Legal Leaders Exchange - Podcast episode 25

How attorneys are embracing generative AI ahead of a pivotal year of transformation

For this episode, two of our key Wolters Kluwer legal operations experts return! Jennifer McIver, Associate Director of Legal Operations & Industry Insights for ELM Solutions, and Ken Crutchfield, Vice President & General Manager of Legal Markets for Wolters Kluwer Legal & Regulatory, talk about generative AI and the changes it is prompting for legal professionals.

It is the fifth anniversary year of Wolters Kluwer’s Future Ready Lawyer Survey, and much of the conversation is drawn from this year’s results. The survey found that a majority of respondents are using generative AI on at least a weekly basis, representing an acceleration in the adoption of this impactful technology. Jennifer and Ken discuss how the technological progress revealed by the survey is changing the legal profession.

Listen to hear from our experts on:

• The differences in AI adoption among corporate legal departments and law firms and what it means
• How confident lawyers are in using generative AI technology in comparison to other technologies
• The potential impact of AI and GenAI on work-life balance in the legal profession.
• The effect that AI is expected to have on the billable hour, service delivery models, and corporate legal department decisions about when to engage outside counsel
• Changes in hourly rates that have happened into 2024 as the legal industry has begun integrating GenAI

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Transcript

Greg Corombos

Hi, I am Greg Corombos. Welcome to another episode of “Legal Leaders Exchange.” In today's session, we’ll have another thought-provoking conversation between Ken Crutchfield, Vice President & General Manager of Legal Markets for Wolters Kluwer Legal & Regulatory, and Jennifer McIver, Associate Director of Legal Operations & Industry Insights for Wolters Kluwer ELM Solutions.

This episode centers on the transformative impact that generative AI is having on the legal industry, drawing insights from the 2024 Future Ready Lawyer survey, which revealed that a significant majority of corporate law attorneys are using generative AI on a weekly basis.

As we mark the survey's fifth anniversary, it's clear that technology adoption has accelerated and that the legal landscape is undergoing a fundamental shift. We'll explore the survey results, discuss real-world use cases, and contemplate how these technological advances will shape the legal profession in the years to come. Jen and Ken, the floor is yours!

Jennifer McIver

Thank you, Greg. It's great to be here today for another episode of the Legal Leaders Exchange podcast. And I'm excited to have another conversation with Ken Crutchfield. Thank you for joining today, Ken.

Ken Crutchfield

Thanks for having me again, Jen.

Jennifer McIver

I love it. I love it. I'm excited about today's topic because first, I can't believe that it's already the end of 2024 and the holiday season is in full swing. I have to tell you, my house is decked out. But I really wanted to get into the spirit of the season of giving and talk a little bit about what Wolters Kluwer has recently released. And that is the 2024 Future Ready Lawyer survey. And it's full of great insights. So, let's talk a little bit about it. Ken, what is it? How has it evolved?

Ken Crutchfield

Sure. The Future Ready Lawyer survey is something that we've done six times now. So, we're basically at a five-year anniversary from the first time. And we basically review and interview 700 respondents that are all attorneys in the US and in nine countries in Europe. And the attorneys respond both from law departments and from law firms. The survey’s evolved over the years and basically where the first conversations were about how to be future ready, there was some debate about how important technology was and there were gaps in terms of the understanding of what in technologies were important. And then also basically expectations between in-house and outside council. So, it was very interesting. But then we had this phenomenon where COVID happened and we had the pandemic and technology became more important very quickly.

One of the things that played out was you couldn't get access to materials that you had in your office because you couldn't get into your office. So, the ability to get in and take information from research services or whatever forced an acceleration and a move away from print. If you wanted to engage with your clients, you needed to use Teams or Zoom or other online meeting capabilities and things like DocuSign. And electronic signatures were pretty much the only way you could sign contracts. So, there were a lot of things that moved and pushed technology forward. And that was kind of what we saw and experienced in the middle. And then, you know, we're two years and two days since ChatGPT 3.5 Turbo happened and the world kind of changed where everybody awakened to what GenAI could do. And so that really kind of drove a shift in terms of driving consensus that AI was important and that AI was going to fundamentally impact the way the law was practiced. So that was really what's played out through the last few years and then coming into this year. It's been really exciting seeing what's there.

Jennifer McIver

I love the survey. You know, I joined Wolters Kluwer back in February of this year. I got to see the 2023 report as it came out or just after it came out. And I found it really interesting that we're serving both in-house legal as well as law firms because I think that that really puts the needle on where the entire legal ecosystem is. And the focus on technology, I think, is key, which really does take me to that conversation around generative AI and what stood out to me on this particular survey for this year in 2024. And that's the statistic that 76% of the responding law department attorneys are using GenAI daily. Now you mentioned COVID, you mentioned needing to kind of push us forward from a technology perspective. But let's face it, historically attorneys are slow to adopt technology. So, this particular number, 76% of law departments attorney using GenAI daily, really surprises me. I find it encouraging, but it surprises me. What are your thoughts on this?

Ken Crutchfield

So, Jen, I think it's 76% used it weekly.

Jennifer McIver

Weekly. Sorry. Oh, good, good then. I'm definitely feeling a little bit better and not as surprised, Ken.

Ken Crutchfield

So, 76% used GenAI weekly is basically what they came out and said, and I thought that was a real surprise. I thought it was also exceptionally a surprise when you talk about the law firms too, especially when you get into AI governance. So, you know, when did you use AI to advise a client? When did you not? How do you disclose that? Those are all like emerging issues here. So, I think the bottom line though is that attorneys are using this technology. It's not clear to what extent they are using it in a vendor provided solution versus just using the ChatGPT or Claude or whatever GenAI a firm is providing or a corporation is providing to its law department. But those are huge numbers and suggest a lot of embracing of the technology.

Jennifer McIver

And let's, you know, follow that up a little bit. You know, we're talking about law departments and again, correction, we're talking about weekly. So not quite as surprised as I was before, but law firms’ use is a little bit lower, 68% compared to the 76%. I believe that you recently held an advisory council meeting, maybe talk a little bit about that with our law firm clients. And you know, what was the sentiment during that meeting about law firm use of ChatGPT or just generative AI?

Ken Crutchfield

Absolutely. So, the Wolters Kluwer LR US Legal and Regulatory business in the United States in the VitalLaw platform, we have a customer advisory board that's made up of thought leaders in the library and knowledge management space. And so those were the people that we had gathered together and walking and talking through them. I think we certainly have heard that partners at law firms are paying attention to this technology more than any other technology before. There's no real debate as to whether or not this is going to change the way law is practiced and also the business models of law firms. There is leadership buy-in at the highest levels of large law firms to look at, evaluate and understand how to use this technology. I think that's the key starting point here and I think it's very interesting because law firms, when they talk about this, they'll say, I've got some clients that say don't use it, that is decreasing. But also, they have others that are like, hey, if you could save me money or give me better answers in your advice to me, I'm interested in you using GenAI and applying it to my matters and engagements. So, I think that's really the top level. And then there's just a whirlwind of activity within law firms and the library and knowledge management staff, evaluating, responding to attorneys and partners, asking about the latest new tool. And so, there's some real challenges in terms of maintaining the cadence of evaluating all these new technologies that are out there and prioritizing to be sure that work can be done to support what their firms need to look at.

Jennifer McIver

I think that you hit a key piece there, Ken, and that is the top down that you're looking at. The actual owners, essentially, of the law firms that are saying, hey, we're on board for this. And I think that for corporate legal departments we're seeing something pretty similar where a lot of general counsel and legal operation teams are really moving forward and embracing this new technology. And I believe, and please correct me if I'm wrong, this survey says 56% of attorneys express confidence in the ability to manage these tech driven changes. And I think that that's just very different and we're seeing something that we really haven't seen before in the legal industry.

Ken Crutchfield

Yeah, I think you're right there, Jen. This is a technology that has driven a lot more consensus. I find it interesting because I think a lot of attorneys – and maybe it's just the training or the people that get attracted to the law somehow – are not as tech savvy as some other industries. And I don't mean that in a negative way. I think it's just a reality of the way the training and thought is. But what's so interesting is that these large language models are so good at language, and that's what attorneys really understand is logic and language. And it behaves like humans in a lot of ways. There are ways that it doesn't. I think it makes it a lot easier for attorneys to grasp how to engage this technology, and I think that gives them more confidence.

Jennifer McIver

I've said this before, it might even have been on a podcast talking to you, Ken, a few months back. But I think that we're seeing something very similar to what we did – talking VitalLaw, talking some of the other legal research tools – where we had to make the shift from print to online searching. And to me, I equate a lot of the use of GenAI to the same trials, tribulations, and the need to really kind of learn how to use the technology.

Ken Crutchfield

Right, right. I think there's a lot of different places. I think of the innovators, early adopters, early late majority and laggards and those adoption curves, and you still have a number of partners and seasoned attorneys that still prefer print in terms of their primary way of doing and going about research and engaging with the law. And there are some places I found it interesting. I had a neighbor around the corner who’s got young kids and was in-house and was using a Wolters Kluwer book that is available for securities work. And he was saying, yeah, I can't live without this in print. So it's interesting, you do have that long tail. But I think this is also just the kind of technology where the possibilities are there, and there's more early adopters with respect to technologies like GenAI. I think it's very important, though, to recognize that as we teach people and as law firms and in-house counsel learn and deploy these technologies, they understand what they do. Because there's a tendency to think of this as like, this is like searching. And GenAI is not searching. It's probabilistic. It's guessing the first word, the second word, the third word, in a very mysterious way that's eerie and confident and gives answers to questions. And that's a different technology than doing a search. Now you can use GenAI to point it at specific documents. So there's a hybrid, it's called retrieval augmented generation, where you search trusted data to find the set of documents and then you query and chat with those documents, which reduces hallucinations and also helps give answers that are grounded in fact that you can point in reference to links, which is very important.

Jennifer McIver

Interesting. And thank you for taking me back and showing me why it's not quite searching, even though I still think there's a little bit of a parallel because it took me forever to figure out how to search. But let's switch gears. I know a lot of people, when you say GenAI or AI are kind of at point of almost rolling their eyes because there's just been so much talk about it. So, I want to shake up the flavor a little bit and talk about another section of the Future Ready Lawyer survey and that's talent. Let's talk through the sentiment of the legal workforce right now.

Ken Crutchfield

Sure. I think we've seen for a while there's a latent demand for legal services and I think particularly over in Europe, there's been studies about how much latent work is there that really could have used an attorney but didn't, even in the corporate world. And I think that's a very important thing to understand is I just don't come across attorneys, particularly in large firms and in corporations, that have time on their hands. There's the need to apply tools and there's a need to have work-life balance that doesn't always exist. And those are things where I think AI and technology in general, leveraging tools to multiply the value of the intellectual horsepower of the human brain in applying law to specific problems is going to be very important and is going to drive change and hopefully get us to a place where there's a little more work-life balance. Because that's certainly something that legal professionals have said they want.

Jennifer McIver

81% of those in the Future Ready Lawyer survey.

Ken Crutchfield

Yes.

Jennifer McIver

I think the other piece of that too is just professional development and training and that could play into AI. 79% reporting that as well as 79% expecting competitive compensation. So, following up in that same kind of idea, that desire for work-life balance, the professional development training, it really makes me think about new attorneys. And yes, I'm taking it back to GenAI, but new attorneys, I can't help wonder what the life of a first-year attorney might look like in the coming years. Do you have any thoughts on that? And have you pondered that, Ken?

Ken Crutchfield

Yeah, I do have a theory on why the number of attorneys that report having used GenAI at least once in the past week, or on a weekly basis, is so high is because there's this concept of using it like a personal assistant. So, anything that you can do to extend you and perform a task like writing something, now I got to turn this into a client letter or explain it in a way that a non-lawyer can understand. Those are examples of things that GenAI technologies do extremely well and they do them very quickly. So, I think that's one of the things that you're going to see just in general. But you think of the attorneys that are just getting out of law school and going into practice, there's going to be shifts in terms of how that work happens. I think the bottom line is I view a lot of this as evolutionary. It's not going to be like boom, everything changes overnight. It's going to be gradual. But imagine law schools and law school students that figure out how to use agents and use, basically, a staff of five GenAI assistants that they're able to leverage and do a lot of their work so that they're reviewing and extend themselves. I think that's the sort of thing that will be very interesting.

I think it's just like when someone goes and gets an MBA and learns how to be a good manager in business and able to delegate, formulate problems and everything. It's different than doing the work. Doing the work is still important, but I think it's very much like when calculators were introduced. There were teachers that were thinking the sky is falling. How is everybody going to know how to do math if they don't practice and do long division all the time? And the reality is that we've gotten along okay by leveraging calculators. And I think the same thing will happen with GenAI and technology and law. You understand, learn the concepts, you'll learn differently, but you'll still learn.

Jennifer McIver

Yeah. And I think back to my days in law school, which may or may not have been quite some time ago, and a lot of it was training how to think and all of those hypos or all those cases that you had to read and put together. It was about learning how to think. And I see GenAI being very helpful in that and really cutting down the studying but still providing you the ability to think that way. And that's going to make room for more of the practical applications of law, which I think we've seen a shift in the last at least 10 years. There are even legal operations type courses now that are being offered during law school, the business of law. And so, I think the technology is just going to find its place right there along with some of those other advancements in how we approach law school.

Ken Crutchfield

Right. I was with my granddaughter over the Thanksgiving holiday, and I was showing her ChatGPT and asking some questions and then having it explain to somebody who is ten like she is. And it was very fascinating. My wife was listening as I was explaining it and reading. And I think it's things like that that are so powerful with these technologies where we're going to be able to take information and basically think about personas and say, answer this as if you were the judge in this case or how would opposing counsel respond to this? Or give me a counter argument. And I think those are things that are great in terms of the practice of law, but it's also great to be able to ask, you know, basically an AI mentor questions that you might even be embarrassed to ask somebody else or you wouldn't want to if, or you would want to if you only had the ability to reach out and speak to somebody that could mentor you at that level. Now granted, it's, it's synthetic, it's AI doing it, but it can still be pretty powerful.

Jennifer McIver

I think it's a great place, too, to get unstuck. I know as a first, second year associate when I started practicing, I honestly would sit in my office and my head would just sort of spin because I didn't even know where to start if I was asked to do some sort of a position statement. So, I think that not just giving me the answers but providing me some thoughts on where I can go with the project is going to be very beneficial for those first-year associates. And I think you're going to see value of the first year or second year associates go up. Which of course brings me to the chatter that's in the industry about GenAI possibly disrupting the hourly rates legal service model. Curious. Ken, do you have thoughts about that? And did the Future Ready Lawyer survey address that?

Ken Crutchfield

The Future Ready Lawyer survey did identify and say that 60% feel that AI will affect the billable hour. But when broken out, it skews more towards optimism in law departments with 67% looking at it that way versus outside counsel or law firms at 55%. And I think my point on it is we don't really probe into, well, how do you think it's going to change? I think the implication is often that work is going to go to Alternative Fee Arrangements or fixed bid, things like that. And my thought process is that you're going to see a lot of different things depending on where and what type of work you're talking about. So, work that's very highly focused with high powered attorneys, if the work goes from 10 hours to 3 hours, you might actually see the rates go up. In other areas where the work is more repeatable and commoditized and competitive, you might see rates go down or firms that get really good at work in a particular area that can repeat it and predictably identify how much time it's going to take are going to be more likely to do fixed bids. And I do think that this sort of technology, like so many other things, are going cause questions about, when do I really need to take something and send it to a specialist outside of my firm versus now I have the ability to do something that more naturally should have been done. Because this is a business issue, and we are experts in our own business.

Jennifer McIver

Yeah. And I think you hit on something there, sending it outside to more specialists. When I look at the model of service delivery for law firms and the hourly rate, it's pretty ingrained. You know, associates have to hit their hours. You have to have hours billed in order to do that. And that's how a lot of the revenue is made. But when you look to some of the other legal service providers – note, I didn't call them alternative because I do think that's going to go away, that word. But when you look at some of the other legal service providers, I think there's ability, potentially, to invest more in the technology than there might be at the law firm. So, I do think that I could see more specialized services going away from the law firm, which can be a little scary, maybe, at least if you're a law firm.

Ken Crutchfield

Right. I definitely think there'll be competition. But you do have the ABA rules that restrict the practice of law from non-attorney organizations. And I think that's one of those things that, there's been the sandbox discussions in Arizona and experiments in Arizona and Utah and places and, ironically, they haven't revolutionized the world yet. So, I do find it very interesting. There are some of those dynamics about how do you apply more technology? Because a law firm is not a capital-intensive business. So, they are less inclined to spend and invest a lot of money to solve a problem using technology. There’s just the capital structure, isn't there? I think the greatest example I have is Intuit, which is tax and tax returns. And tax compliance is kind of adjacent to law, but it's not exactly. It's a regime that is focused towards collecting taxes and complying with certain regulations. But I do think that the ability for Intuit, or whoever owned TurboTax back in the day, to build an interactive software solution for doing tax returns is the sort of thing that would be very powerful for the practice of law if you could do that with scale and have large amounts of money be put into it by venture capital firms. The only problem is that it would have to be a law firm or law firm ownership to be able to do it outside of those states where you have those experiments going on.

Jennifer McIver

I think that's innovative and insightful. But let's bring it back to the billable hour, because I think that that is the topic that's still there. And it's a continued focus into 2025. The Future Ready Lawyer survey actually listed as one of the top five key trends expected to have significant impact, and that's cost and price pressures. So, in addition to talking about GenAI and talent, as we've discussed, stepping back and really putting some meat around it with regard to rates. Wolters Kluwer is about ready to release our 2024 real rate report. And for those that may not know about the Real Rate report, we're in our 14th year. It started in 2010. And the data from the Real Rate report is taken from Wolters Kluwer's LegalVIEW database, which houses over 180 billion in spend data taken directly from invoices. Now, we do this annually, and the data is taken from July 1, so this year, July 1, 2023 through June 30, 2024. And it's clear that rates are on the rise. For example, in 2024, average rates for timekeepers during this time range: $631 an hour. That's for all timekeepers, including paralegals, associates and partners. Partners are actually averaging $803 an hour per the Real Rate Report. And in fact, partners in Chicago, Washington, D.C. New York City and San Jose, that beautiful tech area, average partner rates of over $1,000 an hour. So billable hours are definitely there. And you're seeing it all over. Partner levels, of course. But I think going back to the conversation we had on associates, the top one quarter of all associates saw an 8.2% increase in hourly rates this year. That's huge. That's retention right there. That's those competitive compensation packages from that 79% who expect competitive compensation.

So, we're dealing with all of that as we're also working on the technology. And I think as a legal service provider, it's important for us to help have more discussions, whether that's the billable hour, whether that's to achieve cost containment. So that's why I just want to break into and give breaking news here that Wolters Kluwer is actually working on a way to bring not only this PDF Real Rate Report to the industry, but also an interactive version of it. And interestingly enough, Ken, talking about working with law firms and your advisory council, law firms are actually the most common purchaser of the Real Rate Report. So we're working on a pilot right now with law firm users, as well as our own client users, to actually get in and use an interactive version of this Real Rate Report, bringing the data updates more often than annually and not only providing the raw data tables, which is what the PDF Real Rate Report provides, but also providing those trends so you can see where those rates are and where they're increasing. And I think by providing this to both the corporate legal departments, as well as the law firm, is going to make a big difference of getting all of that data out there to everybody involved.

Ken Crutchfield

I think that's great. I think that having the interactive version of this report where a law firm can go in and actually kind of understand, well, I'm competitive in this region, but not in this or in this type of matter, but not in that type of matter, is going to be beneficial and reduce friction for everybody. I think that's a great opportunity. I think that's an awesome thing to make available.

Jennifer McIver

What I love about it is I feel like it's mixing traditional technology, you know, the ebilling and the invoicing data, with the potential of bringing in AI and really looking at the entire ecosystem all in one place. For me, that's what's exciting and what I think is going to be coming up for us in 2025. So that's really where I want to go. Now. Ken, as we wrap up our discussion today, let's talk about 2025 and do you have thoughts on, you know, maybe one or two trends or breakthroughs that you think we should expect from the legal industry in this coming year?

Ken Crutchfield

I really think this is the year of adoption for GenAI. I think you're going to see certain technologies really kind of make it and be used, and others that were bright, shiny objects that might fall to the wayside here. I think there's a lot of discussion about ROI and understanding how to get a product in a use case that makes sense. I think deployment, getting the adoption of attorneys and actual usage to get those results is going to be something that we're going to see in 2025 and you're going to start to see some winners.

Jennifer McIver

I agree. I mean, we had our ELM Solutions Amplify conference back in October and I moderated a panel on AI use cases and there were some phenomenal use cases that frankly I would have never thought about. Whether it's responding to claims or whether it is coming in and looking at data for spend. So, I do think the more that we share those use cases across the industry – I do agree with you, Ken – that adoption is, I think it's going to be fast.

Ken Crutchfield

Right. I think we tend to forget that most technologies are really people, process technology, and data. So, the great technology and the great promise of it only works if you have people trained and know how to use the technology. That there are processes around the technology to make sure that you're getting the proper outcomes and to the extent that the technology runs on data, that the data is accurate because it's garbage in, garbage out, otherwise.

Jennifer McIver

And I think that's what 2024 has been, a realization of where everybody stands with their data and the work maybe that needs to be done in order to provide better data in order to fully leverage the GenAI technology.

Ken Crutchfield

I completely agree. Data hygiene and having an inventory of your data and how data gets updated is key.

Jennifer McIver

So, you mentioned people, process and technology. If I'm looking at 2025, I think people is going to be key. And when I say people, I mean relationships. I've been thinking a lot about how we still are focused on traditional relationships between in-house attorneys and relationship partners at law firms. But there's a whole ecosystem, in in-house and law firms that we're not tapping, whether that's going to be the law firm pricing professionals to look at innovative pricing solutions, potentially away from the billable hour or whether that's in-house looking at maybe transitioning legal operations into more innovation centers, including more on data, those maybe with analysts or with AI experience or that have been trained. So I think what we're going to see is instead of attorneys talking to attorneys for engagements, I really do think that we're going to see a lot more relationships and a lot more people being brought to the table in order to move forward and become a little bit more innovative and potentially go back to that Future Ready Lawyer survey response with disrupting the billable hour.

Ken Crutchfield

I agree.

Jennifer McIver

Well, this has been great. The Future Ready Lawyer survey, it's available on the website. We'll definitely provide links to it as well. And I just, I think that it's a wealth of knowledge. And for anybody looking, you know, to what they should be focusing on moving forward in 2025 and, and what we're going to bring, I think it's an excellent survey and a lot of great insights. So, thank you for sharing, Ken, and I hope that you have a wonderful holiday season.

Ken Crutchfield

Thank you. It's been great to be here and wish you a wonderful holiday season, too.

Greg Corombos

Those were the words of Jennifer McIver and Ken Crutchfield. Legal Leaders Exchange is hosted by Wolters Kluwer ELM Solutions, the market-leading provider of enterprise legal spend and matter management, contract lifecycle management, and legal analytics solutions. For more information and additional guidance, please visit www.wolterskluwer.com or call 1-713-572-3282. Please join us for future podcasts on optimizing legal operations and achieving your legal and business goals