Lawyers: Man versus Machine
Updated: Apr 29
Friday 9 April Thomson Reuters once again published its annual ‘State of the Legal Market’ report. The report comes in two different versions, one for the US market and one for the UK market. Typically the reports contain no real surprises. The graphs that illustrate the findings keep following a predictable trajectory over the years. In this year’s UK edition my eye was caught by the graph on page 12: ‘Areas UK partners feel firms should be focusing investment’
At first sight the data seem to show nothing unexpected: 74% say they want to invest more in Technology and 76% wants to spend more on Innovation. This is in line with what law firms have been saying over the past five years. Spending appetite on other areas like Marketing or Recruitment remains the same or will decrease.
It is not the graph or the data that drew my attention, it was what is blatantly missing: Humans! None of the respondents plans to invest in training and development of people. Perhaps it was not even an option in the survey, I don’t know. What I do know is that this is a serious oversight that we need to discuss.
Last week Swedish computer-driven hedge fund IPM announced it would close down. Computer-driven hedge funds attracted tens of billions of dollars in assets from investors during a surge in interest around five years ago, as firms looked to technological developments such as machine learning and big data to gain an edge on human traders. Five years later it became apparent that technology delivered poor returns.
On 12 April, Goldman Sachs released a statement that it had found that successful sustainable investment decisions require a human touch that algorithms so far have been unable to match. Two years ago the picture was different. Electronically traded funds were edging out more hands-on portfolio management partly as part of a cost-saving drive, largely because of an optimistic belief in a technological future.
For the financial industry an ever so slight advantage over the competition can have a tremendous impact on the bottom line. The big players have been investing heavily in innovative new technology. It turns out not all investment has met expectations and human bankers have come back in focus. It is no surprise, given the difference in business model that the Legal Industry is trailing far behind the Financial Industry if it comes to the cycle of technology investment. Still it is surprising that there seems to be little or no spill-over from ‘lessons learned’.
Creation-Production Divide Concept©
In 2018, after having done extensive research and data analytics, we have introduced the Creation-Production Divide Concept©. If you are not familiar with this concept you can read-up on it in chapter-4 of our book ‘A New Dawn’ (2020) or in chapter-11 of our book ‘Data & Dialogue, a relationship redefined’ (2019).
In short the Creation-Production Divide Concept© distinguishes between two components in the legal process. On the one hand there is Creation, which is the process in which the strategy is decided. This component is heavily reliant on human skills. It does typically not involve a great amount of time and it is what has the greatest value to the client. The Creation is what makes one lawyer different from the next.
After Creation (but also to a limited extent intertwined) comes Production. This is all execution needed to turn creation into a tangible legal product. This phase typically is document review and document creation. Production is mostly labor intensive and therefore costly, but it has little added value to the client. There is also not much relevant difference between lawyers as it comes to production.
The Creation-Production Divide Concept© clearly demonstrates that for a law firm the added value is in the Creation and thus in the human skills of the lawyers. From that perspective it becomes incomprehensible that around 75% of law firms say that they will increase spending on technology and innovation, while they do not even mention investing in human skills. Looking from the return on the dollar, it is clearly People first, Machines second.
Invest in people!
Somehow people have dropped off the radar for law firms as too much energy and effort has been directed towards Legal Tech. I want to argue that it is high time that people get back at the center of attention in the legal industry. Every lawyer should be structurally trained and educated from the first day onboarded until literally the last day before retirement. Today training is largely limited to legal knowledge and basically stops the day a lawyer is promoted partner. This is poor use of human capital and potential.
At TGO Consulting we have developed a lawyer development model based on 7 dimensions. None of these TGO Lawyer Development Dimensions© are legal as developing legal skills is already deeply embedded in every law firm big or small. The TGO Lawyer Development Dimensions© are all human skills and non-legal practice skills. We know from experience that investment in these skills delivers a healthy return on the investment. It has also proven to be a great recruitment and retention tool as young lawyers are looking for employers that have a structured personal development program.
To be clear: TGO Consulting is not a training provider, but we will be pleased to help you set up a methodology and program for permanent development for every lawyer in the firm. Please inquire, as we will also be happy to explain the TGO Lawyer Development Dimensions© in more detail.
And before I forget: it makes perfect sense to also invest in technology and innovation as this will help making the Production component more efficient and less labor intensive. Your clients will love you for it, but it might undermine your business model through the reduction of billable hours. No worries, there is a remedy for that. Will elaborate on this in a future article.