TBA Law Blog

Posted by: Reem Blaik on Apr 23, 2019

Journal Issue Date: May 2019

Data Can Help Lawyers Thrive in the Changing Marketplace

The digital age has changed the practice of law as we know it. The rapid rise and growing use of technology influence client expectations which, in turn, impact the business practices of the private sector legal services industry. With a few simple clicks of a button, for example, a user can create an online will or incorporate their business for under $100. How do attorneys stay relevant during such taxing times?

The legal industry’s focus on evolving legal technologies and business practices is warranted. However, the ever-increasing emphasis on the future of the legal industry tends to obscure what is currently going on in the marketplace for Tennessee legal services. This article contributes to the understanding of Tennessee’s current legal marketplace by taking a hard look at the data on this subject, as well as national legal industry data.

Specifically, it analyzes three years of legal trend studies that aggregated data on legal professionals and consumers from the United States.1 It then compares this data to a survey that collected data on attorneys from Tennessee.2
This article concludes that technology usage is, and will continue to be, an integral part of the contemporary practice of law. Technology alone, however, will not be the sole impetus of change. Rather, new business models will continue to transform the legal industry.3 In order for attorneys to maintain their position in the legal industry, they must become change adapters and counselors of customer service.

I. The Current State of the Legal Industry

The current state of the legal industry is markedly different from how society has portrayed it in the common tale. Traditional consumers of legal services are demanding better, faster and cheaper legal services. Moreover, clients expect greater customer service because of the increased availability and affordability of online legal services. As a result, alternative legal service providers — many of which take advantage of the technologies discussed below — are increasing their efficiency while decreasing their costs. And this affects attorneys, too.
Although many things have changed in the legal industry, the fundamental services that attorneys provide have remained constant. That is, attorneys still (1) counsel on substantive issues and (2) assist with process navigation. In other words, clients continue to need help with the “it depends” legal issues, and with resolving these issues according to established legal procedures.4
Admittedly, though, technology is increasingly affecting the second service of process navigation. According to Joshua Lenon, Lawyer-in-Residence at Clio, a leading legal software provider, “the processes lawyers help navigate … are going to change and become tech processes,” thus becoming similar to the other innumerable technological processes clients have in their lives.5 In other words, alternative legal service providers are streamlining process navigations online, for example, making it easier to file a lawsuit or prepare legal documents.
For so long, the tried-and-true business structure of law firms was so dependable, but this quality seemed to slip away from the industry overnight. These issues, however, have been festering for a while now, and it is up to attorneys to address the aftermath. Although some attorneys and law students may think technology has “disrupted” traditional legal practices for the worse—it is better to characterize these technologies as useful project management tools that can assist in addressing the industry’s current economic trends. In turn, adopting more efficient business models can free up more time in attorneys’ schedules—thus increasing their ability to serve more people. Moreover, Lenon advises attorneys to become experts on adapting to new technological processes and “counselors-at-law,” thus delivering maximum solutions and client satisfaction.

II. Legal Services Technologies

Legal services technologies are part and parcel of the current state of the legal industry. In place of “human handcrafted” legal services, the trend is now shifting towards more sophisticated technology-based production.6 Technologies — including e-discovery, machine production, and online dispute resolution, to name a few — are changing the landscape of the legal industry.7 Moreover, artificial intelligence (AI) is reducing the amount of time and money spent on litigation. This, in turn, helps attorneys strengthen their legal project management skills by allocating resources more efficiently—thus working better, faster and cheaper.

III. Comparing Tennessee Technology and Business Practices to the National Average

Now that the foundation of the changing legal market and the rise of technology have been discussed, this part analyzes how Tennessee attorneys use legal service technologies, and how their usage measures up to national averages and client expectations. Moreover, it explores data on attorney income, hourly rates, and hours worked by analyzing legal trend studies from 2016, 2017 and 2018. These studies collected aggregated and anonymized data on nearly 70,000 legal professionals and nearly 1,500 consumers from the general population.8 This part then compares the national data to a 2018 Tennessee Bar Association (TBA) survey that collected the data of more than 1,200 Tennessee attorneys.9 It is important to note that the aggregation and anonymization processes used by Clio reduced the impact of self-reporting biases and small sample sizes, as compared to the TBA survey that relied exclusively on the limited responses of Tennessee attorneys. Although the two datasets are not completely comparable, this article is a starting point for getting a sense of what is happening in the legal industry on a state and national levels.

A. National Data

The national data analyzed in this article are derived from Clio Legal Software, a service that publishes yearly reports on U.S. legal trends. Attorneys and law firms from 90 countries use Clio. To produce its yearly reports, Clio uses aggregated and anonymized data from its opted-in U.S. clients’ usage activity, surveys U.S. law firms and legal professionals, and surveys U.S. consumers who recently hired a lawyer or dealt with a legal issue. This section focuses on Clio’s data concerning electronic services, emerging technology and business practices.

1. National Data: Electronic Services

After analyzing this data, one thing is clear: Technology is transforming the expectations of clients. As stated by Lenon, “What we’ve seen is just the beginning of the impact. … Clients are frustrated with the process as it exists. As they see other uses become more user-friendly, they will demand the same [from attorneys].”10 The latter part of this statement is evidenced by Clio’s data on electronic services and emerging technologies.
Specifically, clients have shown significant preference for electronic payments and client portals, with 38 percent of consumers favoring electronic payments. Furthermore, electronic payment methods increase the likelihood of attorney retention: 50 percent of clients are more likely to hire an attorney who takes electronic payments.11 In addition, electronic payments help with timely client payments. When clients used electronic payments, Clio observed a 35 percent reduction in average payment times (as compared to check payments).12 Thus, clients are expecting more user-friendly legal services.

2. National Data: Emerging Technologies

In addition to online payments, clients have also shown interest in emerging technologies. Recently, clients have been more open to working with virtual attorneys, AI tools and remote attorneys. Thirty-two percent of clients believe that virtual attorneys are a good idea. Twenty-four percent of clients agree that AI and chatbots are useful legal tools. Thirty-one percent of clients prefer never to meet with their attorneys in person. Moreover, 14 percent of clients prefer to text or email their attorneys.13 Similarly, millennial clients prefer to virtually communicate with their attorneys, with 19 percent preferring texting or email communications. In addition, 30 percent of millennial clients prefer to use technology to exchange legal documents with their attorneys.14 Thus, the days of long, costly phone calls and in-person meetings may be winding down.

3.National Data: Business Practices

With the rise of these legal service technologies come business-related benefits and issues. With regard to the benefits, an attorney’s online presence can encourage business. In 2017, Clio found that traditional advertising (i.e., billboards, television, radio and yellow pages) was less effective than referral building and online marketing. Sixty-two percent of consumers asked friends and family for recommendations when searching for attorneys. Referrals and online presence, however, are not the only things clients take into account when deciding whether to hire an attorney. With the first factor being the most significant response, clients also consider the following when retaining an attorney: (1) quick responses to the client’s first call or email; (2) free initial consultation offers; (3) flat-rate pricing options; (4) electronic means of payment; (5) text messaging communication; and (6) aesthetic websites.15
With regard to these issues, some attorneys struggle with configuring technology. Although the average full-time attorney aims to bill eight hours a day, attorneys end up billing only 2.4 hours a day on average.16 So where do the other 5.6 hours go? Many attorneys still report spending several hours on administrative and business development tasks. Specifically, 11 percent of non-billable tasks are spent configuring technology.17
Even considering the issues of configuring technology, the billable hour is still alive and well. Despite the national trend toward alternative fee arrangements, the billable hour is still the most common pricing structure.18 In 2018, the average attorney’s billable rate was $267 per hour.19 The average full-time attorney worked 49.6 hours per week.20 As reported by the Bureau of Labor Statistics in 2017, the average annual wage of an attorney in the United States was $119,250.21

B. State Data

In 2017, the TBA’s Special Committee on the Evolving Legal Market (ELM) helped commission a survey to Tennessee attorneys. The purpose of this survey was to gather data on economic status, technology, and new business models to gain a better understanding of the practice of law in Tennessee. Then-president Lucian Pera directed the ELM to submit a series of questions for the TBA’s biennial Membership Survey.
Of the roughly 20,000 Tennessee attorneys, a total of 1,210 attorneys  — both TBA members and nonmembers — participated in the survey. TBA aspires to continue this survey and encourages all Tennessee attorneys to participate in next year’s membership survey. By analyzing this report, the insights gained about electronic services, emerging technologies and business practices can help attorneys and the TBA better serve Tennessee’s legal market.

1. State Data: Electronic Services

Rather than focusing on the payment aspect of electronic services, as Clio’s report did, the TBA survey brought into focus other services like online filing and online dispute resolution. The data suggests that some Tennessee state courts are not in step with general client demands for user-friendly legal services. Although online filing systems are used in nearly 40 percent of TBA members’ counties, nearly 57 percent of nonmembers reported that their counties did not have an online court filing system such as the one available in federal court.22
Besides online filing, the TBA survey also inquired about online dispute resolution. Although Tennessee attorneys regularly use technology, like social media platforms and electronic devices in their legal practices, not many use online dispute resolution services. Of the handful of Tennessee attorneys who do use arbitration, fewer than 2 percent use online dispute resolution, and fewer than 5 percent advise their clients to use it. Those attorneys who do use online dispute resolution primarily work at larger firms and are within the highest income brackets.23

2. State Data: Emerging Technologies

Tennessee attorneys appear to be fundamentally in line with client expectations for technology-integrated services. Generally speaking, the vast majority of Tennessee attorneys have a positive outlook on legal services technologies. That is, about 82 percent of TBA members and 76 percent of nonmembers reported that the use of legal technology tools had a positive impact on their practice. Specifically speaking, as compared to the 24 percent of U.S. clients who agree that AI and chatbots are useful legal tools, more than 50 percent of all Tennessee attorneys accept the usage of AI tools in legal practice. Namely, over half of TBA members and nonmembers stated that they would use AI tools to conduct legal research. Only a few Tennessee attorneys, however, actually use AI tools, because of their perceived high costs.24 Moreover, other supporting legal services, such as Legility (formerly Counsel on Call), Latitude and Axiom, are not widely used by Tennessee attorneys. Instead, attorneys use services like Attorneys on Demand, LexisNexis and Docketly.25
Although Tennessee attorneys have a favorable view of legal services technologies, the cost of technology training is a significant issue. In Tennessee, the cost of training is the primary deterrent for greater legal technology usage.26 Nevertheless, legal services technologies have the potential to assist attorneys increase the quality and efficiency of their services. Tennessee attorneys likely appreciate this fact, as over half of all survey respondents listed that substantial cost benefits would encourage them to adopt more technology into their practice.27

3. State Data: Business Practices

The TBA data suggests that Tennessee attorneys mainly rely on referral building for acquiring clients but, unlike the Clio data, the same cannot be said about online marketing. Specifically, 89 percent of TBA members and 80 percent of nonmembers get their legal business from referrals. Turning to online marketing, only one-third of TBA members place advertisements in lawyer directories or social media sites. Furthermore, over half of all TBA survey respondents reported that their firms do not use online advertising on social media sites or search engines.28
The state and national data on pricing structures is more comparable. Like the national data, hourly billing is still the most widely used pricing structure in Tennessee. Most TBA members (68 percent) reported that they billed clients at an hourly rate, with an average billing rate of $274 per hour. This hourly rate is 2.6 percent higher than the average national billing rate. Nonmembers, however, aligned more with the national trend toward alternative fee arrangements and used different pricing structures. Fifty seven percent of nonmembers reported that they used flat-rate pricing. Those nonmembers who used hourly billing rates had an average billing rate of $215 per hour. This hourly rate is 19.5 percent higher than the average national billing rate.
The TBA data suggests that Tennessee attorneys work fewer hours than the average attorney, who worked 49.6 hours per week. TBA members reported working an average of 43.9 hours per week. Of these hours, around 65 percent were billable hours. Nonmembers reported slightly fewer hours than TBA members, working an average of 42.4 hours per week. Of these hours, around 51 percent were billable hours. Despite the national trend toward alternative fee arrangements, the vast majority of respondents do not provide the option of using alternative fee arrangements.29
The TBA data suggests that Tennessee attorneys may earn more than the average attorney. However, the available figures compare wages to income. As stated above, in 2017 the average annual wage of an attorney in the United States was $119,250.30 During that same time, the annual net personal income average (including bonuses and excluding taxes) of TBA members was $173,167. Of nonmembers, the annual net personal income average was $107,024. It is important to note, however, that 40 percent of TBA members and 52 percent of nonmembers either refused to answer this question, were retired, or are in judiciary positions.31

IV. Conclusion

More than ever before, legal information and services are right at users’ fingertips. Although many of the technologies attorneys use have been around for a while now, the changes witnessed to date are only the beginning of the impact technology will have on the legal industry.
Technology usage alone, however, will not be an attorney’s only redeeming skill. Rather, attorneys must consider new business models that respond to client demands. Moreover, attorneys must continue to refine their roles as counselors-at-law, especially as they adopt new business models and embrace technological advances. This will allow attorneys to provide clients with quality solutions and superior customer service. After all, a discounted online will might sound appealing — but good service from a dynamic, all-serving counselor-at-law is good business.

Reem Blaik is a third-year law student, the executive editor of the Vanderbilt Journal of Entertainment & Technology Law, and a research fellow for the Program on Law and Innovation (PoLi) at Vanderbilt University Law School. As a fellow to this program, Blaik conducts research on the changes in the private sector legal services industry. The article was made possible by PoLi.

The author would like to thank Kate Prince, Lucian Pera, Joshua Lenon, Erin Walker and
J. B. Ruhl for their assistance in publishing this article.

1. See generally CLIO, Legal Trends Report (2018) [hereinafter CLIO 2018]; CLIO, Legal Trends Report (2017) [hereinafter CLIO 2017]; CLIO, Legal Trends Report (2016) [hereinafter CLIO 2016].
2. Tennessee Bar Association Survey on Membership and Use of Legal Technology: Conducted Among Tennessee Lawyers 1 (2018) [hereinafter TBA].
3. Mark A. Cohen, “New Business Models — Not Technology — Will Transform the Legal Industry, Forbes (Nov. 8, 2018, 7:14 AM), https://www.forbes.com/sites/markcohen1/2018/11/08/new-business-modelsnot-technology-will-transform-the-legal-industry/#7d0cbc0d18cc [https://perma.cc/6UHN-VJ67].
4. Telephone conference with Joshua Lenon, Lawyer-in-Residence, Clio (Mar. 12, 2019).
5. Id.
6. Richard Susskind, Tomorrow’s Lawyers: An Introduction to Your Future, 91 (2nd ed. Oxford Press 2017).
7. See id. at 44–45.
8. CLIO 2018, supra note 1, at 6; CLIO 2017, supra note 1, at 48; CLIO 2016, supra note 1, at 11.
9. TBA, supra note 2, at 1.
10. See telephone conference with Joshua Lenon, supra note 4.
11. See CLIO 2018, supra note 1, at 41.
12. See CLIO 2016, supra note 1, at 35.
13. See CLIO 2018, supra note 1, at 43.
14. See CLIO 2017, supra note 1, at 18.
15. See id. at 15–17.
16. See CLIO 2018, supra note 1, at 10.
17. See CLIO 2017, supra note 1, at 13.
18. See CLIO 2016, supra note 1, at 22.
19. See CLIO 2018, supra note 1, at 47.
20. See id. at 15.
21. See Occupational Employment Wages, May 2017, Bureau of Labor Statistics (May 2017), https://www.bls.gov/oes/current/
oes231011.htm#nat [https://perma.cc/
22. See TBA, supra note 2, at 26.
23. See id. at 5, 13, 30, 132.
24. See id. at 10, 26.
25. See id. at 6, 12, 27, 29.
26. See id. at 13.
27. See id. at 29.
28. See id. at 4, 35, 105.
29. See id. at 32–33.
30. See “Occupational Employment Wages,” May 2017, Bureau of Labor Statistices (May 2017), https://www.bls.gov/oes/current/oes231011.htm#nat [https://perma.cc/
31. See TBA, supra note 2, at 37.