Another
week,
another
study
demonstrating
the
gap
between
what
in-house
legal
professionals
want
from
their
outside
law
firms
and
what
they’re
getting
when
it
comes
to
innovation
and
technology.
Despite
all
the
AI
talk,
we
aren’t
there
yet.
This
time, the study
was interestingly from
a
law
firm.
Thompson Hine, an
Am
Law
200
midwestern-based
law firm,
conducted the study of
almost
200
senior in-house legal
professionals to look
at
how they were
embracing
innovation.
The
study,
entitled Bridging
the
Perception
Gap-Disconnects,
Expectations
and
Opportunities, also
focused
on how in
house legal perceived
their
law
firms
were
doing.
This
is
the
fourth
such
study
that
Thompson Hine
has
conducted. Thompson Hine
partnered
with Corporate
Counsel to
conduct it.
A Disconnect
As
the
title
suggests,
the
study
found
some
pretty
glaring
disconnects.
Only
5%
of
those
surveyed
said they
saw
a
great
deal
of
innovation
from
their
law firms.
That percentage was the
same
in
2023
and
an
increase
of only two
percentage
points
since 2020. That ain’t much
progress.
And
here
is
the
first disconnect.
When
asked
how
much
innovation
their
firms
claim, the
respondents
said 20%
of
them
are actually claiming to
be
greatly innovative.
Why the
Gap?
As
someone
once
told
me,
“There
are
firms
that
want
to
be
innovative
and
there
are
firms
that
want
to
say
they
are
innovative.”
Quite
simply, firms
are
often
telling
clients
what
they think they
want
to
hear
when
it
comes
to
innovation. Some
firms
are
content
to
say
we
did
innovation, pat
themselves
on
the
back, and
check
the
box.
Just
like
back
in
the
early
days
of
converting
to
computers,
there
were
firms
that
bought
desktops
for
all
lawyers
just
for
the
optics
when
clients
visited,
even
if
no
one
knew how
to
use
them.
Then
there
is
a definition problem. In-house legal
professionals
are
interested
in innovation
and
technology to help
them get more work done faster and more efficiently. Law
firms’ interest
in innovation
and
technology is often limited
to reducing non-billable
hours
or marketing. When
a
law
firm says it’s
innovative,
it
may
not
be
innovative
in
a
way
that resonates with
in-house.
In
addition,
note
that
only
16%
of
those
surveyed
said their
outside
firms were
superior
to in-house legal
departments
when
it
came
to
innovation. Only
3%
said
their
outside law
firms were
supplying them with all
of the
innovation
needed.
Think
about
that. Law
firms
are
often
smaller.
They operate in
practice
groups.
This
should
make
them more
nimble than
the large
corporations they
serve.
Moreover, law
firms
are
service
providers.
You’d
think
they’d
want
to be
ahead
of their
customers
in
innovation
to
provide
better
service, not
behind.
We
see
the
same
thing
with
attitudes
toward
things
like
AI. Twenty-three
percent
of
the
in-house
folks
say
AI
has
come a long way
and
should
be
used versus
18%
of
the
outside
lawyers.
Outside
lawyers
are
more
concerned
about
accuracy
and
privacy
than in-house. This
gap squares with the findings of
the Association of
Corporate
Counsel (ACC) which
I reported last
week. That survey found
that use
of
AI in-house had
grown to close
to
70%.
Why
the
Gap,
Part
Two
So
why
aren’t
law
firms
interested
in
using
things
like
innovation
and
AI
to
provide
better
service?
First
and
foremost,
the
billable
hour
model limits robust
innovation
and use
of technology.
Adoption
of
innovative techniques and
things
like
AI inevitability impact
the
billable
hour
and
law
firms
know
it.
Secondly,
the
consensus
decision-making
process
engaged
by
most
law
firms further
inhibits
adoption.
The partnership model
all too often
results
in
too
many
decision
makers, any one
of
which
can
say
no
loudly
and
long
enough
to
have
an
impact.
Add
to
the
fact
that
lawyers
are
skeptical
and independent by
nature and
you
get delay
and
often
blindness to
innovation.
Add
this
all
up
and
it’s
not
a
good
look
for
outside
lawyers.
But
they
aren’t
completely
to
blame.
So, It’s Easy
to Blame Outside Lawyers?
At
first
blush,
it’s
easy
to
blame
outside
law
firms
for dragging
their
feet
when
it
comes
to
innovation
and
technology.
But
there
is
something
else
at
work
which makes
it
easy
for
firms
to
safely
and
blissfully maintain
the
status
quo and not
rush
to
innovate
and
adopt
technology
to
provide better service.
In-house legal
professionals just
aren’t
demanding
change. In
fact,
they reward
their
firms
for
the
status
quo.
We
see
this
with
the Thompson Hine
findings: despite the
fact
that 93%
of
the
survey respondents say
innovation
is crucial or
at
least
important
in
selecting
firms, they apparently are content
with seeing a
great
deal
of
innovation
from only 5%
of
their
firms.
We
saw
a
similar
gap
in
the
ACC
Study:
59%
of
those
in-house legal professionals didn’t
know
if
their
firms
were
using
technology
on
their
legal
matters
and
80% were
not
demanding
or
even
encouraging
their
outside
lawyers
to
use
GenAI.
To
paraphrase an earlier
observation:
there
are
legal departments
that
are
demanding
innovation
and
there
are
legal
departments
who
want
to say
they
are
demanding innovation.
What
Is
In-House
Legal
Rewarding?
Which brings
me
to another recent study,
this
one
by Thomson
Reuters of
law
firm
rates
which it conducted. Based
on
the
findings,
the
study’s conclusion says
it all:
The
legal
profession
has
achieved
what
most
industries
can
only
imagine:
The
ability
to
raise
prices
year
after
year,
with
clients
consistently
agreeing
to
pay
more.
Over
the
past
decade,
law
firms
have
pushed
rates
at
twice
(or
more)
the
rate
of
inflation,
and
2025
is
no
exception
—
worked
rates
are
up
7.4%
compared
to
just
a
2.8%
inflation
rate.
This
isn’t
just
a
routine
cost-of-living
adjustment,
rather
it’s
a
demonstration
of
genuine
pricing
power
that
has
fundamentally
reshaped
how
legal
services
firms
generate
revenue.
To
be
fair,
the study also suggests
that
this
gravy
train
may
soon
be
ending due
to
a
variety
of
factors.
That
may
be
true,
although
that
sounds
a
little
like
the
“death
of
the
billable
hour”
that
has
been
predicted
as
long
as
I
have
been
practicing
law.
It
hasn’t
happened
yet.
Mind
the
Gap
Here
is
the
simple
fact:
unless
and
until
clients
demand
change
by
their
outside
law
firms, it’s not
going
to
happen. And
why
should it? Law
firms,
particularly
large
ones,
are
making
way too much
money
to
change.
Their
clients
aren’t pushing
them
to
change
and
reward
them
year
over
year
with large rate
increases.
Part
of
the
reason
for
all
this
is in-house lawyers
are
still
lawyers.
They
have
the
same
reluctance
to
change
and skepticism as
those
in
their outside
firms
from
which
many of
them came.
Part
of
it
is
because
the
practice
of
law
is
still relational: in-house legal
professionals trust
and
rely
on
their
outside
lawyers.
They are reluctant to
tamper
with
their law
firms’
business
and
perceived
needs. Plus, legal
department
budgets
are often
relatively
small when
compared
to that
of the
overall
business.
And just like in-house legal
professionals rely
on
and
trust
outside
lawyer
for
their
expertise,
the
business
must
trust
and
rely
on
the
legal
department’s
advice
and expertise.
Want
Change?
Demand
It
So we
all
bump
along
singing a Kumbaya innovation
song
but with
little really changing at many law
firms. In-house
whines;
law
firms
make changes
in
name
only. Is
it
about
to
change
with
the
advent
of
GenAI
and
agentic
AI?
Not
unless
clients make
it
so.
Perhaps
it’s time for
in-house
legal
to have a
gut
check with
their
outside
counsel. Or
simply
vote
with
their
feet.
One
thing
that’s
not
going
to
effectuate
change
is continuing
to do nothing.
And the
next
time in-house counsel
complains
about
their
outside
lawyers,
perhaps remind
them
to
mind
the
gap.
Stephen
Embry
is
a
lawyer,
speaker,
blogger,
and
writer.
He
publishes TechLaw
Crossroads,
a
blog
devoted
to
the
examination
of
the
tension
between
technology,
the
law,
and
the
practice
of
law.