Column: Transformation, Goodbye Time Sheets

[Opinion column written by Chris Garrod]

The AI Transformation begins

Every working day, I sit behind my desk and record what I do in increments of 6 minutes.

Time recording. Every qualified lawyer in private practice has been exposed to it, whether it be in the form of manually recording it via time sheets, or entering it directly into a specialized computer program.

Within the next five to ten years, the onset of automation and artificial intelligence [AI] will lead to a revolution of the legal industry that will likely transform that model completely.

The Billable Hour

For the most part, law firms make their revenue by billing their clients by the hour. Lawyers are accountable for their entire day. A “7” hour day is more or less a complete day, if one was to work from 9am to 5pm, take an hour for lunch and putting in the rest of their time as billable. In reality, lawyers work longer than that, but also devote a certain amount of non-billable time to marketing, administrative matters, training, etc. But ultimately in order for both the lawyer and their firm to succeed, then the more hours billed, the more money made for the firm.

Over the last ten years, this model has already come under increasing pressure from clients wanting to increase internal efficiencies and to reduce their administrative and legal costs.

AI Innovation and Legaltech

It is widely acknowledged that AI will eventually change the legal industry, and automation will over time replace certain functions: lawyers will be able to perform their current tasks far more accurately and effectively.

Within law firms, the collection of data and how it is processed is very important, but can also be quite straightforward. As such, various functions being carried out today by paralegals, less qualified associates or legal assistants, will be in time be replaced by robots and computers. They will become automated.

The Collapse of the Time Spent Basis billing model

As we move forward with more advanced AI and a more paperless regime, invoicing legal clients on the traditional “time spent” basis simply won’t work. Time won’t be spent the way it is now.

For example, things like paginating and bundling documentation, drafting standard agreements, simple legal opinions, precedents, resolutions, etc. Artificial intelligence one day will get to a level where it is able to carry out many human tasks, other than those requiring more complex, logical or judgmental tasks which absolutely require human intelligence.

And lawyers may, of course, still need to monitor much of the product that AI is producing, other than the automated tasks or those which are not complex.

But certainly, the way time is currently being recorded by lawyers on matters will have to drastically change. That is because everything will be done in less time and at less cost.

As a result, clients will not expect to pay the same amount for legal advice as are paying today. Based on current trends, and the AI technology which is already being implemented by some of the larger firms in both the UK and the US, it is likely the “time spent” model will disappear for most law firms within the next five to ten years.

The Darwinian Effect on Law Firms

The Darwinian idea is essentially that it is not necessarily the strongest or the most intelligent who will survive, but those who are the most adaptable to change. That idea certainly holds true when looking at the legal industry and how lawyers and law firms will need to adapt to take into account legaltech and AI.

Law firms will have to adapt their billing models to have any hope of either attracting new clients or retaining existing clients and to be able to compete with other firms that already use AI. Those other firms will quickly undercut the “tortoises” from a fee perspective and the firms which fail to adopt the new technology will be left in the dust.

The Knock-on Effects for Lawyers and their Clients

The result? It is hard to say, but I would expect that if robots or machines are carrying out the functions of, say, low level associates, then the path to promotion will possibly be longer for those lawyers. As automation will replace many of the tasks which junior lawyers are currently undertaking, new legal associates will, other than the exceptional few, likely have to expect lesser pay rises and a slower pathway to promotion. But an advantage would be that, because of increased efficiencies — meaning that the “time spent” model will no longer exist — the pressure exerted on those working behind their desks should lessen. Associates and partners in firms will not have to work as much as they currently do.

Indeed, if and when AI progresses to a very high level of intelligence, a large part of a lawyer’s work will shift from providing legal advice to instead marketing: trying to retain clients and attract new ones and working closely with them to understand their needs. From a lawyer’s perspective, the marketing of clients is one which very much requires a “human touch” and, particularly, a degree of empathy. Empathy is something which a robot, no matter how advanced, will likely ever be able to replicate.

Firms obviously need clients in order to generate revenue. From a client perspective, if the work which lawyers currently carry out shifts towards spending more time working on their relationships with them — including how to more efficiently and innovatively invoice them — then, ultimately, that will lead to greater value for clients.

The end result of the legaltech revolution should mean that, while some firms will be slow to embrace it and therefore struggle, it will lead both to the extinction of time sheets for lawyers, but also better, more effective and efficient client service.

And in the long term, everything in the legal industry as it relates to managing clients, will eventually be turned on its head.

Chris Garrod is a Bermuda insurance attorney with opinions on AI, legaltech, insurtech, IoT and fintech.

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