Lawyers are not anti-technology. Lawyers are pro getting sh*t done. The caricature I drew of the nose-to-the-grindstone inside counsel in my last post was an attempt to illustrate how the need, predisposition, and incentives to focus on immediate, mission-critical work often dominate the competing demand to systematically integrate new process and technology to improve the delivery of legal services.
I don’t blame lawyers (I don’t blame anyone). As I’ve written about before (and will expand on again in another post), technology is not magic and lawyers are not magicians. Properly integrating process and technology takes time and investment of organizational capital. Busy inside lawyers have neither. Yet, at a certain point, they have no choice.
While inside lawyers can often wield the illusion of unpredictability as a shield from scrutiny by other departments (e.g., finance), it only goes so far. Not only are law departments finding it harder to secure exemptions from across-the-board budget cuts, but the opacity that serves them well in maintaining their autonomy also derails attempts to make a compelling business case for more budget, headcount, etc. Law departments really are being asked to do more with less. And they can no longer meet the challenge of more by throwing additional (internal or external) bodies at the problem.
People cost money. And they tend to cost more money over time. Technology trends in the opposite direction (well, most technology). Labor-intensive industries (the stagnant sector) therefore have to raise prices as time passes, while technology-intensive industries (the productive sector) are able to lower prices. Absent confounding factors, there is a gradual increase in the share of spend directed towards the stagnant sector (education, health care, performing arts, and other labor-intensive industries) with a corresponding decrease in the share of spend directed towards the productive sector (food, manufactured goods, and other areas where technology has substantially augmented human labor).
This is Baumol’s cost disease, an economic phenomenon that undercuts the classical theory that wages rise with productivity. The classical theory was that the more productive you are, the more you get paid. The reality is that (across industries, as opposed to within them) the less productive you are, the more we need to pay you (unless there is a glut of qualified workers competing for your job). Unsurprisingly, Baumol himself identified “legal services” as subject to the cost disease. And recent scholarship has concluded, “Legal services are decidedly in the stagnant sector.”
Throwing ever more bodies at a problem is unsustainable. If the problems to be addressed exceed the bodies available, either the problems go unresolved or you find ways to improve the productivity of the bodies you have. Lawyers cannot stand letting problems go unresolved (again, the biggest reason they don’t take time for process and tech is because they are fixated on mission-critical work). So, despite many countervailing influences, inside lawyers are turning more and more to process and technology. Law is resistant, not immune, to productivity improvements.
In Altman Weil’s 2015 Chief Legal Officer Survey, the CLO’s (rightly) identified technology advances as the force that will most change the legal market in the next 3 to 5 years (the combination of internal cost pressure and unsustainability of law firm pricing ranked second).
Putting their money where their mouth is, law departments also focused their management efforts on the greater use of technology tools to increase efficiency in the delivery of legal services:
The focus on technology also caught the attention of Ron Friedmann and inspired him to ask Is Software Eating Law Departments? while reading Inside Counsel’s annual innovation awards issue:
The 2015 IC10: The law department of the future describes the 10 most innovative law departments of the year. It’s an annual feature. This year, 9 of 10 awards revolve around software. In years past, I recall that only 3 or 4 awards involved software….Reading IC, none of these strikes me as particularly advanced or game changing. Law departments seem to have won for automating processes that, in many other functions, likely would have been automated long ago….The good news here is that 9 of 10 awards are for tech and that law departments can still do so much more with software to improve their performance.
Along similar lines, I was recently contacted for a predictions-for-2016 piece in which the question posed was something along the lines of: what technologies will have the most impact on law firms in 2016? I cheated in responding that law firms should be most concerned with the technologies that law departments are deploying to keep work in-house or manage external work in a more sophisticated manner from multi-sourcing (e.g., involving LPO’s) to matter management to pricing. While the headlines cut in both directions, and there is no immediate existential threat, I do see a continuation of the trend that the biggest law firms’ biggest headaches will come from their biggest customers
Do I contradict myself? Very well, then I contradict myself. There are competing forces within law departments. In my last post, I dug into some of the reasons why inside lawyers are obstacles, rather than proponents, of innovation. In this post, I made the case that economic imperatives would drive investment in process and technology. Given the opposing pressures and constraints, it is unsurprising that progress is slow and scattershot but continues nonetheless.
Still, there remains a fundamental tension between last post and this post that is worth exploring further. While inside lawyers may feel compelled to invest in process and technology, it is still outside their wheelhouse. For most, process and technology are areas of neither personal interest nor professional training. And, regardless, inside lawyers are already overburdened with genuinely important work. This tension would seem to introduce a high likelihood of failure that would only create a deeper suspicion of process and technology. Yes, yes it does. It is almost as if larger law departments would be well served to have an interested, trained resource dedicated to the process and technology aspects of legal service delivery. Enter legal operations, a subject for another post.