While GenAI can automate many tasks, it doesn’t necessarily mean reducing headcount. This is especially relevant for Midsize law firms, many of which already face leverage challenges. GenAI can allow such firms to reallocate their human resources to higher-value tasks like complex problem-solving, client relationships, and strategic work that AI cannot replicate.

With GenAI handling routine tasks more efficiently, firms often find they have increased capacity without increasing staff, leading to growth in revenue without a proportional increase in costs.

Will GenAI mean fewer staff?

Many Midsize firms are justifiably wary of further reducing staff. Some firms already face significant challenges attracting and retaining top talent in a competitive legal market, making the prospect of downsizing even less appealing. For them, GenAI represents a powerful tool to enhance both performance and job satisfaction by alleviating tedious tasks. The ability to focus on the more stimulating and rewarding aspects of their work, in turn, makes the firm more attractive to ambitious legal professionals. Indeed, the top two areas in which legal professionals wanted AI to influence were improved work-life balance and more time spent on engaging judgment-based or expertise-driven work, according to 成人VR视频 Future of Professionals Report.

Moreover, human oversight remains essential. While GenAI can draft documents and conduct research, legal professionals are still needed to review, refine, and ensure the quality of AI-generated work. As , an experienced litigation practice leader at McGivney, Kluger, Clark & Intoccia, aptly puts it: “Our legal professionals use AI tools to enhance our work product and save time and money for our clients, but we always verify the facts and law.”

Many clients now expect firms to use AI to improve efficiency. And law firms have discovered that meeting this demand doesn’t necessarily mean reducing staff but rather enhancing current staff鈥檚 capabilities. In fact, corporate general counsel have expressed a desire to evolve their departments into value centers and become strategic leaders, according to the by the 成人VR视频 Institute. This desire for efficiency and strategic operation isn’t limited to in-house legal teams, the report shows, it also extends to GCs鈥� expectations of their law firm partners as well. Clients increasingly want to see the same commitment to leveraging technology for efficiency and cost-effectiveness that they seek on their in-house team reflected in the actions of their outside counsel.

Enhancing existing capabilities

Leveraging GenAI effectively starts with integrating the technology into current workflows 鈥� training teams to use AI-powered tools for tasks like document review, due diligence, and contract analysis, or to speed up case preparation. McGivney Kluger鈥檚 Raymond, a self-described optimist when it comes to AI in law, says that if law firm leaders 鈥済et this right, this is a growth opportunity,鈥� adding that clients are becoming increasingly aware of the potential of AI. “As sure as death and taxes, they will not pay for manual review of 5,000 pages of medical records” the same as they did before this technology was available, he notes.

Enhancing the team’s capabilities with GenAI also better positions those Midsize firms that are looking to capture a larger market share and deliver superior service by targeting clients that might have historically been out of reach due to concerns about scale. This ability to punch above your weight is a key advantage for Midsize firms aiming to secure higher-value and more prestigious work that had been traditionally dominated by larger competitors.

Special Report Perceptions, usage, and impact of GenAI on the future of work   View full report

For example, Raymond describes his firm鈥檚 integration of vetted, secure, and closed-system AI tools which ensure data privacy and accuracy into its workflows, which allowed the firm to demonstrate to client its commitment to providing both exceptional results and cost-effectiveness.

This efficiency gain is evident across various practice areas. For example, in litigation, tasks like deposition review and summarization or complex medical records review, which previously demanded hours of lawyer time, can now be achieved up to 80% faster with GenAI, allowing for significant cost savings and freeing lawyers to focus on strategic case development, which translates into more billable hours that are less likely to fall victim to a write-down. Further, transactional attorneys and paralegals experience similar benefits. Instead of painstaking manual contract reviews, these tools can quickly analyze contracts for specific clauses, identify potential risks, and even compare documents against precedent or regulatory requirements 鈥� all completed in minutes, leading to quicker turnaround times for clients and more efficient use of billable hours.

Other ways GenAI can help Midsize law firms

There are a few additional considerations for Midsize law firms that are looking to position themselves for an AI future, including:

Developing new service offerings 鈥� GenAI opens doors to innovative services that were previously impractical or impossible. For example, some firms are offering AI-powered legal health check-ups for businesses, rapid regulatory compliance reviews, or predictive legal risk assessments. Firms might also develop automated contract management and alerting systems. These new services can create additional revenue streams without significantly increasing costs, positioning the firm as an innovative leader in the legal market.

Investing in human skills 鈥� Midsize law firm leaders shouldn鈥檛 lose sight of the uniquely human elements of their legal practice. Instead, they should invest in developing critical thinking and strategic planning skills among their team. By focusing on enhancing emotional intelligence and client relationship management abilities and nurturing the capacity to provide nuanced legal judgments and make ethical decisions in the context of AI use, leaders can better prepare their teams for an AI-driven landscape.

Aligning with client expectations 鈥� By proactively adopting GenAI, firms are not just cutting costs, they鈥檙e meeting and exceeding client expectations. According to the 成人VR视频 Institute鈥檚 2024 Generative AI in Professional Services听谤别辫辞谤迟, a significant portion of various corporate departments expressed that their external partners should be utilizing GenAI. Specifically, 58% of corporate legal departments and 56% of corporate tax departments held this view. Additionally, 44% of court systems and 40% of government legal departments also indicated that the outside firms they collaborate with ought to be implementing GenAI in their practices.

Communicating value 鈥� Transparency is key when implementing GenAI. Firm leaders need to clearly communicate to clients how GenAI is being used to improve service delivery and reduce costs. Educate them on AI adoption processes and its benefits and be open about addressing any concerns regarding data security and ethical AI use. This openness builds trust and positions the firm as an innovative leader in the legal industry. Raymond characterizes this as an opportunity to define the client firm relationship and establish guidelines together on billing and workflow efficiency optimization.

Offering continuous learning and optimization

The 成人VR视频 says that to deliver unparalleled client outcomes, law firms must proactively harness the transformative potential of GenAI for enhanced efficiency and cost-effectiveness. As such, firms should regularly assess and update AI tools and processes and stay informed about legal and ethical considerations of AI use in law. Leaders should encourage innovation and experimentation among staff; and to ensure GenAI integration is empowering a profit center, they should establish clear metrics for AI implementation. They should also regularly review and analyze the impact of AI on their firms鈥� profitability, gathering feedback from both staff and clients to continually refine firms鈥� approaches. And remember, be prepared to pivot your strategy based on results and emerging technologies.

Conclusion

The future of law isn’t about replacing humans with AI 鈥� it’s about creating a synergy between skilled legal professionals and cutting-edge technology. By strategically implementing GenAI, Midsize law firms can transform themselves into highly efficient, profitable teams that are ready to meet the challenges of tomorrow’s legal landscape.

Remember, the goal isn’t just cost-saving 鈥� it’s about positioning the firm for success in an increasingly AI-enhanced world while ensuring employee development and satisfaction. With the right approach, GenAI can help better serve clients, open new areas of service, and drive profitability in ways that, before now, weren鈥檛 always possible. As the legal industry navigates this transformative period, it’s clear that the firms that embrace this change proactively and with optimism will be better positioned to win.

You can find more about the challenges facing Midsize law firms here

Let鈥檚 start with what it 诲辞别蝉苍鈥檛 need to do: It 诲辞别蝉苍鈥檛 need to hire data scientists or turn its lawyers into AI experts. For smaller law firms, as for most firms across the spectrum, Gen AI technologies will increasingly be embedded in the products they use. If a firm deploys those products effectively, it is deploying AI.

Like any implementation of new tools and technology, however, this does require some measure of strategy and forethought. Even the smallest of firms needs a time-bound strategic plan executed with testing and learning across the firm.

Part of that strategic planning process will include identifying pain points and challenges in the current way of doing things. One area that may be low-hanging fruit for many smaller firms is in marketing and business development 鈥� simple blog posts and website creation can be facilitated more easily with Gen AI, for example 鈥� as well as other areas where non-legal administrative work takes too much time and resources.

Our recent study, Chat GPT & Generative AI within Law Firms, provides a road map. In general, the survey found that while law firm lawyers are generally open to using Gen AI in their work, there is considerable skepticism about leveraging AI in core legal work.

However, respondents felt slightly better about using Gen AI tools, such as the public-facing ChatGPT, for non-legal work within a law firm, such as basic question-and-answer services or other administrative tasks. Almost three-fourths (72%) of respondents said they felt that Gen AI should be applied to non-legal work within a firm 鈥� a much higher percentage than those who said they felt it should be applied to legal work within the firm, 21 percentage points higher, in fact.

If a small law firm is looking for places to get started with Gen AI, there are some examples in which a strategic approach can bring quick, yet real transformation to both the business and practice of law within the firm.

Turning administrative tasks into strategic advantage

Efficient deployment of software to enhance the administrative side of running a law firm can shift the discussion from efficiency to strategic advantage. Gen AI-based tools can turn back-office tasks into vehicles for additional strategic insight, better client relations, and, ultimately, higher revenues.

Some key first steps that firm leaders could take include:

• • • Review goals, processes, and tools for client communications 鈥� Are the firm鈥檚 teams able to produce timely, accurate, and engaging client communications? Could its lawyers sometimes be better communicators? Gen AI will significantly impact the time and effort required to generate first drafts of communications. Think of this as an opportunity to revisit the firm鈥檚 goals and strategies for better client communications and to leverage the expertise of its professionals that is currently locked away in internal documents and work product.
    • Find new ways to provide more responsive client service 鈥� Gen AI is behind many products (such as chatbots) which offer organizations new ways to provide speedy responses to clients about their matters and billing and take some of the friction out of routine client inquiries.
    • Assess markets and identify business opportunities 鈥� AI also has become essential for transactional lawyers by enabling them to assess prevailing market terms while advising clients. Those same techniques can be used to understand broader market trends and identify market opportunities by tracking the direction in which the market is moving.

Accelerating and enhancing the quality of legal work

As lawyers build familiarity with Gen AI through its application to administrative tasks, and as the tools continue to evolve, the stage will be set for the application of Gen AI beyond the business of law and into the practice of law. Indeed, Gen AI has the potential to transform the substantive legal work at the heart of a law firm鈥檚 value to clients, with a wide range of potential applications and advantages, including:

• • • Legal research: Keep up with the dramatic improvements that Gen AI is bringing to legal research tools 鈥� AI has been embedded in legal research tools for years, but a new generation of AI capabilities will dramatically alter the research experience for lawyers. Central to those changes is the ability to ask questions in conversational dialogue with research services and arrive at synthesized answers rather than just lists of relevant documents. Staying on top of the latest features of legal research platforms will provide a strategic advantage for small law firms against competitors of all sizes, allowing solo and smaller firms to meaningfully level the playing field.
    • Drafting: Integrate Gen AI tools across the drafting process and leverage a firm鈥檚 work product 鈥� Gen AI systems can enhance the process of drafting, but they also provide an opportunity to increase the value of a firm鈥檚 own standards and precedents. AI-based drafting tools can automatically pull preferred document language from external content sources or a firm鈥檚 proprietary documents.
    • Document review: Make AI part of a firm鈥檚 document review processes 鈥� AI has proven to be an effective way to support lawyers with first-pass analysis of documents such as contracts or leases. Gen AI features will make those processes more like conversational dialogue with the documents and will spare lawyers from the more routine parts of the job to instead free their time to focus on analysis and client consultations.
    • Unleash better service and productivity: Leverage integrations among these tools to achieve better quality of service and productivity 鈥� Gen AI will weave together the research, knowledge management, and drafting processes that are now separate processes that require lawyers to shift in and out of different tools. Firms can benefit by examining and re-working their internal workflows to take advantage of those shifts and by changing processes or changing who does what work.

Moving boldly toward an AI future

There is no reason for small law firms to be intimidated by AI. None of these innovations are out of the reach of the typical small firm, and these firms often have the advantage of being able to redeploy resources and change direction more quickly than their larger counterparts. Being nimble requires discipline, however, and all law firms need to take a strategic approach.

As we discussed earlier in this series, AI has already made many important impacts in how lawyers do their work. Gen AI will add important components to the mix, not the least of which is added capacity for lawyers and the potential to increase the appearance of professionalism in the eyes of clients. This new generation of Gen AI tools will draw upon data, technology, and expertise to produce quality results, and lawyers in small law firms are just as well positioned as their larger law firm counterparts to add their own unique domain expertise to that equation.

Larger law firms that are experimenting with Gen AI have spoken often about how their first forays into this new world of AI tech will focus on internal tasks, looking to experiment and iterate out of view of the client, while seeking to develop levels of expertise that can then be leveraged to the client鈥檚 advantage. Small law firms can undertake the exact same process, and in fact, may even beat their larger competitors to meaningful results thanks to their agility and already simpler processes.

No one knows for sure what the future of Gen AI will look like. However, for small law firm leaders who are willing to take bold but intelligent steps, a bright future may come into focus quickly.

This is the third in聽a series of blog posts聽about how small law firms can address the opportunities and pitfalls brought by generative artificial intelligence.

Further, artificial intelligence itself 诲辞别蝉苍鈥檛 replace lawyers鈥� expertise. Rather, it provides a platform for lawyers to leverage and extend their domain knowledge, enabling them to bring higher levels of productivity and service to the benefit of their clients and firm alike.

In short, Gen AI presents unprecedented opportunities for small law firms to compete.

Human expertise is critical to the success of AI

It鈥檚 common to hear concerns that Gen AI and other technologies will cost lawyers jobs or diminish the value of their work. While AI might entail a shift of some specific tasks from humans to machines, in reality, the idea that AI will diminish the contributions of human lawyers could not be further from the truth. Indeed, the opposite is true: Gen AI requires legal domain expertise and skills to function correctly.

AI is not just a technology but a fusion of three essential resources: i) relevant data sets; ii) technology tailored for specific applications; and iii) the human expertise guiding its practical use and informing training and error analysis.

AI won鈥檛 work in a specialized domain like the legal system unless all three of these components are present 鈥� none of them alone is more important than the other two.

In a highly specialized domain like legal, extensive sets of accurate and updated data such as statutes, regulations, and case laws are necessary to train the machine-learning algorithms of the technology. Moreover, without lawyer-generated data such as contracts, memoranda, and prior work product, reliable outcomes from AI tools would be unattainable.

AI technology combines data with the tools built by expert developers who combine analytical and problem-solving skills with a solid understanding of the target domains.

In the final component, legal experts guide AI training, verify algorithm performance, and are central to error rectification. They bridge the gap between tech professionals and domain-specific applications. Only lawyers think like lawyers, and their perspective is crucial to ensuring AI works correctly within the legal practice.

What happens when one part is missing?

鈥淕arbage in, garbage out鈥� is certainly one of the most time-tested rules regarding data and technology, and it鈥檚 certainly having a moment amid popular early impressions of Gen AI鈥檚 capabilities.

The widespread availability of early forms of the public-facing Gen AI tool, ChatGPT, was useful because anyone could test it out, which encouraged experimentation and drove initial innovation. Lawyers testing ChatGPT soon found that it could create legal documents that sounded very authoritative; however, they also found out that reliance on them could have real consequences.

The openly available versions of Gen AI are really just sentence-completion engines trained on an unfiltered base of data from the internet. ChatGPT has no intelligence of its own; rather, it鈥檚 good at drafting language that sounds like a plausible response to a user鈥檚 prompt.

Because of the lack of native intelligence, ChatGPT may sound like a lawyer, but it 诲辞别蝉苍鈥檛 deliver the accuracy and precision that lawyers require. It can, and has, cited non-existent sources and invented facts. These examples are called hallucinations and聽include the submitted a brief supporting a motion that included citations of non-existent cases and other legal inaccuracies 鈥� but it sounded good. He had simply asked ChatGPT to write his brief, with disastrous results.

ChatGPT 诲辞别蝉苍鈥檛 have the data training nor domain expertise to be reliable. As a result, it can very easily introduce errors into its responses. It simply 诲辞别蝉苍鈥檛 know better.

The possibility of such errors presents an unacceptable level of risk for legal professionals. So how will lawyers, especially those at smaller firms, effectively use Gen AI while maintaining all their client and ethical obligations?

Authoritative legal data is the backbone of Gen AI

Beyond just selecting the words for a response, technology also provides part of the answer for how lawyers can effectively use Gen AI. Retrieval Augmented Generation (RAG) is one method designed to improve the response quality in Gen AI systems. In products that use RAG, the user鈥檚 prompts or queries do not pass directly through to the underlying Large Language Model (LLM). First, the question runs as a search against a trusted body of content 鈥� for example, verified legal content from a legal publisher or trusted documents from the user鈥檚 organization.

Documents relevant to the question are retrieved first, and the question and the verified content are passed on to the LLM for processing. This ensures that the answers to users’ queries are grounded in trusted domain-specific data, not just a random sample of data (however large) from the wider internet.

Gen AI presents unprecedented opportunities for small law firms to compete.

The idea that legal Gen AI means turning over legal decision-making to a machine overlooks the importance of the data portion of the Venn diagram above. A properly trained and targeted Gen AI application for legal use will build on the work of lawyers in the form of cases, statutes, briefs and memoranda, how-to guides, contracts, client advisories, templates 鈥� all the esoteric and robust data that results from lawyers’ expertise and knowledge.

All law firms, even smaller ones, have an opportunity to leverage their own data assets against competitors at scale once their lawyers identify and curate the appropriate critical data sets from within their firm and embed them within the AI solution. This proprietary data can be combined with larger pools of data from authoritative external sources like trusted legal content sources to further strengthen the responses that the Gen AI tool provides.

Legal domain expertise is vital for success

Lawyers provide a layer of trust between clients and the systems that generate their various legal deliverables. Clients rely on lawyers鈥� domain expertise to ensure the right tools are used for their legal matters, with the best results. After all, clients hire lawyers because they want trusted experts representing them.

The recent 成人VR视频 Future of Professionals Report surveyed lawyers and accounting professionals about their concerns and expectations around the role of AI in their work. One of the report鈥檚 primary conclusions was: “As an industry, the biggest investment we will make is trust.鈥� Trust is the legal advisor鈥檚 stock in trade; tools and technology can enhance productivity and generate new types of service offerings, but in the end, it鈥檚 the legal expertise of human lawyers that creates value upon which clients rely.

That layer of trust has several dimensions, including:

• • • Accuracy 鈥� Is the machine producing the correct result? Does the lawyer understand how the machine works and knows how to evaluate its accuracy?
    • Ethics 鈥� Is the lawyer accountable for the work product? Is the lawyer fully representing the client’s interests and using the best tools for the job?
    • Security & confidentiality 鈥� Is the lawyer protecting client data?
    • Value 鈥� Is the lawyer using sound judgment in choosing where automation creates value and where direct human interaction is more valuable?

Ultimately, the value that clients see in their outside firms鈥� legal work is not determined by the underlying tools; it鈥檚 found in the client鈥檚 confidence in lawyers鈥� expertise in matching the right tool and methodology to the legal task, and lawyers鈥� accountability for the result.

By leveraging strong proprietary data sets, access to the same technology and industry data as larger firms, and deep domain expertise, coupled with the inherent trust that small law firms can build with their high-touch client relationships, small law firms can use Gen AI to gain access to scale and competitive abilities unheard of before in the legal industry.

This is the second in a series of blog posts about how small law firms can address the opportunities and pitfalls brought by generative artificial intelligence.

That is a key finding in the latest edition of the 成人VR视频 Institute鈥檚 .

Where previous editions of the report have frequently been a case of the more things change, the more things stay the same, this eighth annual edition of the report shows that small firm lawyers may be exiting this rut.

This is understandably of critical importance because practicing law 鈥� rather than administering to the business, while albeit vitally important 鈥� is literally how small firms and their lawyers make their money. The primary service that every law firm sells is each lawyer鈥檚 billable time 鈥� and the limitations are the number of hours in a day, and how many of those hours each lawyer can devote to billable activities. At the end of the day, being able to record more billable time is an essential way for small firm lawyers to bring in more revenue.

Each year we鈥檝e conducted this survey, respondents have said they are spending too much time on administrative tasks and not enough time practicing law. Indeed, this problem has been at or near the top of listed challenges that lawyers report facing. Yet, despite this consistently being among their top challenges, we had noted a disturbing pattern in which the percentage of time spent practicing law had been declining 鈥� until this year.

After holding steady in 2021 and 2022, the percentage of time small law firm lawyers spent practicing law went up to 61% this year, a jump of 5-perecentage points, compared to 56% last year. At the same time, time spent on administrative tasks declined slightly to 9% from 11% during the same time period.

Each year we鈥檝e conducted this survey, respondents have said they are spending too much time on administrative tasks and not enough time practicing law…聽 until this year.

Moreover, small law firms may be on the cusp of significant changes that could affect how they practice law, as well as impacting their potential for better growth and financial performance. Technology is definitely part of it, although not necessarily in the way that may come to mind immediately for many.

Small firms occupy a unique spot within the legal industry, making up the vast majority of law firms, despite their size. Small firm lawyers are both simultaneously legal practitioners and small business owner-operators. Whether a solo-entrepreneur or part of a firm with several dozen lawyers, small firm attorneys must manage and balance both the legal practice and the business side of their firms.

However, potentially significant changes are currently underway, according to the findings of the report. And these changes likely will impact how small firms operate, especially the emergence of new technologies such as generative artificial intelligence (Gen AI) and public-facing tools like ChatGPT that could help firms more effectively manage both the practice of law and their business.

Among the report鈥檚 other key findings:

• • • Increasing efficiency and better cost control are rising as additional key challenges. Firms are taking steps such as making investments in technology to improve efficiency and reduce costs.
    • Gen AI is currently a hot topic, but it鈥檚 too early to assess with any certainty how it will impact small firms. While Gen AI tools for legal workflow are just beginning to emerge, other forms of AI-driven technology may have more immediate possibilities for assisting with back-office functions such as marketing.
    • Focusing on fundamentals such as improving efficiency, reducing costs, and marketing & business development may hold the most immediate potential for further gains in small law firm performance.

For a full discussion of the current state of performance for small law firms and their outlook for the future, you can 听丑别谤别.

I know this because I have seen first-hand how law firms have adopted earlier generations of artificial intelligence into their practices. From the first generations of natural language processing that were built into legal research products decades ago, to more advanced applications for AI in products used for large-scale document reviews, law firms have effectively adapted to new forms of AI when they are embedded in the many products that lawyers use every day.

By strategically implementing early-generation AI technologies, small law firms have achieved greater efficiencies, improved client services, and tapped into analytics and automation, all of which were once the exclusive domain of larger firms. And smaller firms can often pivot to these new capabilities much faster than their inertia-bound large law brethren.

How AI has already boosted the performance of small law firms

Artificial intelligence has already transformed the way small law firms do their work in ways many don鈥檛 even realize, especially in areas such as:

Research and document review 鈥� AI has been leveraged in legal research and document review for years. Now, a newer generation of research and analysis tools is taking on more of the workflow around these tasks. Traditional time-consuming and labor-intensive research and review work can now be executed in a fraction of the time. Small law firms with limited staffing can leverage these capabilities to take on more cases without compromising the quality of their work, increasing their profitability and competitiveness. Further, this allows smaller firms to take on more client work if they choose to augment billings.

Case analytics 鈥� AI-powered data analytics is another area where small firms can level the playing field and go toe-to-toe with large firms. Advanced machine learning algorithms can sift through vast amounts of data to uncover patterns, assess legal precedents, and even predict the likely outcomes of cases. Such analytics were once the purview of large firms that could afford dedicated resources. Now, smaller practices can access similar insights through SaaS (software-as-a-service) platforms at a fraction of the cost. This enables more informed strategic planning and resource allocation, and it can also serve as a powerful tool for client engagement, as firms can offer more precise, data-backed advice 鈥� all topics I鈥檝e written about for years.

Client services 鈥� Chatbots and AI-driven customer relationship management (CRM) systems can significantly enhance the client experience as well. These tools can handle initial client queries, schedule appointments, and send reminders, offering a level of responsiveness that was previously only possible for large firms with dedicated support staff. Such technologies create an impression of high-quality, attentive service, making small firms more appealing to potential clients. They minimize lawyers鈥� administrative burden, freeing them up to spend more time on the practice of law. Additionally, utilizing AI in this way will measurably increase the satisfaction of current clients through these service and support enhancements.

Marketing 鈥� AI can be a boon for the marketing strategies of small law firms by analyzing market trends, customer behavior, and even the efficacy of previous marketing campaigns. This data can be used to tailor more effective, targeted advertising strategies, enabling small firms to reach their desired audience with a precision that was once only achievable by large firms with extensive marketing budgets. Content for marketing campaigns can be generated and tested with limited effort and expense. And all of this will strengthen the conversion of prospect to client, thus addressing the all-too-important business development need for small law firms.

What generative AI will add to the mix

Generative AI capabilities go well beyond the changes that AI has already brought to legal work, in a number of ways, such as:

• • • It can engage in a dialog with lawyers by providing answers to lawyers鈥� question prompts, but in a dynamic way, allowing lawyers to modify, narrow, or broaden a question as needed. Working with generative AI is more like working with a trusted colleague 鈥� it serves up helpful results quickly, so you can get to the next step of applying legal expertise and validation even sooner.
    • Gen AI can identify insights from authoritative legal content 鈥� either a firm鈥檚 own data or content provided by trusted publishers or other sources.
    • It assists with drafting documents, speeding the process toward a client-ready work product while drawing on authoritative data sources.
    • Gen AI also can mine a firms鈥� own data on legal matters, billing, and other areas to more quickly synthesize data and highlight key trends within seconds.

Generative AI also enhances professionalism in the eyes of clients

Lawyer-driven tasks such as those mentioned above are all areas in which the skills and experience of a legal professional are essential. They also include some related tasks that consist of more tedious and lower-skilled work.

Analysis, advice, listening, and negotiating 鈥� these are the situations in which the personal services that small-firm lawyers provide add the most value. Scheduling, assembling spreadsheets, drafting routine memos, document review, and the many other manual tasks that lawyers do? Not so much.

Many lawyers already understand the benefits and competitive advantages of leveraging generative AI in client service. In 成人VR视频鈥� recent Future of Professionals report, legal professionals identified many applications for AI, including speeding up drafting and editing client communications, assisting clients with updates on changing regulations and legislation, and improving the readability of the documents they share with clients. The study also identified research and document review as tasks in which efficiency and improved response times will benefit clients.

However, the survey identified a larger and more strategic benefit that should be of particular interest to small firm lawyers. Most professionals believe AI will result in greater appreciation of their higher-level professional skills.

And this is key, because one of the reasons many lawyers and clients choose small law firms is the opportunity to work in consultative and trusting client-advisor relationships. AI is likely to have its most significant impact on lawyer tasks that are largely hidden from clients, and streamlining those tasks creates an opportunity to enhance long-term relationships with clients and allow lawyers to focus on those human engagements that clients value.

The competitive opportunity for small firms

Leveraging generative AI will not require small firm lawyers to suddenly become data scientists or invest heavily in developers or computing power. Increasingly, powerful generative AI capabilities are embedded in the types of products that lawyers at small firms are already using. Success will come from seeing those products’ capabilities enhance and transform the way legal work is delivered.

AI technology can become a disruptive force that may significantly mitigate resource disparities between small and large law firms, leveling the playing field for small, agile firms to outmaneuver their larger competitors by embracing innovation more swiftly. In an industry often seen as traditional and resistant to change, those small law firms that leverage AI effectively will thrive in the future competitive landscape and demonstrate the real innovative spirit clients are looking for.

This is the first in a series of blog posts about how small law firms can address the opportunities and pitfalls brought by generative artificial intelligence.

However, that optimistic outlook didn鈥檛 necessarily translate into new tech adoption, as fewer small law firms adopted new technologies in 2022 than in either of the previous two years. What small firms did focus on, however, was supplementing and formalizing technologies that had been recently adopted, such as video conferencing platforms that were pushed into use during the pandemic. Further, there鈥檚 reason to believe that as small firms anticipate a business boom in 2023 and beyond, business development and marketing upgrades are firmly on their radar.

Just 41% of small law firms adopted new technologies in 2022, according to the report, which was down from 50% in 2021 and 45% in 2020. That decrease in new tech adoption may largely be a function of technology budgets that were static 鈥� 78% of small law firm leaders said their budget for legal-specific software in 2022 was unchanged from the year prior, and similarly 82% said their budget for non-legal-specific software also was unchanged. A higher proportion of firms had reported increasing budgets for both types of software in 2021.

A more status quo state of being didn鈥檛 surprise Stephen Curley, former chair of the American Bar Association鈥檚 GPSolo Division and principal at the Connecticut-based Law Offices of Stephen J. Curley. At his firm, technology spend largely focused on bolstering the use of recently adopted technologies, such as Zoom, Curley says.

鈥淪ome of the investments that I made back in 2020 that were more or less done in an ad hoc or an emergency basis, I just backed up,鈥� Curley explains. 鈥淚 didn’t branch out into something new or different come 鈥�21 and 鈥�22.鈥�

Focusing on business development & marketing

When small firms did plan tech investments, however, the report found that business development & marketing priorities played a bigger role than ever before. For example, the percentage of firms planning on purchasing billing & invoice software rose from 6% in 2021 to 18% in 2022. The firms investing in marketing software or a firm website, meanwhile, rose from zero of the 80 respondents in 2021 to 14% of respondents in 2022. These shifting tech priorities mirrored a rising goal for small firms: To grow the size of the firm, which respondents ranked as their top firm goal for the first time.

Part of the reason for these increases could be simple: the emergence of a larger potential client base since the pandemic, Curley notes, adding that previously, as an attorney located in Stamford, Conn., he focused his business development & marketing efforts on clients in his immediate vicinity and out of his local courthouses. Now, with virtual meetings and remote court proceedings, it was possible to take on business in other areas of Connecticut, such as in the state capital of Hartford.

鈥淭he reach of a solo who has expertise in those areas isn鈥檛 necessarily confined to where you can drive or get to on a Monday morning, when it might have been five years ago,鈥� Curley explains. 鈥淣ow you can have a more statewide practice, and you can be competitive in other regions of the state that you wouldn’t have otherwise been able to thoughtfully do.鈥�

Curley 诲辞别蝉苍鈥檛 see remote proceedings ending any time soon, indicating that he was planning on continuing to invest in video and other related technologies. Indeed, the report echoed this point: More firms than ever before (73%) said that more than 10% of their initial client meetings were done remotely. More than two-thirds also said they preferred having marketing events, product trainings, and sales & renewal conversations with outside vendors in a virtual setting. And while the proportion of firms with more than 10% of attorneys working remotely dipped slightly from 2021, the survey still reported more than half of firms (60%) with that level of attorney remote work.

Taken together, the report paints a picture of small law firms that are conscious that changing business development and legal practice strategies is necessary for the evolving legal world and are solidifying their efforts to do so.

Not surprisingly, this technology adoption is not only taking place among younger, potentially more tech-savvy attorneys, but also among more seasoned attorneys who find themselves at the frontlines of technology now that the virtual legal world has proven to not be a fad, Curley says. 鈥淚 think, to a degree, those who didn鈥檛 throw in the towel and are still practicing are going to find themselves more and more wedded to it by choice or otherwise.鈥�

And particularly among attorneys who are a decade or more into their career and may be at the peak of their revenue-generation power, it鈥檚 even more crucial to keep up with the changes. 鈥淚f you’re not up to speed on that technology, you’re losing your edge and you’re losing the ability to maximize the most productive years in your career,鈥� Curley adds.

These are among the key findings of the newly published 2022 Report on the State of US Small Law Firms from the 成人VR视频 Institute.

Even as the overall economy has turned sour for many, smaller law firms have maintained a bullish outlook on their future prospects, and likely with good reason. Evidence across the legal marketplace indicates that corporate clients are looking for ways to push work down to lower-cost legal service providers, creating new opportunities for smaller law firms to capitalize on their pricing advantages.

At the same time, however, those small law firms that serve primarily individual clients continue to face pressure from alternative providers like do-it-yourself (DIY) legal sites. Yet, small law firms report that they are not facing an increasing degree of pressure from those competitors, with whom they have learned to cope over many years of market maneuvering.

This most recent edition of the Report on the State of US Small Law Firms once again explores the current state of the legal market through the eyes of leaders of small legal practices, offering several insightful glimpses into their thinking. While leaders of small law firm continue to characterize their practices as generally successful, for example, some cracks potentially may be emerging. Increasing costs pressures for some small law firms and a heavier administrative burden continue to place ever greater pressure on firm leaders. Moreover, broader economic challenges could put further pressures on this group of firms.

Still, for those small law firm leaders who take a mindful and strategic approach to the problems many of them foresee in the future, as well as those they admit they鈥檙e already dealing with, the current upheaval in the broader economy and the legal market specifically could provide fertile ground to turn difficulties into opportunities.

Among the report鈥檚 key findings:

• • • The outlook for small law firms is increasingly positive;
    • Small firms by-and-large consider themselves to be successful;
    • The competitive landscape is shifting, and this provides both new opportunities and rising threats; and
    • Small firms are demonstrating the ability and wherewithal to make changes and potentially take advantage of those opportunities.

The report also highlights the positive outcomes that can result from a determined focus on addressing a key challenge, offering the example of how small law firms dealt with one recent problem. In 2020, getting paid by clients was one of the top concerns among small law firms with nearly two-thirds (64%) of firms reporting it as a significant or moderate challenge. However, more than 40% of small firms reported that they have a plan to address the problem and they had already implemented changes to address the issue through such strategies as increasing retainers, improving payment collections, and accepting electronic payments such as ACH payments and debit or credit cards. Fast forward two years and the percentage of firms that view getting paid by clients as a significant or moderate challenge has fallen to 54%. And those firms that rated it as a significant challenge has been cut by more than half to just 9% compared to 19% in 2020.

Small law firms that follow this example as they look to address the challenges reported in this year鈥檚 edition of the Report on the State of US Small Law Firms are certainly not guaranteed a similar result, but the evidence suggests that they are far more likely to enjoy a positive outcome and capitalize on their bullish vision for the future.

You can download a copy of the 鈥�2022 Report on the State of US Small Law Firms鈥� by completing the form below:

They also can level the playing field by engaging in the right activities that get them in the arena; and they can build a reputation that attracts the next level of clients with whom they want to work.

Know what you want to do

Before we start, however, we must make some assumptions. If the type of matters you, as a small law firm lawyer, seek needs armies of lawyers that you don鈥檛 have, then you鈥檙e fighting a losing battle. If you have little or no knowledge or talent in a specific area, you first need to upskill before expecting to land work. However, if you鈥檙e choosing matters you can handle from a staffing and skills perspective, here are some things you can do individually to help make your case:

Your bio 鈥� This is your first audition for the job, and most lawyers fail miserably. Most bios are cold, sterile, laundry lists of services that do little to inspire, intrigue, connect, or convince. Open with an interesting statement that sets a tone, focus on the type of work you want to attract, add some (properly edited) success stories, add a pinch of personality, and highlight some characteristics that make you different from other lawyers.

Identify your targets 鈥� After you determine the type of work you want, clearly define your audience. With what type of companies do you want to work? In what geographies? What are the names of those companies, and who are the decision makers you need to meet? Where do they congregate, what do they read, and what do they listen to? These are your future business friends, the people who need to know you. Few lawyers put in the time to gather this information, but it鈥檚 a crucial step toward making a name for yourself in the right crowds.

Become famous 鈥� Once you鈥檝e identified your audience, find ways to get on their radar to build your reputation and establish important relationships. Be ubiquitous and saturate the market with your name. As they say in the Broadway smash Hamilton: 鈥�Be in the room where it happens.鈥� Go where they meet, speak where they listen, and write where they read. There are several ways to accomplish these goals:

• • • Speaking: If you have the personality for it, get on the speaking circuit. Get some coaching and study videos. This is another opportunity to audition, where people extrapolate your skills based on how well you present yourself. If necessary, start small and build yourself up. Use one talk as a reference for the next. Get in some practice so when you get on those bigger stages, you鈥檒l have honed your craft. Also, while your firm may not be a household name, the bigger stages allow you to borrow their authority to enhance your personal reputation. Fortunately for you, many lawyers are poor presenters, so if you put in the time, not only can it become a major differentiator for you, but it also amplifies your presence in front of large, targeted audiences.
    • Writing: Similarly, you can borrow the authority of news publications, trade journals, blogs, or social media channels. Without too much strenuous work, you can create short pieces that provide insights, add a bit of style, and find topics not everyone else is talking about. Again, start small if needed. When I began my career in legal marketing, I was living in Boulder, Colo., and I reached out to the local Boulder Bar Association to ask if they wanted an article. That was an easy yes, and after I was published, I used it as social proof to get an article in the Colorado Bar Association. I repeated the process and got published in American Bar Association publications 鈥� it took off from there, and I now have written 14 books and more than 60 articles to date.
    • Establishing personal connections: I won鈥檛 kid you into thinking speaking and writing are the Holy Grail for magically attracting top clients. It鈥檚 good for reputation-building, but you need to get down in the trenches and go one-on-one to build personal relationships with the right people. You can do that by using your speaking and writing as reasons to reach out to your target audience. Interview some, ask a few to co-author or co-present, and request feedback from others.
    • Leapfrog: In the game of leapfrog, you use someone as leverage to go from where you are to somewhere else. Similarly, you can ask people you know to introduce you to high-value people that they know. For example, if you interview someone for an article, at the end you can say something like 鈥淭hank you so much, I really appreciate your insights. By the way, do you know any others who might be interested in sharing their thoughts for this article?鈥�
    • Take leadership positions: I鈥檝e heard it said it鈥檚 better to be the star in an off-off-Broadway show then to be buried in the chorus of a big production where no one sees you. Get people used to seeing you a leader. Even if you start small, it gets you visibility, you gain social status through the reputation of the organization, it provides access to others, it gives you reasons to reach out to targeted people, and it provides a launching pad for leadership positions in higher level organizations.

None of these approaches require staffing, gobs of money, or a pre-existing brand name. It does take planning, grit, and consistency. If you follow these steps, you鈥檒l start finding yourself on the short list for the type of work you most desire. 鈥�Be in the room where it happens.鈥�

But law firm profitability does not end with that portion of the analysis. Of equal importance, of course, are the concepts of client expectations, data and metric capture and analysis, and ultimately, the positive outcomes that law firms can experience by meaningfully examining the full spectrum of their profitability.

Client expectations

A lawyer has clients, and not customers, and for very good reasons. There should be nothing more important to a lawyer than the tasks that their clients have given them. Lawyers owe a fiduciary duty to their clients; however, this duty often has been distorted to justify the pricing of legal services. And while clients cannot always be right in the attorney-client relationship, the relationship has been far too one-sided 鈥� the lawyer is not always right, especially when it comes to pricing and methods.

Legal practitioners tend to overlook another key variable that drives profit in nearly all other businesses 鈥� customer expectation and satisfaction.

A persistent myth regarding the practice of law holds that lawyers cannot manage these outcomes because the results are simply the results: clients will go to jail, get divorced, pay money damages, not receive enough damages, or feel they paid too much for a transaction.

In reality, the intangibles of client satisfaction, regardless of matter outcome, are key to finding more profit. For example, satisfied clients are more likely to pay the bill, return for more services, refer a friend, and even promote 鈥渢heir lawyer鈥� in casual conversation. Most lawyers consider customer satisfaction anecdotally, i.e., sometimes former clients refer new clients. However, client referrals and the business they generate can be more than just an unintended happenstance. Just as with the other key areas of law firm profitability 鈥� costs, pricing, and revenue 鈥� customer care must be systematically measured with an eye toward intentional improvement.

How to capture the variables of profitability

While law is a mental exercise, how the practice manifests and grows (or not) can be measured by data, such as client demographics, net promoter scores, client satisfaction scores, conversion rates, return rates, billing & collection rates, in-depth time analysis (not the billable hour), and analysis of fixed and variable costs.

How to gather and measure this data seems like an impossible task to most lawyers, especially those in smaller firms or solo practices. And to be frankly honest, most lawyers do not have the aptitude. They went to law school to help people or because they were fascinated by the operation of law and politics, but not data and economics. The old attorney adage has been said often: 鈥淚f I was good at math, I wouldn鈥檛 have gone to law school.鈥� Yet, it is also true that one of the clearest paths to higher profitability is found by collecting and analyzing that data, then acting on the findings, no matter how small the law firm.

For lawyers pressed by time and budget constraints 鈥� in other words, everyone in the legal profession 鈥� the only solution is collaboration with technology, even if the lawyer is a proud Luddite. The investment of time and money into technology may be a barrier for some smaller outfits; however, the return on those investments can be seen throughout the legal industry.

Fortunately, technology on the whole is getting cheaper. The right investment in the right technology will quickly recoup the cost. And yes, there is risk in choosing the right technology, but not making a choice is guaranteed to put the technology-inept lawyer behind as more lawyers shift to these more innovative methods.

Profitability analysis is good for lawyers, clients & the profession

Merely raising hourly rates, as has been done for decades, is generally good for no one other than the lawyer, assuming the lawyer or the firm can collect.

Yet, after taking a long hard look at the firm鈥檚 profitability 鈥� and possibly taking steps towards improvement based on this analysis 鈥� who might benefit then?

• • • The client might get a lower bill, resulting in a higher likelihood of paying promptly and being a happier customer. And even on a lower bill, the lawyer鈥檚 profit and margin could ultimately be higher.
    • After a critical evaluation of the inputs, the bill could be higher but still be paid by a happy client because now the client better understands the value of the work.
    • Through management of firm costs, a higher bill may result in even higher profit and margin due to the firm鈥檚 efforts at budgeting and improving efficiency.
    • Work performed more quickly and efficiently frees up time for more lifestyle choices for lawyers, and whether they choose to find and do more work or head home to family and hobbies, there is a clear benefit to lawyers鈥� well-being.
    • The firm can produce better work product because the work is created with efficiency and therefore more uniformity. Plus, legal malpractice risks are reduced.
    • Finally, lower bills and a better presentation of value encourages more lawyer engagement, which in turn allows for more lawyer availability to protect the fundamental rights of clients.

If your law firm is not engaged in profitability analysis, you鈥檙e falling behind. It does not all need to be done at once, and nearly any effort should move the needle in the right direction. And once that momentum begins, the positive results will be obvious.

In the end, however, it is a change in mindset that is more important 鈥� lawyers must be taught to seek profitability, not billable hours.

Of course, moving beyond this simple formula takes time to consider and critically examine the revenue, costs, and methods of practicing law. To the lawyer, the limited billable time in a day cannot be wasted in doing so. Thus, law firms merely set the prevailing hourly rates for their lines of work in their community; and ultimately, consumers had no influence on price because the only marketplace was the one established by lawyers.

The ever-rising hourly rates were justified to consumers because practicing law is indeed complex, though not all aspects of practicing law are equally complex. Nevertheless, many in the legal profession insisted that profitability would sully the integrity of law. The practice of law is an art, they contended, and the result yields what it yields. For the most part, many legal services have always beyond reproach 鈥� short of a malpractice accusation 鈥� and therefore, the price to consumers and the cost to law firms related to these methods stayed beyond reproach, too.

Even when presented with cost saving methods, such as electronic research, the billable hours that could have been saved were merely worked and billed in other ways.

Today, however, there many more alternatives fueled by technology, money, vision, and changes in regulation. Today鈥檚 clients expect great service, value, and results 鈥� all at a price they perceive to be better, just like everything else they buy. This creates downward pressure on prices for all law firms.

The largest law firms spent billions of dollars and hired expertise to meet the challenge with improved profitability as the goal. Meanwhile, most lawyers seem oblivious as rates and services have remained steady, creating a 鈥渢ake it or get no services鈥� proposition for consumers. In the face of this failing model, profitability analysis should be a welcomed change.

What is profitability?

For most midsize to smaller law firms, profitability is the balance in the operating account 鈥� cash on hand to pay office rent, salaries, the mortgage on the house, college tuition, all with some left over. In short, bringing in more revenue than the expenses.

In reality, this has little to do with actual profitability.

To stay competitive all lawyers must examine and measure the actual variables of higher profitability. That means managing costs and pricing & revenue, along with other variables that I will discuss in the second installment. Now, let鈥檚 look at how cost and pricing & revenue can be addressed to improve profitability.

Costs

In nearly every other business, examination of costs is a critical function. Concepts such as margin, fixed and variable costs, operating leverage, billing utilization and collection, return on investment, and cost per unit, while crucial, are seldom part of a law firm鈥檚 business plan.

Consider for example lawyer wages. In business, labor and wages are generally considered variable costs. The more a business produces, the more labor the business needs 鈥� and this holds true for law firms as well. Yet, where law firms disconnect from other businesses is in that their associate wages are often seemingly an entitlement based on the number of years an associate is out of law school.

Some will argue that this is how professionals are paid. In other businesses, however, costs, including wages and profit, are driven by many variables in the marketplace. In law, wages of lawyers and support staff are merely baked into the billable hour. Associates are expected to bill hours to the detriment of their lifestyle in order to cover expected wages plus partner profit. And because law firms compete for talent based upon the entitlement system, the labor cost analysis is stunted from the outset.

Scale is another critical element of cost. Instead of partners merely passing billable hours onto associates, which is not scaling, the analysis should be how to efficiently scale 别惫别谤测辞苍别鈥檚 time and work, including staff. Lawyers and staff must be keenly aware of how they spend all their time, including on flat fee and contingency matters, and not just the time that ends up making it on to a bill. Through this, everyone at the law firm can consider the actual cost of labor, the return on investment, and then find ways to scale. As in every industry, when scale improves more money is made by everyone.

Price & revenue

The idea of doing work at a lower price seems anathema to most attorneys; however, some work will have to be done at a lower price point. When it is done more efficiently and at scale, more work can be done, which can actually bolster revenue. While the challenge in this scenario is finding more work and clients, lower prices should attract more clients and bills should be easier to collect, which equals more revenue.

Other legal work can be done at the same price or even higher prices, if clients find value in the product 鈥� even when that work is produced at lower costs unbeknownst to the client. Examples of this span the horizon of the changing legal marketplace 鈥� from the complex, such as cross-discipline collaboration, multi-jurisdictional practice, and artificial intelligence to simpler things, such as lower real estate costs made possible by remote work, document automation, texting and video communication, better billing and meaningful use of technology that will lower costs and lead to better financial outcomes.

There is more to explore related to calculating and improving law firm profitability, and we will explore that in the next part of this series as we examine client expectations, how to capture measurable data for profitability, and the ultimate benefits of robust profitability analysis.

Next: How law firms can best capture profitability and its benefits