Embracing change: From AI innovation to transformative leadership in law firms

May 28, 2024

In an era where change is the only constant, law firms are facing a pivotal moment that calls for a radical shift in key aspects of their business, from strategic planning to technology adoption. However, it’s not just about embracing change, but also having the courage – and skill – to navigate the transformation effectively.

At Sandpiper Partners’ COO/CFO/C-Level Roundtable on Business and Financial Management, top law firm leaders, knowledge and innovation executives, and industry experts, including our CEO Clare Hart, highlighted the importance of change management in the context of evolving office space norms, generative AI (artificial intelligence) implementation, and decisive law firm leadership.

Here are the key takeaways from the event:

Modernizing the law firm: From dusty plans to actionable strategies

Today’s legal arena, marked by rising costs and a growing emphasis on efficiency and innovation, demands effective strategic planning and unwavering follow-through from law firm leadership, transforming discussions into tangible results.

“Law firm leadership these days understands that if you don’t have a plan in place, in terms of how to move your company forward… you’re operating with one hand tied behind your back,” said a law firm C-level panelist.

Priorities have also shifted. While having a centralized vision for the entire organization remains important, the focus of today’s law firm leadership has moved from vague goals to more concrete, actionable ones, ensuring that clear objectives are set, and individuals are held accountable. “These days, it’s less about vague aspects and more about business management and business development,” one C-level panelist commented. “It’s about where the next dollar is coming from, where the firm should be, in what sectors, really drilling down into those practice areas.”

When it comes to advocating for and executing these plans, the panelists agreed that firm leadership must be relentless. “Make sure your plan has a concept and keep referencing it,” said one panelist. “Make it the backdrop of your culture, develop networks, develop metrics, and keep hammering those through, whether it’s about technology, changing work environment, or the financial discipline that’s needed, both on the revenue and cost sides.”

Historically, law firms have not been the biggest proponents of change, making change management a challenge. However, they have shown remarkable resilience in recent years and will continue to evolve. Williams Lea CEO Clare Hart noted that this newfound flexibility and adaptability has extended to outsourcing, particularly to India. “For years, a lot of law firms would say ‘No, we’re not going to do it.’ Now as firm leaders look at budgets, they remember that Williams Lea has over 1,500 of highly skilled professionals in India and know we have provided work for the largest investment banks and professional services firms in the world,” she said. “If we can do it for them securely and efficiently, we can do it for law firms. In fact, we’ve set up two big law firms in India in the last two quarters.”

A flight to quality, nuanced approaches, and agile working

The future of the modern law firm, as it relates to physical space, is still taking shape. However, firm leaders and workspace consultants are seeing trends toward quality, agility, and communal spaces to adapt to the ever-evolving ways of working.

“There’s a real flight to quality in terms of office space,” said a panelist from a real estate consulting firm. “Law firms are looking to get better buildings and spending more money on rent per square foot, so there’s a lot of competition on the higher end of the market.”

How these spaces are configured varies from firm to firm, with each one spending more time figuring out what works best for them. Many have converted conference rooms into communal spaces such as lounges and coffee bars, but there are other firms that have taken an even more nuanced approach to space utilization. “Starting from the partners down, how often you showed up in the office in the last six months determines whether you’re getting assigned an office, and a lot of folks don’t qualify,” said one law firm panelist. “At the end of the day it’s not about saving money, but about creating energy, by having folks sit more closely together, not having a lot of offices between them – that will certainly influence the energy and culture, how often people bump into each other, which we hope will be quite often.”

One workspace strategy that law firms continue to discuss is hoteling. It gained momentum in the last couple of years, but according to the real estate consultant on the panel, “Every firm is having a debate on what to do and how to handle it, but we’re seeing very limited hoteling, and very few firms have gone to a complete hoteling [strategy].”

Navigating the complex realities of AI adoption

Forget AI robots taking over; law firms are facing a far more grounded reality: Tackling the numerous hurdles that come with harnessing the potential of GenAI, from finding the best talent to managing expectations.

The market for top AI talent is particularly fierce, with tech giants often outpacing law firms in attracting the brightest minds. Hiring your own talent to develop and maintain an AI tool requires substantial resources, prompting many firms to consider the “buy vs build” model. This decision adds yet another layer of complexity to the process: Selecting and trusting the right partner in a crowded marketplace filled with varying promises and capabilities. One knowledge and innovation executive shared, “The space is moving so fast that with every new generation of Large Language Models that comes out renders a bunch of startups obsolete.”

Another panelist cautioned, “Make sure the vendors you speak with understand how their products work, and whether their product can integrate with your systems.”

Firm leaders also have the responsibility to ensure that their existing technology vendors, which are normally bigger players in the market, collaborate with the new partners and welcome them into the ecosystem. “It’s really tough for a lot of these [new] vendors to integrate with these systems, because there’s resistance on the part of the bigger players,” shared one panelist. “Firms should consider taking more of an advocacy role, saying to their existing vendors, ‘We expect you to be a collaborative player.’”

The transformative journey from a traditional law firm to a dynamic, innovation-driven one is well underway, and those that embrace this shift with open arms will not only survive but thrive. The moderator at the event asked, “If 2007-2008 was the era of the Great Recession, 2011 was the era of transactions, and 2020 was the pandemic, what is this era going to be?”

This is the era of change.

The landscape of legal services is shifting. Download our report, The future of the legal workplace, to ensure that your firm isn’t just a participant, but a leader in this age of transformation.