What Will The Legal Industry Look Like In The Future And What Challenges Do Law Firms Face?

By: Hannah McMurrough


The legal industry is constantly evolving and responding to social, political and business development. In recent years major changes in areas such as technology, mental health and diversity and inclusion have prompted innovation across the profession, raising recurring and new challenges for firms and their clients. This article aims to touch briefly on a few of these issues by considering what these challenges are and what the future of industry could look like.


Covid-19 and Remote Working


When considering the future of the legal profession, the on-going COVID-19 pandemic undoubtably raises its head as one of the central challenges faced by the industry today. PWC, in their Embracing Change to Succeed Law Firm Survey 2020, stated that the corona virus pandemic is viewed to be the most ‘significant threat to law firms and their ambitions to meet their future objectives over the next 2-3 years.’


The survey reports that 81% of the Top 100 law firms felt either ‘extremely concerned or somewhat concerned’ that the pandemic would inhibit their ability to meet its ambitions and profitable growth objectives through to 2022. Other areas that are predicted to fall include fee income, which is estimated to decline throughout 2021, alongside significant falls in profit from ‘6.5% to 20.5%’ across the Top 10 firms and the Top 26-50 firms respectively. Uncertainty remains regarding the future effects of the pandemic and as a result, firms face the challenge of balancing caution when it comes to financial management with anticipating positive changes in income and profit throughout the months and years to come.


The pandemic has negatively affected all sectors, and the legal industry is no exception. The lockdown in March 2020 dramatically halted the traditional, face to face office environment for the foreseeable future and required firms to implement immediate measures to facilitate remote working for its employees to enable efficient, effective and productive delivery of its services for clients.


The implementation of firm wide IT measures and technological infrastructure has been a steep learning curve for many. Technologies including digital platforms to assist in video conferencing between colleagues and clients, cloud computing and virtual private networks for sharing and storing data, services that enable remote management of teams and provide monitoring and productivity statistics are some of many developments that have enabled the industry to effectively adapt to the new environment. The challenge in doing so must not be underestimated but law firms have reacted remarkably well to the disruptions, especially given the industry’s reputation of being relatively slow to respond to technological and IT developments.


In a sense, the pandemic has sped up what was already occurring slowly across the industry. Prior to the March 2020 lockdown, some firms had already implemented remote working opportunities for lawyers seeking to split remote and office work throughout the week. The benefits of these alternative models have been significantly highlighted over the past year.


The Office for National Statistics estimated that in 2019, 1.7 million people out of 32.6 million were reported to have mainly worked remotely from home. Some predict that this number will dramatically increase as firms implement longer term initiatives to promote remote working beyond the pandemic in a bid to reduce their physical footprints in the form of real estate, a cost generally seen to be a firm’s second largest expense. Not only does this provide cost benefits to the firm but it also promotes an enhanced work life balance for employees who have the option to split their weeks between working remotely and in person, offering a more flexible work model.


The future of the industry therefore seems to be moving towards a hybrid, innovative and flexible method of working that enhances the balance between the needs of the firm, its clients and its lawyers. As firms continue to invest in technologies such as machine learning, AI and IT that facilitates remote working, the path ahead appears to demonstrate a widespread shift across the commercial law industry towards non-traditional and innovative work methods.


Technology and Innovation


Beyond the challenges presented by COVID-19, the legal industry is also faced with the pressure to be technologically innovative. If law firms wish to remain competitive, innovative and forward looking they must seek to challenge the structures that hold back and slow LegalTech development. Professionals from firms such as Pinsent Masons and Ashurst point to partnership structures, traditional business models and a general culture of conservatism as examples of such barriers.[1] In recent years the focus on challenging the traditional model of the law firm and keeping pace with rapid technological change has increased, with firms investing in and promoting the development of modern technologies such as artificial intelligence and machine learning that provide efficient, productive and cost reducing benefits.


The benefits of legal tech are undeniable, but how much technology is too much technology? The Financial Times reports on how the explosion of legal tech start-ups and providers has supplied firms with an overwhelming plethora of choice among new innovative technologies, generating a new challenge for firms within the industry. The article refers to how the once small group of ‘medium to large providers of specialist legal software’ has been transformed into a ‘constellation of small providers’ that overwhelms the market and provides an excess in supply that is not met by demand.[2]


Furthermore, legal tech apps may be frequently incompatible with each other and unable to be utilized together therefore raising numerous issues from ease of use to concerns regarding the security of data which must be shared and uploaded to separate systems. Looking ahead, firms are instead seeking to also invest in single platforms that are specialized in providing numerous services therefore reducing the difficulties associated with integration of applications and improving cybersecurity.


Cybersecurity


As briefly mentioned, the advancement of legal tech and the expansion in the use of cloud-based data storage and sharing systems also presents a modern challenge to firms in the form of cybersecurity risks. The survey conducted by PwC demonstrates that cybersecurity is the second greatest challenge to the legal industry behind the COVID-19 pandemic. Due to the sensitive nature of the data that law firms hold, breaches in cybersecurity can have detrimental consequences for firms and their clients. Therefore, implementing measures to mitigate against these risks is another central challenge for firms currently and in the future as tech innovation continues to expand.


Mental Health and Wellbeing


Technological development is not the only form of innovation that firms are seeking to invest in in the years to come. The legal profession is known for its long, grueling hours, heavy workloads and competitiveness. Many professionals report feeling anxious and depressed, facing burnout and work-related stress as a result of an inability to switch off or maintain a healthy work life balance. In recent years law firms have recognized this issue within the industry and have committed to investing in measures to support employee health, both mental and physical. One example is leading commercial law firm Allen & Overy who have implemented the ‘Our Minds Matter’ programme that aims to support the health and wellbeing of its lawyers by promoting a ‘safe, supportive and open culture’ that encourages discussion surrounding mental health and provides a support network for those who may be suffering. Commercial firm Slaughter & May have adopted a similar stance, implementing strategies such as the partnership with Upmind, a workplace mental health and wellbeing app. There has been increasing momentum for improved mental health and wellbeing services across the industry and firms have and will continue to invest in initiatives to make positive change in this area a priority.


Diversity


Finally, an exceptionally important issue facing the legal profession is diversity and inclusion. The legal industry has traditionally been dominated by elitism and privilege. Firms lacked diverse representation at all levels. Diversity and equality were, for a long period, not a priority.


In its D&I report, Linklaters emphasises the importance of ‘top down’ commitment to challenging and changing the firm’s culture and environment. By celebrating diversity and creating an open and supportive environment to share and listen, they aim to generate ‘new networks and relationships’ that promote belonging and inclusion for all. Inclusive culture training, tackling unconscious bias during recruitment and bringing awareness to bias are some of the strategies that firms like Linklaters have implemented in recent years.


Firms have committed to increasing diversity and inclusion at all levels, from recruitment, retention and job progression. Investment in initiatives aimed at promoting equal access and providing greater opportunities for under-represented groups during recruitment has been a priority.


Significant developments have been made in promoting a culture that is supportive and inclusive. However, there is still a long way to go in transforming the industry and ensuring that it is diverse, equal and open to all at every level, regardless of race, ethnicity, gender, religion or sexuality. In February 2021, senior vice-president of Coca-Cola Bradley M Gayton, criticized the efforts made by firms stating that ‘discussions about the importance of diversity, written action plans, score cards, committees’ have not worked, and that the industry has been ‘too quick to celebrate stagnant progress.’ Top level members of legal firms still lack diversity and many fail to meet minimum diversity and inclusion requirements.


Large corporations such as Coca-Cola and technology company HP have begun deducting fees in response to these issues. Coca-cola has implemented its own diversity guidelines, requiring that 30% of partner and associate billed time must be delivered by diverse lawyers, with half of this time being delivered by black lawyers. Powerful companies such as these are enforcing their influence to encourage greater levels of inclusion and diversity, especially at senior levels of firms.


The road ahead for the legal industry is uncertain and firms face many challenges from technology to diversity. Yet these challenges present exciting opportunities to expand and grow into areas that require further progress and others that have yet to be explored and developed.

[1] https://www.collectivecampus.io/blog/legal-innovation-5-experts-predict-future-challenges-and-opportunities [2] https://www.ft.com/content/d9d475c2-d544-11e9-8d46-8def889b4137