Hunit - Smart Legal Contracts

Lawtech can increase diversity in legal services

As in many industries, diversity remains a challenge in the legal sector. But unlike others, a significant portion of the legal sector’s problems emanate from a business model that is core to how the industry creates revenue and measures itself.

In our own customer focus groups, Hunit interviewed legal professionals from around the world and found unequivocal assent that technology would prove a key driver in unlocking billing model evolution and the numerous benefits that accompany it.[1]

Tying value to time is a Gordian knot. Could focusing on the quality of the work, rather than the quantity, be the blade that can cut through? In other words, can technology help the legal sector shift to using outcomes instead of inputs as the basis for its revenue model?

The billable hour is the bedrock of today’s legal services. The more hours a lawyer posts, the more value they are assumed to be contributing to the client. The more value they contribute to the client, the more the firm may bill and therefore the more opportunities the lawyer has for promotion. When time is used as a proxy for value creation, it serves as a surrogate for qualities that are far more nebulous, such as ambition, intelligence, commitment and professionalism.

Bar a few exceptions, the time-based billing model is most beneficial to a specific type of worker: the unencumbered. This places many highly talented people at a structural disadvantage. This includes lawyers with caring responsibilities, as well as those who are disabled, neurodiverse, or anyone who may suffer from mental health conditions.   Many workers are often held back and even deterred from careers in law. In one example, a 2019 Law Society report found that 49% of female respondents said that unacceptable work-life balance demands to reach senior positions was holding back their ability to progress.[2]

The legal sector continues to struggle with diverse representation at the top level. Despite a recent slew of initiatives by leading law firms to increase diversity, recent research shows that only 3% of lawyers identify as having a disability compared to 19% of working adults nationwide.[3] Meanwhile, only 19% of senior leaders (either CEO or managing partner) are women even though women have been graduating from British law schools in equal numbers for over 25 years.[4] The number of top lawyers from Black, Asian, or Minority backgrounds remains low: making up only 8% of partners and with over 25% of this group reporting severe or extreme stress due to the feeling of needing to put in more hours than their white colleagues to get ahead—a statistic that goes some way to explaining the high rate of burnout and low retention levels amongst this demographic.[5] 53% of partners at top London law firms went to independent (fee-paying) schools, compared to just 7.2% nationally. A so-called ‘partnership penalty’ is in effect for lawyers from lower socio-economic backgrounds. A recent study showed that it took lawyers from less affluent backgrounds around 18 months longer than their better-off peers to make partners, with some respondents to the survey highlighting ‘a construct of long working hours as being part of the way to making partner’.[6] Individual performance is monitored and rewarded by a system biased in favour of unencumbered, able-bodied men from socio-economic backgrounds most often associated with being Caucasian.

It has recently been suggested that flexible working, in both hour structure and location, might provide a means of enabling a more equitable workplace, with over 91% of respondents in a 2019 Law Society survey stating that a flexible working culture was critical to improving diversity in the legal profession[7]. However, this doesn’t fully solve the issue. In the same survey, roundtable participants consistently expressed concerns that working flexible hours would prevent them from progressing or bar their chance at promotion, a fear noted by many sector observers.[8]

Cost efficiency technology (like that already in use across the sector) is a step in the right direction. Tools that can reduce the portion of the day dedicated to administration and quality control free up time to be focused on strategy and negotiation – cornerstones of creating client value. But do these go far enough to create a tipping point or are they marginal improvements?

Smart Legal Contracts (SLCs) may instead provide a basis for valuing outcomes over inputs. When bilateral contract automation is built into the legal agreement itself, value creation is decoupled from the input of additional time – a well-crafted SLC continues to provide tangible benefits to its parties throughout its lifecycle, largely independent of solicitor hours. Self-executing terms can greatly reduce the need for manual follow-up (either by a law firm or by SLC signatories) and pre-planned remedies to key types of agreement breach increase trust and transparency of outcomes. If creating long-term client value occurs more through the application of skill than time, law firms have a basis for rethinking their client billing models and how they quantify a lawyer’s contributions to the firm’s success.

But the change-management aspect of billing model evolution is two-fold. When a firm re-thinks its client billing (by adding subscription or project-billed models for example), it should also re-evaluate how it quantifies a lawyer’s contributions to the firm – the most critical metric for making and staying on the partner track. Here the 6-minute increment is still almost exclusively the go-to internal measurement of productivity. We cannot expect meaningful increases in the diversity of the legal services sector until it stops measuring itself in the way that has created the challenge to begin with.

Going beyond a simple levelling of the playing field, new billing models stand to benefit all legal services stakeholders. A more diverse stock of solicitors brings different lived experiences and perspectives to the issues at hand. This in turn benefits their clients in the quality of the solutions they are provided and helps an equally diverse society find representation that better understands its needs[9]. Over time, it also increases the quality of the judiciary and policy, as the legal services sector sends its top performers into positions in courts and in government.

Generally, the diversity conversation has shifted from ‘need for’ to ‘advantages of’ inclusion. We have moved past placing more diverse faces on leadership teams and towards systematic measures that enable active participation in the workplace from a diverse workforce. The legal sector should evaluate innovative paths to increase its progress. While legal services are technically only one sector, the nature of its role in society means that it is a critical and central contributor to nearly every aspect of one’s personal and commercial life – legal services touches everything.

Unlocking the benefits of technology-use in law is a key pillar of unlocking a more equitable and diverse legal industry. Realizing that some of the most exciting examples of emerging lawtech serve to solidify the importance of solicitors, it means that instead of being at a precipice where technology begins to disenfranchise lawyers, we could instead be on the cusp of a golden age for the legal services sector.

[1] Legal Insights: Billing for legal services when time is no longer the measure of value

[2] The Law Society: Advocating for Change: Transforming the Future of the Legal Profession through Greater Gender Equality

[3] Solicitors Regulation Authority: Disability in the Workplace

[4] Bloomberg Law: Law Firm Diversity – How it’s Going, and a Way Forward

[5] The Law Society: Race for inclusion: the experiences of Black, Asian and minority ethnic solicitors

For further evidence of low retention rates amongst BAME lawyers, see the statistic in the above Law Society Report that around half of female Black, Asian and Minority Ethnic solicitors moved firm or sector between 2015 and 2020.

[6] Legal Futures: “Partnership penalty” of lower socio-economic background laid bare

[7] The Law Society: Women in Leadership Law Report, 2019

The Law Gazette: The True Cost of Billable Hours to the Profession

[8] Michelle J Budig, Joya Misra et al, ‘The motherhood penalty in cross-national perspective: the importance of work-family policies and cultural attitudes’ (2012) 19 Social Politics: International Studies in Gender, State and Society

[9] SRA: Mapping advantages and disadvantages: Diversity in the legal profession in England and Wales