Why Law Firms Are Automating Advice
The Traditional Law Firm Business Model
Advice is at the heart of every law firm’s business model, so why are law firms automating it? The answer to what seems like a contradictory practice lies in first understanding how traditional law firms currently operate. Law firms at their core, are revenue making machines. When a client has a legal problem, law firms provide advice and generate legal documents. These activities are billed in six-minute increments, so why would lawyers want to automate these processes if inefficiency increases revenue? The simple answer is this: Law firms are driven by their clients and partners. With automation becoming more prevalent in the legal space, clients and partners are driving law firms to innovate for several reasons, including efficiency and revenue generation around the clock.
Why Are Law Firms Automating Advice?
The Rise of Fixed Fees
Clients are demanding fee structures for simple types of work. Accelerated by the emergence of NewLaw, reduced pricing models, alternative legal services, and new players in the market, law firms are now being driven towards commoditising these services. However, if fees are fixed, lawyers are now incentivised to do more work, faster. The problem here is that efficiency in the current law firm model is constrained by the number of lawyers and the number of hours these lawyers work. Therefore, several firms have now turned towards automating fixed fee work to provide services around the clock at a competitive price point.
A lot of work done by law firms is not billable. However, non-billable work must be done in order to maintain relationships or is considered “value-add”. An example of this is loss lead work which is often done for business development and obtaining new clients via free work. By automating non-billable work, lawyers can free up time for expert analysis instead of focusing on generating business for the law firm.
Innovation to Win Work and Retain Clients
As innovation becomes more prevalent, panel tenders expect law firms to be using automation to drive efficiency and retain their position on the panel. With panel clients focusing strongly on efficiency, it is more important than ever for law firms to show that they are innovating and can provide their services at a competitive price point.
Productisation to Create Models of Value and Revenue
Traditional law firm business models are being challenged, particularly because clients are starting to expect less strictly legal advice-based outcomes but more business outcomes. Because of this shift, law firms are now looking to use automation to maximise profit around the clock. Law firms currently are constrained by the working hours of their headcount but with productised legal services, clients can access the law firm and generate outcomes around the clock.
But If We Automate Advice, What do We have Left?
If this is what law firms fundamentally do as a business, then why would we automate it? Thinking about this makes some lawyers quite uncomfortable but it is important to understand that automation does not apply across the entire business.
Expert and Lawyer Work Falls into Three Key Stages:
- Gathering and organising facts by asking questions through interviews, back and forth emails, and other inefficient channels of communication.
- Applying analysis which is rules or expertise based.
- Completing tasks such as generating documents, writing e-mails, and providing legal advice. However, referring to the diagram above, it becomes quite apparent that not all of these can be automated. Lawyers should be spending more time on expert-based analysis and actions from expert-based analysis.
How Are Some Law Firms Automating Advice?
There is a traditional way of automating advice which includes building your own tech from scratch but from our experience, this has never been the right way to go about the process. Lawyers are experts in legal advice and should not be expected to be software experts as well.
Therefore, the types of advice automation tools currently being used by law firms include:
- Internal tools: used by law firms to internally arrive at an answer
When law firms are looking to arrive at an answer internally, they may engage in a lengthy, fragmented, and non-billable process. As a result, some law firms use automation to build self-serve tools that provide fast and accurate information and assessments 24/7.
- Internal-client tool: used by the law firm when interfacing with a client
When clients are looking to set up a new business, lawyers conduct non-billable manual meetings to identify the scope and gaps in their business. They often seek answers to questions such as if the client has a shareholder’s agreement. Questions are followed up manually by the lawyer and is often an inefficient process as the expertise of corporate law is concentrated between one and two lawyers. As a result, law firms have used automation to build apps which guide lawyers to ask the right questions and provide the right advice.
- Client-internal tool: used by the client who is then directed back to the law firm
When completing an unfair dismissal application, inquiries can be completely manual, requiring lawyers to complete the discovery and interview process manually. Such a process can be a huge waste of time for lawyers as the inquiries are incomplete, and clients may not know how to instruct or describe their problem to their lawyers. To resolve this issue, law firms have built apps using automation that are made available on their public website for self-serve preliminary assessments, guiding clients to answer the right questions. This often saves law firms up to four hours of work per applicant and improves acquisition from eight to 60 per month.
- Client tool: used by the client independently to arrive at an answer
An example of this is insurance claims eligibility. This is where law firms have insurance companies as clients and need to assess whether claims were eligible against their insurance policy. One of the biggest problems law firms encounter is low visibility on claims below the line aka in-house claims. To mitigate both issues, law firms have built automated apps and offered these to their clients to assist them with eligibility determination and triage. This has enabled law firms to better understand and track their client’s business.