Law firm leaders remain focused on talent development, AI, and ESG amid tumultuous times

November 20, 2023

With global conflict, economic uncertainty and the growing prominence of artificial intelligence (AI), law firm leaders had plenty to talk about at Sandpiper Partners’ 16th Annual Global Law Firm Leaders Conference in London.

Responding to the global turmoil, addressing Environmental, Social, and Governance (ESG) issues, examining  the risks of AI on the legal industry and understanding the impact of all these on the talent development of junior lawyers were front and center as Denise Reid, Global Managing Director at Williams Lea, joined a stellar lineup of panel speakers comprising top international law firm leaders, general counsel, and industry experts for some thought-provoking discussions currently facing the legal industry.

Here are the top takeaways from the event:

Law firms are weathering the storm and are optimistic for the future

Despite the relentless challenges and uncertainties over the last three years posed by global shockwaves, caused by the COVID-19 pandemic, economic uncertainty, volatile financial markets, and geopolitical tensions, the panelists agreed that the legal industry has weathered the challenges and even thrived. “We’re operating at the moment in what sort of feels like a perma-crisis” said a managing partner of a leading international law firm, “We were on precarious ground and yet over the last three years, despite pessimistic expectations, I think the industry generally has performed remarkably well. It shows the resilience of our industry.”

The current conflict in the Middle East, and between Russia and the Ukraine, along with continued economic pressures, volatile markets, and a slowdown in corporate activity, leaves a wide-open path for continued uncertainty. However, the consensus from the panel was optimistic, “Of course, who knows what next year will hold, but so far this year, despite all of these shocks, we have done remarkably well.” This positive sentiment was backed by the CFO of a major global law firm, “I meet with many other law firms, and most are ‘well hedged’ businesses. For us, if M&A markets are more challenged, our litigation business is really flying as well as our RR&I business, and I imagine that’s consistent across most firms, and how many law firms tend to manage the economy.”

Law firms need to be proactive and strategic in addressing ESG issues

Global warming, social unrest, the effects of international conflict, and even AI are pushing law firms to manage Environmental, Social, and Governance (ESG) issues responsibly. The firm leaders agreed that there is a growing need to have a clear purpose, values and culture that align with the expectations of their clients and employees, and to use that to guide their decisions and behaviors on ESG and other ethical issues. “ESG in essence is about ethics: how are we as a firm understanding the responsibilities that we owe to our various stakeholders? And then how are we structuring our business to really deliver on that,” said one of the panelists. “Your ethics provide a very significant set of resources and frameworks for thinking through those kinds of issues in a way that I think can be more helpful.”

A co-chairperson of an international law firm argued that law firms need to take a holistic and strategic approach to ESG, rather than simply siloing it off into a separate department or function. Clients are increasingly demanding that their law firms demonstrate a commitment to ESG, and those that do are seen as more attractive and trustworthy. Ultimately, law firms need to develop a clear vision and mission for their ESG performance, and they need to invest in ESG initiatives accordingly. This will help them to better meet the needs of their clients and employees, and to become more attractive and competitive in the market. As one panelist pointed out, “Rarely have we taken a step back and said, ‘What do we want to be? Do we want to be a responsible business? How do we want it to go? What is our purpose around this? What are our values and what sort of investment commitments are we going to put behind it?’ Without that piece, you will always have a siloed approach, which doesn’t come across as well to the clients and the people that work for you.”

AI will have major implications on law firm business models and talent development

There is little doubt that AI will enable lawyers to work faster and more efficiently, leading to new business models and enhanced legal strategies: “You’re going to see AI applications that really extend the expertise of lawyers and law firms, and that has a lot of implications for leverage and speed.” said an AI expert. “If you can imagine training newly qualified associates… what if they could actually summarize 100,000 documents in a span of two days, which is not possible with the old way of working.”

There is a potential that AI will create more competition and differentiation among law firms, which will lead firms to rethink their size, shape, and value proposition. In previous years, there was a fear that lawyers would be replaced by alternative legal service providers and then by the so called, “Big Four” consultancy firms. That didn’t happen, but will AI be the game changer? An AI expert on the panel believes so, “You’re not going to get a memo, you’re just going to feel it in your business. Clients often don’t call and tell you they’re moving the work; they just move the work. I think partners are going to have a harder time bringing in business at the rates that the firm CFO is setting, and if you don’t have your fingers on the pulse, you can’t really see where the pressures are spiking faster.” The biggest threat to law firms may be corporate general counsels using AI to bring their work in-house, or as a panelist opined: “AI will make competition a little bit fiercer and then a lot fiercer. Really the biggest threat [in my view] is insourcing…the threat of in-house departments operating at scale, because they are going to be able to handle a lot more work than they may have in the past.”

Despite the lure of AI, law firms need to be aware of its risks and implications, especially bias

There was some concern on the panel that AI poses significant risks. Not only with fraud and cyberattacks, which law firms need to be aware of, but with AI bias, “There’s potential bias in the data that we use to train AI. There are issues around AI ‘hallucinating’,” said a panelist who focuses on legal risk and governance. “AI has the tendency of making stuff up where it doesn’t have an answer, but it knows what it sounds like, and so it makes it up. Already in the legal sector we’ve seen examples of this.”

A general counsel panelist pointed out that AI bias demonstrates that AI cannot yet replace human judgement, creativity, and empathy, and that lawyers need to be aware of the limitations and quality of the AI tools they use. Law firms will need to work harder to show their clients how their lawyers and associates provide excellent legal judgement: “I have concerns of the quality of the data you feed into AI tools, which dictates what comes out,” said the panelist. “For me, the biggest risk to these tools in terms of the legal profession is how we will develop our lawyers in light of AI so that a client or a buyer of legal services, can be confident in the quality of the work that has been produced.”

A culture of progression and rewards is crucial for attracting and retaining top talent in law firms

On the topic of attracting, retaining and developing future law firm leaders, the panelists agreed that there are challenges with ensuring effective supervision, training, and feedback for junior lawyers in a hybrid working model. They also highlighted the need for transparency and clarity around the partnership track or alternative career paths for lawyers who may not aspire to become partners.

A senior partner at a leading UK law firm talked about trying a variety of tactics to lure their staff back into the office, and believes that leadership is key, and that senior lawyers and partners need to model the desired behavior by coming into the office more often. “It’s all very well telling junior lawyers to come in for supervision. But if the more senior lawyers and in particular partners are not there then obviously junior lawyers are going to say, ‘why do we bother?’ Role modeling is key.” A senior partner on the panel also argued that career progression is crucial, and that the progression of partners is as important as the attraction and retention of associates: “It’s about culture, and I think it’s how much the real estate plays a part in that culture and informing what it’s like to work there,” they said. “It’s great to have a nice building, it’s great to be paying people well, but then it becomes about how well they are progressing through your firm. People often forget that talent isn’t just about junior associates coming through the market. It’s also about senior rainmakers with institutional and big-ticket client relationships. To increase market share, law firms must keep these individuals happy.”

Law firms need to be flexible and adaptable with support functions in the post-pandemic era

The panelists did not overlook the fact that professional and support staff also play a critical role in law firm success. In addition to the competition for talented junior lawyers, there is also a war for talent in areas such as marketing, technology, and project management. Law firms are trying to ensure that there isn’t a divide between fee earners and professional staff and that everyone is treated as a colleague. A senior managing partner at a law firm on the panel said that his firm was focusing on the social benefits for their lawyers and colleagues across the firm: “We do a lot on the social mobility front, particularly with generational success. When junior lawyers and law schools come in, we bring people in to talk about the entire law firm. It’s not just associates and partners. We have our billing and our HR folks meeting with these people and presenting. So, the idea of coming to work in the City is not just for the lawyers.”

Denise Reid touched on how Williams Lea is helping law firms reimagine support services in a hybrid working world, “Support staff are absolutely a vital part of the services that law firms deliver to their clients. We’re working with a lot of law firms now to reimagine some of the services that are being provided around colleague and client experience. With our floor ambassadors, for example, we work with law firms to offer a seamless global service regardless of whether your office happens to be in New York or London. We’re also working with clients to review when support staff needs to physically be in the office and are centralizing many of these services to our offsite and offshore service centers.”

Learn more about the changing landscape of law firms. Download the future of the legal workplace to stay up to date on the factors re-shaping the industry.