then you’re not probably going to be a leading firm in other ways too.

Now come the caveats. Are the most profitable firms spending more on tech because they can? I.e. if you are the largest law firm in London you probably have great clients and are very profitable. That means you can spend more on tech.

Or is it something else: do larger, more profitable firms actively desire to spend more on legal tech, which in turn facilitates their ability to serve their clients and hence allows them to make more money than less well-off rivals?

Or does it just happen because they feel they have to due to the segment they are in? I.e. is spending on legal tech now is in effect ‘standard procedure’ if you want to play in the big leagues and work with large, sophisticated clients.

Conversely, some of the smaller firms with less profitable work are not likely to spend any more on tech than they feel they need to in order to just to ‘keep the lights on’. So they are in a cycle, but more of a negative one. (Of course, there are some smaller firms out there that are VERY innovative and proportionally to income probably spend more on tech than some larger rivals….but they are clearly not the norm from what this site has seen over many years.)

We also have to consider whether ‘super apex law firms’ such as Wachtell Lipton make loads of dosh because of legal tech? Probably not. Meanwhile, Gubbins & Partners on the Old Kent Road, which mainly handles low end wills and probate, may not really see a massive boost to profits because of a raft of new tech investments….although it may certainly help a bit…..but only so much given its market position (and unless it was about to massively grow to get economies of scale).

One is stuck at the top of the market, the other is stuck at the other end. However, it’s everyone else in between we need to consider, and that is a lot of firms and 10,000s of commercial lawyers – and they may indeed benefit significantly from embracing tech tools that make serving their clients easier and can help to create value more rapidly (and may also prevent burn out of their best staff, which retains talent, which helps the firm to make more money – see below).

Overall, what this data suggests is that increasing tech enablement is a key part of being a profitable firm. This site would argue there is causality there, although there may be some more hard to connect elements around the edges, e.g. do the most profitable law firms spend mostly on ‘operational hygiene’ tech, or do they also put a lot into more strategic tech that changes how the lawyers work? That part we don’t know yet for sure in exact numbers, although total tech spend divided between ‘keep the lights on’ and ‘pioneering legal tech startup engagements’ will clearly be more toward the former category.

However, if you look at the UK, some of the larger and most successful law firms, whether Linklaters, Slaughter and May, Allen & Overy, Addleshaw Goddard, Dentons, Mishcon de Reya and many others here, clearly take legal tech investment very seriously and have put millions of pounds into innovation projects and spend plenty of time considering new technology and its benefits to the firm and clients. If that all went tomorrow would it be to their detriment? Both this site and apparently the survey results would say: Yes, you need to invest in tech to be a leading firm and make good profits – it goes with the territory (at least in the UK it does).

The question is perhaps now: what is the split between operational hygiene tech and truly innovative legal tech projects that firms undertake? And how much does the latter move the dial for profitability?

What else? There is lots to look at in the report (with a link to be added when available), with plenty of data showing more interest in tech across the legal sector overall, which is good to see. But the other nugget that really struck this site was:

  • ‘70% of corporate lawyers and 58% of law firm lawyers say they are very or somewhat likely to leave their current position in the next year.’

Not sure what kind of organisation you work in, but if I was the CEO of a large business and the HR team told me that between around 60% and 70% of my highly skilled and hard to come by staff wanted to leave, I’d be rather worried. In fact, I might even go as far as to ask: is there something systemically amiss here…?

It also shows that the salary war is a race to nowhere, as illustrated by this short legal drama.

Associate: ‘This work is too process-focused and dull. This is not why I became a lawyer.’

Partner: ‘OK, we totally understand, here’s some more money.’

Associate: ‘Wow. Thanks. And can I reduce the amount of dull process work that makes me feel like a legal robot not a highly trained lawyer that wants to help clients and maybe even make a difference?’

Partner: ‘Er…well…no. But how about we give you a bonus as well for all those long hours?’

Associate: ‘Thanks. But, can I just do less of this…?’

Partner (getting annoyed now): ‘Look, we gave you a pay rise, we gave you a bonus, and we let you work from home. Yes, I know you are burnt out, yes I know your mental health is crumbling right now, but money is all we have to give at this firm, so you can like it or leave. Your choice.’

Associate: ‘OK, if it’s like that, then I’ll leave.’

Partner (now worried): ‘What? You’re prepared to turn down the money so you can have more of a life? Are you totally insane? What is wrong with young people today!?’

And so it goes.

But, more seriously, this connects directly to legal tech. Tech is there to eat process and create efficiency. That is what technology does. From toasters to solar power.

If your staff are unhappy because they are bogged down in meaningless work, then….you can do something about it.

It may well mean re-thinking your organisational model. It may mean sitting down with clients and talking about how you can work together to drive efficiency and develop a better work/life balance for all……Sounds like a pipe dream, right? Perhaps, but what else is there to do? Just throw more and more money at associates until one day they are making as much as the partners? That truly would be an extreme scenario. There has to be a better way and tech is a tried and true method to solve this problem. We’re just not really using it…..enough….yet…..even though the WK report shows many positive signs. There’s still plenty of road ahead here for systemic change.

If this was of interest check out the webinar at 5PM UK time today where I’ll be part of panel with some very esteemed experts, all chaired by Ken Crutchfield at WK – link here to register for the event today.