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Law firm changes

Top UK law firms, slow to automate, shift decision-making away from partners toward experienced professionals as the line blurs between client-facing and back-office roles, finds report by Professor Kishore Sengupta of Cambridge Judge Business School for LexisNexis.

Close up of a statuette of Themis, the ancient Greek Goddess of justice, wearing a blindfold and holding scales in one hand and a sword in the other.
Kishore Sengupta.
Professor Kishore Sengupta

There has been a shift in decision-making at large UK law firms away from partners toward highly experienced professionals along with a “blurring” of client-facing and back-office roles, concludes a report on the largest 50 UK law firms over the past five years by Cambridge Judge Business School on behalf of LexisNexis.

The report concludes further that, despite advances in artificial intelligence and other technologies, top UK law firms have been slow to automate owing to a focus on short-term profits and billable hours. The report also finds that progress among firms in adopting sounds strategies coupled with strong execution has been very uneven, leading to a “two-track sector” in which firms on the top track are likely to accelerate past stragglers.

“This two-track variegation is analogous to the challenges and opportunities of globalisation in the nineties,” says the report by Kishore Sengupta, Professor of Operations Management at Cambridge Judge, who interviewed partners, leaders in business services roles and general counsel. “A few decades on, those who did act with clarity have become significantly larger global firms than those who were ambivalent. Variations in progress accumulate over time, and differences in speed are difficult to overcome later.”

The new report – entitled “Lead or follow? How law firms adapt to a changing market” – builds on earlier reports by Cambridge Judge Business School for LexisNexis over the past five years on topics such as the client experience, trust and transparency, and innovation at law firms.

“Make no mistake, these are big questions and important ones,” says Mark Smith, Director of Strategic Markets at LexisNexis, in a foreword to the report. “In the same way that 10 or 20 years ago large law firms made some important strategic questions about their international footprint, firms right now are faced with big decisions about their business model, their technology strategy and their culture. While the winners and losers may take time to emerge, we hope the research can prompt further reflection about the nature and pace of change in law firms.”

The report notes how decision-making was traditionally the preserve of partners, but many firms have now recruited outside professionals, often from management consultancies, and conferred significant business-service responsibility on them including placing a few on boards or executive committees. “This shift has enabled capability development, transfer of practices from other professional sectors, greater professionalisation in operations, and faster innovation,” the report says.

The blurring of front- and back-office roles has come through recruiting and assigning professionals with key specialisations. “The traditional divide of lawyers being client-facing and being supported by others in the back office is being complemented by embedded and integrated teams in which business services personnel (such as legal project managers, technologists or data scientists) are central to client interactions. Such teams reduce traditional silos between the front and back office and thereby improve delivery.”

The report said that while greater automation allows legal professionals to focus on complex problems where they can add the most value, talk about a law firm technology revolution has not been matched by action. “Repeated conversations with partners, senior business services professionals and individuals from legal technology-oriented start-ups lead to the conclusion that the degree of automation has not been adequate,” the report says.

Three reasons for this are identified: many law firms use technology primarily to grab “low-hanging fruit” rather than thinking strategically about how tech can transform legal practice; lawyers expect technology to simply work out of the box rather than evaluating how it will affect their own work and firms; and law firms focused on partner in-year profit are historically reluctant to invest in assets (including technology) whose returns may be well into the future, while billable hour targets leave many lawyers with little time to experiment with new technologies.

“Why does this matter?” asks the report. “The legal sector has become increasingly competitive, not least because of the entry of non-traditional competitors such as the big-four accounting firms. These firms have invested in technology and are in a significantly better position than top-50 law firms for exploiting technology-related opportunities. Somewhat less immediate is the threat from big technology firms that have mastered the intricacies of technology and in some cases have used technology (typically for commoditised legal services) to bring legal work in-house. Thus, the gap in technology is not abstract: it has the potential for significant competitive challenges for the legal sector.”