What if AI saves lawyers time, but it either hurts their profits, or makes no real difference because they still have to bill enough hours to hit their targets?
A Thomson Reuters Future of Professionals report has found that AI could ‘save [professionals] four hours a week in the next year and up to 12 hours per week within the next five years’. But, what then? What will lawyers do with this saved time? Artificial Lawyer explores.
First, let’s look at the data. TR says that: ‘Assuming a professional works 48 to 50 weeks per year, this could result in up to 200 hours saved annually and is equivalent to adding an extra colleague for every 10 team members, as the four hours saved per week per professional represents approximately 10% of a full-time workload.
‘For US lawyers, that time savings could translate to nearly $100,000 in extra billable time annually. This is calculated with Thomson Reuters data gathered directly from participating firms’ financial management systems, which is then anonymised and aggregated.’
OK, so what they are saying is: you use AI, this saves you time on tasks. All good so far. Thus, because you can work faster with AI it takes less time to complete a matter for a client. OK, also clear.
But, now it gets more complex. TR says that this gives you $100,000 in ‘extra billable time’. However, if you are a lawyer who mostly bills by the hour, then the billable time saved in your work on a task means you have in fact lost money.
In which case this extra $100,000 of billable time is not extra at all, it’s simply the expected work the lawyer would have done in any case in order to meet the firm’s targets. And now they need to get on and find some client work to do to make up for the missing billables created by being efficient with AI.
I.e. if you have billable targets and you make money by selling your time, then going faster on that billable work with AI just means you now have to compensate for your efficiency by doing enough hourly-paid work to hit your quota. This is because the end goal is to sell X units of time per week to the clients, per fee earner. If you use AI and now do X – 4 units of time per week, then you still have to go and find those 4 missing units to make up for the short-fall.
To take that to its logical end: the more efficient you are because of AI when it comes to doing billable time work, the less money the firm makes on that matter – as it is finished more and more quickly. QED: Total efficiency in time means zero income (if you bill by time).
So, no matter what you do, the time left over in your day may be worth a lot of money on paper, but you, or someone else has to plug that gap in your earnings, as you will not have made enough.
In short, this could be seen as a message telling lawyers NOT to use AI.
Or, it could be a subliminal message telling them to embrace fixed fees and leave the time-based legal economy behind. As if you use fixed fees then efficiency on billable work makes sense.
One final option, is that ALL of the time saved that TR is referring to was on non-billable work, although if one looks at what genAI tools do, e.g. help draft contracts or find critical information for a client matter, then it seems that time-saving tech is meant to show its value most of all on client work, not on noodling around on other things not related to client needs or things that don’t matter much.
It’s possible of course that genAI – and any other tech – is only used for super-low value / no-value work, and so it only helps to free lawyers to do billable work, in which case the TR formula might work. But….if that is the case, then what is all this valueless work that lawyers are doing – at least in BigLaw? And again, whenever you look at a legal AI product it is ALL about how it helps to do client work, not noodling about on no-value stuff. They can’t have it both ways.
Of course, it’s well documented that smaller firms without internal support see lawyers doing loads of admin tasks, which reduces billable time. But, that doesn’t seem to be what TR is getting at here – at least one would hope so….And as mentioned, most genAI tools are all about the client work……
Any road, it just goes to show that saying ‘X is great, it saves you time!’ is not a slam dunk proposition in the legal context.
So, what is the answer? Move to fixed fees and stop selling lawyer output value as time, then embrace AI….just an idea.