Analysis from the experts at Legalweek 2022

In case you missed it: Experts break down the first in-person Legalweek since the pandemic began.

Zach Abramowitz, CEO of Killer Whale Strategies and host of The Higher Bar webinar series, recently sat down with Gina Passarella, Editor-in-Chief of Global Legal Brands at ALM Media, and Zach Warren, Editor-in-Chief of Legaltech News, to discuss their insights and the biggest takeaways of Legalweek 2022 in the webinar “Back in Person: Breaking Down Legalweek 2022.”

Highlights at a glance:

• In-house legal departments are starting to embed legal tech into their business operations
• Contracts are the next growth area in legal technology
• Legal departments struggle to compete for talent due to salary
• Law firms are going (mostly) back to the office
  

Has the pandemic accelerated legal tech adoption?

The first in-person Legalweek in two years reflected the changing dynamics within the legal industry. No longer solely focused on technology, the conference highlighted the interconnectivity between technology and legal department operations. Lisa noted she saw more GCs and law firm leadership in every session she attended, not just attendees from Alternative Legal Service Providers (ALSPs) or the legal tech space: “All of these different components of the legal industry are so increasingly interconnected; you can’t break them apart…It’s impossible to break apart this ecosystem. That is what Legalweek was meant to reflect.” 

Technology has become embedded in all aspects of legal operations now. As Zach comments, “it’s all kind of wrapped up in one now. The way you’re bringing value now is in integrated ways that often before didn’t include technology.” He says that for many firms and legal departments, they now need to use technology as a business decision: “That’s why you’re seeing a lot more diverse people and job functions show up at this [event].”

Does this mean the legal industry is all-in for embracing technology?

Not necessarily, but it’s getting there. The pandemic did change the mindset for many people in how they think about technology, like moving calls to Zoom and storing documents in the cloud, etc. Zach thinks this signals a bit of willingness for some people to consider new ways of working, or join their corporations or firms in being committed to thinking through these problems. He doesn’t see this as a “huge wave of embracing technology a lot of people expected a year or two ago, but I do think we will see some downstream effects for people jumping on board, when previously they may not have been as open to it.”

Gina agrees: “Adoption is the keyword here. The tools that allowed us to function remotely, more efficiently – yes. But the bigger tools that change the way we do work and expressly benefit the client… [have not experienced] the level of adoption… that is so meaningfully different.” Within the conference and in her personal conversations, she’s actually seen the GC community as a whole thinking about technology much more recently. It’s a tougher sell for GCs, as they need to prove the ROI for legal departments to bring in tech, but there is a focus on working smarter: “There’s a lot of opportunity, and less hesitancy, but I think we aren’t there yet in terms of… opening the floodgates.”

More focus on contracts

While Legalweek was primarily an eDiscovery event in the past, this year’s conference showed there has been increased attention to contracts. Why is this?

Zach says the answer is two-fold. There’s a lot of money behind contracts now: “There have been so many nine-figure investments into contract companies in just the past two years. It’s been wild! People are seeing dollar signs in contract lifecycle management and contract analytics.” Because these companies are growing quickly, their marketing spends are growing quickly as well.

The other reason behind this, according to Zach, is the composition of who exactly is interested in technology. More GCs and in-house counsel are getting involved in legal technology than ever before. In previous conferences where the focus tended to lean toward eDiscovery, the sessions appealed more to outside counsel and litigators who manage the discovery process. Fewer in-house counsel attended the conference. But with contracts, the roles are reversed. More than ever, GCs and AGCs are considering contract lifecycle management tools (CLM) to manage the contract workflow, create contracts for the business, and identify key information in executed contracts: “GCs and AGCs are specifically interested in adopting those tools in-house, so they are interested in these kinds of shows to see ‘what’s up.’ I was seeing this even in 2019 and 2020, but it ramped up even more for this conference. There’s a higher proportion of in-house people present.”

Gina goes so far as to say that she would even put contracts above eDiscovery as an everyday business issue for GCs, according to her conversations with many in-house counsel and legal departments: “It’s a global issue, not just in the U.S. As a function, eDiscovery is more mature with tech behind it, usually managed by someone and under control. But with contracts, that’s the business issue they are trying to solve for and streamline. It’s critical to the business and all eyes are on it, from almost every business unit.” There is a lot of opportunity for those in this space.

For those lawyers working in legal departments or consulting for them, there’s not as much focus on the minor efficiencies that can make the operation of the legal department more effective. Zach Abramowitz emphasizes that “legal departments need to stay on pace with the business, as well as sending insights and data back into the business. They won’t get that from eDiscovery. eDiscovery is always going to be a legal and compliance-first tool, with less impact on the rest of the business.”

Addressing the Great Resignation (aka the Great Reflection)

There are many terms to describe the current talent shortage, such as the talent wars, talent drought, talent supply chain crisis, but most notably the Great Resignation, or as we call it at Axiom, The Great Reflection. How much of this is happening within the legal industry?

According to Gina’s insights, she’s hearing about it happening more in-house than in law firms: “We’ve definitely seen the Great Reflection or Great Resignation happening. I’ve seen it more on the in-house side, or at least those are the people out there talking about it and saying why they’re leaving. I’ve seen many in-house folks saying ‘I need to take a step back.’” She considers it a reshuffling, noticing a lot of the movement has been between the same work environments, or even across the country or globe. 

GCs struggle to hire talent 

Gina finds talent was the number one topic legal department leaders have spoken about in the last several weeks and months: “They can’t hire people, they are desperate for people, but they just can’t compete with the [law firm] salaries and can’t justify it. It’s not as though it’s the adage of ‘it’s an easier work-life balance.’ That’s not the case anymore, and almost insulting to the in-house community to suggest that it is. Yes, you’re not under the billable hour pressures, which is a joy for anybody, but besides that, it’s just as complicated, you’re just as in the thick of it, you’re working the same number of hours,” but without the pay of the law firms. 

Until recently, in-house legal departments were growing tremendously in terms of size, to the point where it seems that in many instances, there are as many lawyers working in-house as in outside counsel roles. One of the reasons GCs began building larger in-house teams over the last couple of decades was to save money, since law firm rates increased tremendously. Due to the pandemic’s shift in the in-house workforce, could legal department teams start to get smaller again?

Due to the ongoing uncertainty and changing workforce, this is slightly complex. “[Legal leaders] are all making this calculus, depending on the economic circumstances, about when it makes sense to bring in a specialist in-house versus sending out,” Gina states. “Right now, I thought this would have been the year where we saw some rationalization of outside counsel spend in terms of where they’re spending their dollars and how much, but they’re just continuing to accept these massive rate increases, and so it hasn’t happened yet. […] It makes sense to have some effort for the in-house teams to reduce their overall costs for legal, whether that means finding a way to bring someone in-house, going to different types of law firms, or different legal service providers (which makes a ton of sense to me, and I don’t know why we don’t see more of that).” She discusses how in-house leaders prefer more collaboration between their outside providers and in-house teams. They “don’t want to have to be the ones to figure out what that mix is. They would love their outside providers (firms, ALSPs of any kind) to create this magic team that comes to them with their solutions at the right price.”

Another reason why legal departments might get smaller is because law firm salaries are higher than in-house salaries. So, while GCs may not necessarily want to shrink their team, they may not have many options due to the talent shortage.

But this might change with the new generation of lawyers who value purpose just as much as salary: “There’s something different happening right now. It’s this purpose, [which is] not a new concept, but an ‘I need to know what type of work I’m doing, why it matters, and if I can feel good about it.’ That’s real; it’s a growing contingent.” 

Growth companies are shifting their hiring priorities

Zach shares interesting insights into the recent formation of legal departments at growing companies, where he’s discovered small legal departments are adding legal operations professionals within their first ten hires. While this isn’t a large trend yet, growing legal departments are building teams to be efficient from the start. While he doesn’t view it as something we’ll be seeing on a grand scale right away, he thinks as companies are trying to build something new, they will try to build smarter: “That may be something we see five, six years down the road, where maybe it’s not a complete overhaul of a legal department, but it’s just a legal department built in a different way to be efficient from Day 1.”

Gina concurs, adding that GCs at companies that have gone through an IPO in the last year or two are hiring new specialists (think compliance officers, lawyers who understand crypto, legal ops, etc.), and adding new skillsets to the team. Even smaller growth companies are hiring specialists where it makes sense.

What’s the future of the legal work environment?

Law firms are going back to the office

One of the biggest takeaways on remote work during the conference is that almost all law firms will be transitioning to a hybrid work model beginning in April. While not required to be in person full-time, most law firm lawyers will be in the office Tuesday through Thursday. There will still be some remote work, but there is the mindset, particularly from management (not necessarily partners), that an in-person work environment is important to the success of training and talent management. “There is a clear thinking,” Gina says, “that in order to keep the advancement and the training, etc., they need to be in person for a good chunk of time, and all need to be organized to be there at the same time.”

So, during this tumultuous time for most businesses, as well as a shift to many employees choosing a work-from-home lifestyle, why are law firms making this decision? Both Zach and Gina think this is not about clients, but about the lawyers themselves: “I think that’s a key point here, in the talent and management portion of this. I’ve found that it’s not about the clients. They know they can handle their clients remotely. The issue is making sure associates, summer associates, people on the partner track, etc., are developing in a way that the firm wants. Especially for a lot of firms right now, they’re thinking, ‘okay, what we really need right now is to make sure training is in order, our networking is in order,’ and that’s a lot easier to do in person than over Zoom. For that reason, I think hybrid isn’t going away anytime soon, but I also don’t think fully remote will happen any time soon.”

Is this to avoid burnout? Not necessarily, though firms are very much focused on mental health. But, according to Gina, the reason why firms are bringing people back to the office is because there is a recognition that everyone’s situation is different. Firms are mindful they “have to consider the realities of all of our staff and understand that there are differences in what works for everybody. And that’s where this flexibility comes in.”

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