Many law firms have made significant investments in AI and are wondering how they can begin to experience a return on that investment; however, a simple framework can help identify places where those benefits are most likely to be felt first
AI is expensive — that is an unavoidable reality. Law firms that are making a substantial investment in AI, and many are, are understandably looking for ways to calculate the return on that significant investment. AI’s value is not necessarily one that lends itself to a standard ROI analysis, as AI, and particularly generative AI (GenAI) promise both quantitative and qualitative benefits. However, that does not mean that investing in those technologies are not good options for how to at least begin to understand the benefits AI may bring to a law firm.
In a recent Thomson Reuters Institute white paper, The AI-driven future of legal efficiency, we offered some insights on specifically where firm leaders could begin looking for some initial indications of ROI, even if they may not be readily apparent.
To start, the paper argues that “AI should not be viewed merely as a means to reduce human input, but rather as a tool to elevate legal service delivery.” To that end, AI can be an incredibly powerful tool to address a common, but often underappreciated problem for law firms — the millions of dollars every year that are lost due to inefficient workflows.
Understanding where the time goes
Lawyers frequently make proactive adjustments to their bills even before the client sees the invoice, a practice commonly known as a write down. By way of brief explanation, the partner charged with reviewing the client bill will look at the pre-bill inclusive of all the time and fees for the period, then often will adjust that pre-bill invoice downward. There are myriad reasons for this that are detailed in our Law Firm Billing Efficiency and Write Downs report, but most often, this happens because the partner reviewing the bill feels the firm’s fees may be too expensive and wants to pick a number that feels like it will work better for the client.
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The time that is lost to this practice of write downs can seem insignificant in isolation, but in the aggregate can results in millions of dollars of lost time. This process has been termed fee erosion or revenue leakage.
And it is exactly these areas of common leakage and erosion that make for an easily compelling target for AI applications.
This framework can be applied across a law firm, starting with an analysis of the areas in which leakage is occurring, then driving toward outcomes that deliver better value for the client and better financial results for the law firm.
The key resources that a law firm has to sell, naturally, are the time and expertise of its lawyers. Using AI to target where those resources are being wasted due to inefficiencies can provide a quick and measurable ROI on the firm’s AI investment.
Many law firm leaders remain concerned about the potential downsides of AI efficiency, worried that it will ultimately degrade billable hours. This is not an inevitable outcome, however. Technology can be used to create benefits, but it can also be used to avoid pain — and firm leaders who strive for an effective rollout of new technologies can accomplish both. Meaningful analysis of the places in which AI can be most effectively deployed creates opportunities to plug leaks, optimize attorney time, and improve the outcomes for clients and ultimately, the firm itself.
The biggest challenge, or course, may well be making the decision to start the process.
You can download a copy of the Thomson Reuters Institute white paper, The AI-driven future of legal efficiency, here
