Other than the billable hour, he says law firm traditional assumptions are all under threat
Jordan Furlong is a strategic consultant to legal organizations in Canada and the United States. For our CL Talk podcast, we spoke to him about artificial intelligence, the billable hour, mental health and why he is done predicting the profession's future.
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Below is an edited summary of the conversation.
It was the advent of the pandemic and everything that flowed from that. Not just in social change but also in professional change, how legal work is done, how law offices are constituted, and the rise of artificial intelligence. What I said was that the future's here now. There's no point talking about what's going to come. We have our hands full right now with the present. That's the spirit in which I'm approaching all the crazy stuff right now.
Generative AI is a rapidly moving target at the best of times. Any discussion you can have about AI today will differ from the one we had four or five months ago.
The number one thing I say to lawyers is nobody entirely understands yet what we have on our hands and what this can ultimately do. We do have a pretty good sense of what it can do today, though, which is already impressive.
I tend to be relatively conservative in my predictions around generative AI. This is not because I don't think it's an important technology. I believe it is game-changing for the legal services sector. But it's easy to over-predict and overstate.
We have just come to the end of the intense hype cycle around generative AI. Right now, we're probably looking at a little bit of a crash in terms of disappointment.
Generative AI has two dimensions which are essential for the legal profession. The first is its ability to generate content at an extraordinarily streamlined, rapid and proficient pace.
But the other dimension, which I think is more interesting and powerful, is the creative side. You can think of it almost as a creative intern who works with you and helps you bounce ideas off them. That could be for client work if you're very careful about maintaining confidentiality, but it's terrific for your business and managing your people.
My takeaway for lawyers is to go out and use it, play with it, and see what it can and can't do. You will be surprised at the applications you can find for your work.
I want to give credit where it's due. In the last 20 years of watching law firms, I have seen business models, operations, finances, management, and all the elements of how law firms work improve significantly. This is true for massive law firms and solo and small firms.
A lot of this comes down to the explosion of accessible legal technology. If you're a small firm lawyer, and you're not using Clio or a similar online practice management program, I haven't met you yet because I don't think you exist.
However, I think we have a long way to go. A vulnerability is at the heart of the traditional law firm business model, even if you have one or two associates working for you or other lawyers who are not equity-owning partners. You rely, to a certain extent, on leverage. You are paying your associates a certain amount of money, and you're billing them out at a higher rate because you know you can give them lots of hours.
Generative AI will swoop in, and it will gobble up a lot of those hours. It is also getting more challenging to convince associates that it's worth their time to power through years of straightforward and uninteresting work so they can pay their dues and generate billable income for you.
You throw into this all the issues around remote work and hybrid work, and you get to the point where a law firm’s business model is not sustainable.
This isn't about the billable hour per se; that's a separate conversation. This is more about the value you're providing to your clients.
We need to talk about pricing. It's going to have to be more packaged pricing. It will be more retainer pricing, perhaps monthly, quarterly, annually, client-based; who knows?
We don't have time to dig into all the other ways law firms need to improve. We can have a whole conversation about the management of people, especially of younger lawyers, but also staff members.
So, I want to give credit; we have come a long way. But there's so much more to do in so many respects. Law firms are still well behind the curve in how even other professional businesses run. And it does not take that long to find good resources. There are lots of them out there, and many people are willing to help you with it.
But as a lawyer, you need to commit to saying I will carve out the time and effort to pay attention, not just to work in my business, but to work on my business.
I published an entire cover story at the CBA’s National magazine during my tenure as editor predicting this. I was not the first and not the last to write the obituary of the billable hour. My current position is that it will survive until shortly after the sun dies.
I am no longer in the business of predicting. I am in the business of trying to figure out why it is so resilient. It isn't just because it's convenient and profitable for lawyers. If that were the case, clients en masse would have rebelled against it ages ago. All the efforts to develop much more sophisticated pricing mechanisms, fixed prices and fees would have succeeded, but they have not.
When I talk to innovators within law firms around pricing, they often shrug and say the clients say they want to stick with the billable hour. They don't want to try these new efforts. They say it is because they don't trust law firms and assume that it is because firms are making more money off them. I say, “Okay, you don't have a pricing problem. You have a different problem.”
But I have tried to understand the billable hour a little bit better. The billable hour works pragmatically because it's a proxy for the value exchange between the lawyer and the client. Many people, brilliant and forward-thinking value pricing advocates, will say it's all about determining the value to the client.
A client usually doesn't know how much the lawyer's work is worth. Lawyers don't know. We don't have a clue. We have no training in this kind of thing.
So, when lawyers and clients don't know how much something is worth, you must find something to assign value to, and the billable hour is easy. Because it correlates with our general sense that the harder and longer you work at something, the more you should get paid for it.
That goes back before the Industrial Revolution days. I think that's why it has survived as long as it has.
My remaining issue with the billable hour is compensation, lawyer assessment and billable hour targets. Because we have made a fetish out of having a high number of billable hour targets every year. We have built so many bad habits, discouraged innovation, and severely compromised lawyers' mental, physical, and emotional health.
It's not just buzzwords. It's a severe problem. We're seeing more of it for a couple of reasons.
Some but not all of the stigma of admitting to being unwell, mentally, emotionally or physically, because of your work as a lawyer is starting to ease, especially among younger lawyers. For the older ones, it is still more of a more of a taboo subject, especially when we talk about substance addiction.
The other reason, there's a lot more of it. And once again, you will find this is the case for younger lawyers. I graduated from law school with a debt I could pay in about six or seven years. With tuition ten times what it was in my time, young lawyers will carry debt for decades. The pressure that is placed on them is extraordinary.
That's just one of the sources of pressure that they're under. We talk about the billable hour targets, the demands, and the fact that law firms are not what you would call emotionally safe spaces.
Law is a punishing profession. It's supposed to be stressful and difficult. If you're living a completely stress-free life as a lawyer, you are doing something wrong. But there's ordinary pressure, and then there's what is crushing people, especially younger people, today and driving them out of the profession, never to return.
How do we how do we cope with that? My advice to the regulators on this point has been to prepare people much better for law practice. That means a complete revamp of the education training licensing process for lawyers, which is simply inadequate to the challenge of practising law.
But you must also warn them, tell people coming in you are heading into a blizzard, and it's tough in there, and you have to be ready for it as much as possible.
You look at that survey that the CBA and the Federation of Law Societies of Canada jointly did a year ago. In the numbers that they found in Canada, which reflect the numbers elsewhere, the one I will never forget is that 24 percent of lawyers surveyed have at least once in their careers thought about killing themselves.
That goes beyond red flags or a red alert. This is not an approaching problem. This is a full-blown crisis that we're in right now.
The Canadian market, generally speaking, is in the same place and proceeding at the same pace for the most part as other Western common law countries, such as Australia, New Zealand, England, Wales, and Scotland.
I do find that, speaking broadly, the European nations tend to be further behind in terms of openness to innovation, change practice, gender issues in the law, and so forth.
In my limited exposure to South America, I think they're a little more new-world-oriented than Europe. Canada probably tracks relatively close to the US; we tend to be about two or three years behind them in everything.
If you offered me a choice to practise law in the US or Canada, I would practice law in Canada, not just because I love living here but because I think the firms are more sensibly and humanely run.
That has pros and cons; I'm not saying either is better or worse. But I would like to see more ambition from Canadian firms. I think there is a level of complacency here which concerns me.
I worry about that because we are already in a very challenging time, and it will get rough next year and the year after. Storms are coming our way. People need to have all hands on deck and take the fundamental, maybe even existential issues, seriously for the legal profession.
Please think beyond the next quarter, beyond the profit per partner. Consider your role as a legal professional and your law firm's place as a pillar in the community.
It's an extraordinary time we're in right now; there are many challenges but many opportunities as well.
