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Perspectives on Artificial Intelligence (AI)

AI Perspectives

Today’s post is titled “Perspectives on Artificial Intelligence (AI).” This is a follow-up from our previous post commenting on “Practice Performance Indicators,” written and published in Clio‘s in their Legal Trends Report. Today’s post will highlight some information from Clio’s publication, but we’ll also share with you a few of our own perspectives that we hope will be helpful to you in your A.I. planning and integration.

STATISTICAL HIGHLIGHTS:

(From Clio’s Legal Trends Report)

  • Nearly 79% of legal professionals have adopted AI in some way.
  • Clio found that nearly three-quarters (75%) of law firms’ hourly work could be potentially automated by AI, which stands to have a dramatic impact on firm revenues.
    • Lawyers – 57%
    • Paralegals – 69%
    • Administrative Assistants – 81%
  • In 2023, Goldman Sachs published a study saying that 44% of work tasks performed in the legal industry could be automated by AI, and AI could potentially replace 40% of legal industry employees.
  • Automation Potential – If a task typically takes 10 hours to complete and has AI automation potential of 50%, a law firm could expect that same task to account for only five hours of billable time.
  • The American Bar Association’s Formal Opinion 512 on generative artificial intelligence tools states that lawyers may only charge for the actual time spent on tasks (even if AI allows them to perform these tasks faster).” (pg. 21 of the document). So… while some AI efficiencies may result in quicker completion times, however, these efficiencies may not result in higher engagement revenue and profitability; especially if your billing model is hourly based.

THE OPPORTUNITIES:

  • AI INTEGRATION – From our perspective, we see most early adoption of AI integration will come from operating software platforms currently being used by lawyers and law firms, or new and improved systems coming online soon.
  • OPPORTUNITIES FOR AI INTEGRATION – The opportunities are obvious…including Automation and Standardization, Data Analytics and Modeling, as well as, Legal and Market Research. All of these integrations should result in streamlining efficiencies in project turnaround and output, resulting in increased profit margins. (There’s a flip-side to this though, and we’ll address this below.)
    • Automation and Standardization – AI is already being used to standardize and streamline many areas of work-flow production (See areas of application in the Clio’s Report).
    • Data Analytics & Modeling – AI can dramatically save time with data intensive projects, in terms of speed, analytical accuracy, increased project turnaround, and profitability. Streamlining and standardizing employee time allocation with data intensive projects in such tasks as data analytics and modeling, and trend forecasting sensitivity analysis, can enable rapid scenario projections to consider. This can result in significant overall project efficiencies and value; so long as the data being used is clean and reliable, and that the algorithms used in the AI modeling are pin-point accurate in their design application.
    • Market and Legal Research – AI already significantly reduces initial hourly costs associated with both these tasks. AI research can pull from numerous sources in fractions of seconds, with detailed descriptions, far outpacing any Google search could ever produce. While Google queries push titles results, AI not only sites the sources relevant to your query, but actually summarizes each referenced content relevant to the query presented. This can save HOURS of research investigation time versus what a Google query provides. This is the power AI research can deliver. THAT SAID, the AI sources and the integrity of their content must be verified and evaluated for biases, relevance, and accuracy. Many sources we have personally encountered in our own research queries resulted in some biases, as the AI models are programmed by human beings. So, be careful to phrase your queries precisely to better focus the AI deliverables, and verify the results presented.
    • Speed of Workflow and Deliverables – These AI efficiencies should enable lawyers/law firms to leverage their time and resources to take on additional clients OR reduce employee workloads (hours spent at the office physically or remotely) and costs. This sounds great, but AT WHAT COST?
      • AI integration may improve many efficiencies; however, these efficiencies may also result in reduced revenue “if” your practice is hourly based, and “if” you don’t increase the number of clientele to offset the streamlined efficiencies that result in reduced billings.
      • AI Integration may potentially reduce staffing expenses, but once again, at what cost? How much do your staffers directly and indirectly support you and your clients’ needs that are essential, yet not billable? Who or how will you manage the practice support needs if you’re laying off staffers? If you think you can load more work onto your existing staff who are likely at their maximum workload, you may want to reevaluate each of these factors. Staffing refinements will need to be strategically and tactically evaluated and adjusted accordingly to minimize the unforeseen negative human capital consequences versus perceived AI integration efficiencies.

PERSPECTIVES:

  • A KEY STATISTICAL POINT:
    • We believe the first statistical point listed above, sums-up a VERY important point that we believe you should play close attention to…the point being: “We found that nearly three-quarters (75%) of law firms’ hourly work could be potentially automated by AI, which stands to have a dramatic impact on firm revenues.” (All billing models will be effected…but to different degrees.)
  • HOW AI CAN POSSIBLY IMPACT YOUR REVENUES:
    • AI automation can ultimately result in spending less time on a case tasks (cost savings), right? However, this may also result in the firm having LESS billable hours.
    • As stated in the above section: “the American Bar Association’s Formal Opinion 512 on generative artificial intelligence tools states that lawyers may only charge for the actual time spent on tasks (even if AI allows them to perform these tasks faster). So, depending on your billing model, revenues can be impacted significantly.
  • WHAT ARE YOUR OPTIONS:
    • FIRST – You can make a “Quality of Life” decision to implement AI in strategic operating components of your practice to increase workflow efficiencies (that will reduce hourly work demands and costs), resulting in working less hours per day/week/and month in a year. Doing so could result in a reduced hourly workload that “may” result in a higher quality professional and personal life. However, this is dependent on one’s professional and personal financial goals and objectives, AND so long as those goals DON’T CONFLICT with the Firm’s goals and objectives for you as an employee!
    • SECOND – In order to maintain your current profitability using AI, and to position yourself for future revenue growth (personal/firm revenue growth), you’ll have to make a choice:
      • Either take on additional clients, which would require additional resources such as business development, matter management support, and additional human capital in order to continue producing high quality deliverables (that client’s would expect), in a timely, efficient, and cost-effective manner. Or…
      • Raise your chargeable fees to recoup lost hourly billings resulting from AI Automation (which may or may not be possible), if your competition is substantial and clients are willing to pay you higher fees. REMEMBER…”Cost is an issue in the absence of value.” Or lastly…
      • Modify your billing model (if possible) to a “Value-Based” model, “Fixed-Fee” model or a hybrid thereof. This may not be as easy nor as predictable to do, depending on your line of practice, and the complexities of your client matters. That said, each practice line will need to evaluate these factors carefully as they consider the depth and breadth of implementing AI into their practice.

CONCLUSION:

AI is here to stay, and improvements will be made, but it is not perfected yet! However, we should all keep in mind a broader perspective on AI and its application. We need to assess the value and risks AI implementation can have on both a personal and professional level. AI is a relatively new technology with many great possibilities, but don’t make the mistake of jumping on the technological bandwagon by making quick implementation decisions. At GMS Business Consulting, Inc., we always recommend to strategically plan and tactically identify the areas of your practice that can significantly benefit from immediate implementation. At the same time, you must evaluate the potential risks and rewards to your practice, your client service and deliverables, and the overall benefits to your firm. Administrative areas of your practice needing streamlining may be a good starting point. But take it one step at a time, and measure each AI implementation’s impact, both positive and negative.

Understand that AI incorporates mathematical algorithms that are designed by human beings. Humans have natural biases that may impact AI results. You need to always evaluate and measure the AI deliverables. Trusting is not enough…you MUST verify that the results are objectively produced and without biases. This is particularly important while utilizing AI in ANY type of research being conducted. While testing AI output, our experience has regularly identified biased production of research data results and programming output depending on how we wrote or defined our requests, AND depending on the sources the AI model pulled from versus other sources we identified on our own research.

As mentioned earlier, AI can also be fantastic at performing data analytics and financial modeling. However, keep in mind using AI in these tasks should be highly scrutinized, as the results AI presents should be accurate and unbiased. This can only happen if you’re assured that you’re using reliable, scrubbed, and clean data. If you put bad data in, you’ll get bad data back. Again, good results will be dependent on the accuracy of your queries, and the relevant accuracy of the sources of the data used or pulled from.

Lastly, we believe the more we rely on AI to perform our work, the lazier we may become in using our own cognitive thinking and reasoning skills. At this point in time, and until further testing is made, we would rather err on the side of thoughtful consideration of AI implementation and by using our own intellect, education, and experience rather than being conditioned by public opinion that may nudge us blindly and lazily to follow the newest breed of technology. We always recommend to strategically plan and tactically execute ALL AI considerations and implementation on a methodical and systematic basis to evaluate each components potential of effectiveness. We recommend proceeding forward when considering AI implementation, but do so in a cautious and measured process of evaluation. Don’t get caught up prematurely in the hype. We hope this post gives you pause for thoughtful consideration.

GMS BUSINESS CONSULTING, INC. – Provides lawyers/law firms, for-profit & non-profit organizations, and business professionals with Value-Accounting Services, Business Management & Development Services (utilizing our TAP Solution), Business Optimization Services, and Digital Marketing Services. We help business professionals strategically manage and tactically grow their businesses with a high return on investment and peace of mind.  (We do NOT provide investment advice.)  Contact Us If you would like to learn more about our services, especially TAP, our high-level Tactical Action Plan Solution, designed to help you strategically and tactically optimize your business.  We welcome the opportunity to speak with you.

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