Artificial intelligence (AI) is becoming a commonplace technology that helps us navigate our personal and…
Much has been talked and said about the pandemic ever since its spurge on the world economy. While the world is now getting into better shape with every single passing day, the legal industry also has not left itself behind. Lawyers and attorneys were still working remotely then and embraced the new normal wholeheartedly and are still getting into the pace with the moving and changing trends.
Amidst all the chaos that the legal industry also witnessed, there was ClioCon that was held in the Oct of 2021, giving some useful insights and wavering progressions in the law industry that has helped the established as well as the upcoming legal professionals.
Of all the important things that were presented at the conference, were a few that became crucial to all those connected with the law. And that was TECHNOLOGY! Well, the change was slow but certainly moving. The rapid emergence of new technology and its impact has left no choice for the legal professionals, but to adapt to the rapid technological changes.
Let us look into the top 5 highlights and impacts of adapting technological changes
Clients expectations have changed –
With the rapid adoption of new technologies, it’s important to recognize the immense impact this has had on the fundamentals of how we interact and communicate with each other. Any law firm operating in 2021 needs to acknowledge that—in less than two years, through cloud-based technologies—our communication infrastructure has evolved immensely, to the point that we need to re-evaluate the nature of interaction within the context of legal service delivery, and what it will look like both now and in the years to come.
With more opportunities to connect with people remotely, it is no surprise that we also see significantly more appetite for remote communications when working with a lawyer. This isn’t to say that clients expect a fully remote legal experience. In fact, 67% said they would look for a lawyer offering both remote and in-person options when searching for an attorney. This figure increased to 79% among consumers who had hired a lawyer in the past.
It’s worth noting that remote communication is not a new concept, even in the sometimes slow-to-adapt legal space. Phone, email, and even physical mail have long been established forms for communication within the context of legal practice. However, just three years ago, research from the 2018 Legal Trends Report showed a clear preference for in-person communications.
When it comes to a first meeting or consultation, the most stand-out takeaway from our survey data is that video conferencing ranked very highly among consumers. While in-person (76%) is the most commonly preferred, with phone (70%) the next most common, video conferencing (58%) is the next-most viable option among clients.
During a legal matter, when looking at key milestones within a legal matter, traditional methods of communication are still preferred among consumers. For communications about key decisions within a legal matter, in person (75%) and phone (71%) are the most preferred, but once again, video conferencing (61%) is the next best option. Presumably, the option to discuss details in real-time is perceived as most important to many consumers at this stage in a matter.
When it comes to transactional interactions, points like viewing and sharing the documents, in person communication has been the most preferred with (71%) among the clients. In this case, we also see strong preferences for several other options. Email (63%) is a top choice, as well as secure client portals (60%).
For making payments, it’s clear that online options are strongly preferred by consumers. Online payments (66%) are the top choice, followed by automated payments (61%) and payments via mobile app (61%). In-person payments (59%) sit near the bottom of the list. At this stage, clients prefer options that prioritize convenience over any direct forms of interaction.
Technology advantages among growing firms –
Growing firms are early adopters of client intake and CRM solutions. While shrinking firms continue to see steady adoption of these solutions, they appear to be lagging behind that of growing firms.
Client intake and client relationship management (CRM) software help law firms deliver enhanced client experiences, especially during the crucial intake phase of a legal matter. These solutions make it easier for law firms to keep track of potential clients who reach out to the firm, ensuring streamlined operations at each step of the intake process.
One of the most striking differences in technology adoption among growing firms is their use of firm reporting tools. The reporting tools analyzed for this report offer insights into key business metrics such as revenue generation, bill collection, and productivity. The takeaway from this data is that growing firms are more likely to increase their revenues because they have access to the information and insights that help them assess how their business is performing, which also allows them to focus more attention on planning for additional, ongoing growth over the long term. As a whole, growing firms are twice as likely to be using reporting tools than shrinking firms.
Key Performance Metrics for the law firms
Within Clio Manage, Clio’s legal practice management solution, law firms have the ability to assess specific metrics that impact business performance. These metrics include utilization rates, realization rates, and collection rates:
Your Utilization rate measures workload and productivity.
Realization rate measures the potential value of work performed.
You Collection rate measures the ability to capitalize on work performed.
Year after year, the biggest challenge that law firms deal with appears to be the low utilization rates we see on an industry-wide basis. Utilization is the measure of how much of an 8-hour workday is devoted to billable work at a law firm, measured on a per-lawyer basis. In 2020, the average lawyer billed just 2.5 hours (31%) of an 8-hour day, indicating that many lawyers either don’t have enough clients to fill their day or that they struggle with inefficiencies in their firms that distract from billable work.
Realization rates measure how much of a firm’s billable work actually makes it to a client bill. The closer a firm’s realization rate is to 100%, the more billed hours are being converted into potential revenue. Offering services at a discounted rate—or otherwise writing off time— reduces a firm’s realization rate. Like utilization rate, realization rate can help to identify what is impacting a firm’s financial performance. In 2020, the average realization rate was 84%, indicating that many firms have room for improvement.
A firm’s collection rate is a measure of its ability to capitalize on the billable work it performs—and is an important indicator of whether a lawyer’s hard work is generating revenue for their firm. The average collection rate for law firms in 2020 was 89%, which suggests that most law firms struggle to some degree in getting clients to pay their bills. When it comes to Collection rates, shrinking firms have generally reported relatively poor performance across most business metrics, but in recent years this cohort has seen an increase in collection rates. This increase also correlates with the rapid adoption of online payments for both groups, which may explain the improved collection rates during this time.
Lawyers need more information today than before –
Our 2019 Legal Trends Report found that many lawyers don’t receive the training they need to run the business side of a law firm. Only 7% of lawyers felt that law school prepared them to run a business, and just 23% said that their bar association provided adequate business training. This situation leaves many lawyers ill-equipped to manage and run a business by themselves, a problem which is compounded by the fact that 76% of lawyers feel they are already overworked.15 Without formal business training and little time for further education or self-guided learning, many lawyers may be in need of help to run better businesses. Another issue—which may also be a direct result of the lack of business training—is that a large portion of firm managers don’t have insight into their business’s revenue and spending, two key areas that determine a firm’s financial performance.
Lawyers widely agree that revenue is one of the best metrics for tracking firm performance: 84% agreed that this is the metric they focus on and wish to improve in their firms when we asked about this in 2018.16 To make the right decisions when it comes to planning for the future success of their firms, lawyers need to understand their revenue and their spending above all else.
For many lawyers—especially those who are involved in their firm’s finances—it’s important that they take an objective look at how much they know about these finances and where their knowledge could be improved. Without accurate information about what resources are available to the firm, or where these resources are being spent, decision-makers can’t be confident about how they are investing in their firm’s future success.
Hourly Rates and KPIs –
Several KPIs can be used to gain valuable insights into a law firm’s performance. This information helps lawyers build an understanding of how they and their employees are contributing to revenue generation and can be instrumental in identifying areas for continuous improvement. Despite the challenges posed by the pandemic, our data indicates that these KPIs saw slight increases between 2019 and 2020.
There’s a big difference between simply collecting data and analyzing data. If you want to use data to determine if you’ve performed well or not, you need to first identify what you’re trying to achieve. By identifying and tracking goals for performance indicators (for example, the KPI of monthly revenue), you can better assess how your firm is performing.
Clio Manage’s firm dashboard can be used to quickly access your firm’s key metrics—like how many billable hours your firm has captured, billed, and collected—all in one central dashboard. Presented as an easy-to-understand visual dashboard, the Firm Dashboard makes it simple to view, track, and benchmark key performance indicators, then make data-driven decisions for your firm based on those key metrics.
While the exact long-term impacts of the last two years remain uncertain, we can begin to see a new foundation for the future of legal to be built on. Client expectations have shifted as a result of being exposed to better ways of accessing products and services of all types, including legal services. Traditional formats for communication are not going anywhere, but they can no longer be the only option available to consumers. Remote communication options have not only made legal services more flexible, but they have also recalibrated our sense of distance. Firms have been empowered to expand where they look for clients, and the law office can now be wherever a client wants it to be.
These new formats for engaging with a law firm are becoming a key component for any competitive firm, and it’s simply not possible to operate amidst current consumer demands without these capabilities. As we have seen, technological adoption has been crucial to firm success in the past, and this impact has only grown as these tools have become necessary components of legal services. However, technology adoption alone is not enough: firms must ensure that the way they harness new tools and processes are designed to deliver a client-centered service that will meet the high expectations of the modern consumer.
Lawyers need to recognize this change and be prepared to deliver value not just through their legal advice, but through the flexibility of their services. As technological solutions become the norm, how these solutions are implemented will be more important than simply having them available. Ensuring that implementation is client-centered is key to increasing the value that clients derive from legal services, and in turn is a crucial aspect of driving firm growth.