In an era where artificial intelligence (AI) is reshaping industries, the legal sector stands at a crossroads. The longstanding tradition of the billable hour is clashing with the rapid advancements in legal technology, particularly AI, raising critical questions about value and efficiency in law practices. At the recent ILTACON, a major legal tech conference, experts gathered to discuss these pressing issues.

Stephen Embry, a legal tech journalist and an Above the Law contributor, emphasized the difficulties law firms face in quantifying the benefits of AI. “It’s hard to come up with the return on investment for efficiency gains when you’re based on the billable hour. You almost have to go to a different model,” Embry stated. This sentiment highlights a growing realization within the industry that traditional billing models might no longer suffice in the age of digital disruption.

During a webinar titled “Avoiding the AI Efficiency Trap: What Biglaw Needs to Get Right,” hosted by Litera, panelists including Embry, ATL contributor Bob Ambrogi, and Grant Hewlett, VP of Product at Litera, explored solutions to leverage AI without falling into productivity pitfalls. The consensus suggested a shift towards supporting operational roles—such as finance, practice management, and business development—where AI's return on investment is more apparent.

Hewlett proposed that enhancing these functions could “unlock growth” and mitigate the so-called efficiency trap. “If partners have more time because of AI, they can spend more time on business development,” he explained, suggesting that AI tools could transform service partners into tomorrow’s rainmakers by arming them with essential data and client information.

Moreover, the discussion extended to the role of pricing and finance teams in creating effective alternative pricing structures, driven by better law firm data. This approach, according to Hewlett, addresses the efficiency trap by focusing on operations that directly impact the bottom line.

Embry also highlighted the importance of the human element in law firm leadership. He argued that while law firms are pushed towards greater efficiency, the quality of legal advice—and consequently client satisfaction—depends on attracting top talent. This creates a delicate balance where firms must maintain competitive rates without compromising their ability to hire and retain skilled lawyers.

The dialogue between law firms and clients needs to evolve, Embry added, noting that tough conversations about cost-cutting and value gains are essential for adapting to the new technological landscape. “In the years that I was practicing law, those were conversations that neither side really liked to have, because they’re kind of hard conversations,” he said. “But we can’t avoid that any longer. We’re going to have to sit down and have those conversations.”

As the legal industry continues to navigate the complexities introduced by AI and new technologies, the shift from traditional practices like the billable hour to more dynamic and efficient models seems inevitable. Law firms that can successfully integrate technology while maintaining a focus on human talent and client relationships are likely to thrive in this new era.

Register for the on-demand webinar, “Avoiding the AI Efficiency Trap: What Biglaw Needs to Get Right,” to explore these themes further. CLE credit is available.