Baker McKenzie Head: Law Firm Billing Should Be Ready to Move On

Find all the case information you need faster. Smart litigators rely on Bloomberg Law's broad litigation news coverage and our market leading dockets. Now with AI-driven search and analytics, customized alerts, and expansive state court coverage. Visit pro.bloomberglaw.com for everything you need to win. [MUSIC] Hello and welcome back to On The Marits, the news podcast from Bloomberg Law. I'm your host David Schultz. [MUSIC] The legal world has predicted the demise of the billable hour many times in the past. But today's guest says that now with the rise of AI, it's finally time for lawyers, firms, and clients to move on. Sunny Man is the global chair of Baker McKenzie, a position he's held for the past eight months. Man spoke with Bloomberg Law reporter Roy Strong about how the firm is using AI and also the role AI played in a decision to recently let go a large number of its professional staff. But first Roy asked him how he leads a law firm known for being at the forefront of globalization. At a time when it feels like the globalization trend is reversing. >> So question that I was asked in a town hall that I did in our Bogota office of all places. Where an associate said, sunny in a world that feels increasingly more disrupted, fragmented. Where we seem to be witnessing a period of de-globalization. What is the why? What is the raison d'etre of the original global law firm? Where do we fit into a world that is de-globalizing? I think you really have to understand Roy, what is happening in the business context. And one of the privileges I've had since being a global chair in the short eight month window. I've had the privilege of sitting down for meetings with over 500 different individuals from the world of politics, on the world of business. And the conversations with the C-suite leaders that I've been talking to have been very much focused on how they're responding to this fragmentation disruption. What they've been doing is they're recognizing that their business strategy cannot now entail over-reliance on a single business partner or on a single economy. Because you could find that overnight a sanction could be introduced, export control, a tariff, some regulation, there could be some geopolitical choke point as we're sitting, for example, in the Middle East at the moment. And it could make a whole business structure unviable overnight. So if you are overly reliant on a single customer base or supply chain or where your data resides or where your funds reside. It's a vulnerability. So the strategic response to that is one of diversification. What does it mean for the U.S. presence of the firm? Does it make the U.S. more important for your business as it's still sort of the center of gravity, even for some of these changes, for some of the disruption that's happening? Or do you see a space where you're advising companies working to diversify around U.S. influence? I think I've raised it somewhat differently. The U.S. is still the world's largest economy. The world's largest companies are still in the U.S. A lot of innovation around tech and AI is stemming from the U.S. It is the world's largest legal services market. So for a business like ours, but also for all of the clients that we advise the U.S. is going to be absolutely critical, certainly for many, many years to come, certainly for the rest of my work at career. So I think the way I'd phrase it is, the U.S. will remain key. We are advising many clients in the U.S. on how they go about expanding around the globe. But it does also mean that companies are looking to de-risk some of their business strategy. And that also entails being very mindful of some of the regulations that can stem from the different capitals across the world. And that includes from DC as well. The world is changing, I guess, not only from geopolitics, but also because of AI. It's starting to, I think, really become a major factor in how lawyers and law firms work. Your firm in February reviewed how it works, let go of some professional staff in part as a response to how the firm was using AI. I'm curious, what sorts of things did you see AI doing for the firm that allowed for that? So fundamentally, Roy. First off, I want to recognize that the work, support, and service of those colleagues who did leave our business, they were valued colleagues, and I'm very grateful for what they have done for us over the years as well. And that wasn't a decision that the management team took lightly. It is something that was done off the back of a lot of consideration. I think there are a couple of things driving that. So I think, first off, our firm has been aligning from our financial and the management perspective much more over recent times as well. And that results in synergies being pursued, whereas in the past, they may have been some overlapping roles across different markets and different regions. As we've come together much more closely in recent times and aligned much more, there were certain synergies to be pursued. And the second point is what you've said, AI is part of it as well, and certainly what we're finding is what we're looking to do is work out how we as a business overall can be much more efficient and much more effective in our client facing strategy, and that includes also within the business professional team as well. So we've looked at how we can accelerate and streamline our billing processes, our client onboarding processes, how we can also be much more effective around our client and business development activities, but importantly, how we leverage AI and technology within that. So the fact that we can develop sort of BD and client-facing materials, leveraging AI much more effectively, the fact that we can also leverage AI to get bills out more effectively than we have done in the past, all of these have led us to sort of look at how our business professional teams have operated. The team that was impacted was less than 10% of our overall business professional population which is a sizable group of course, but fundamentally it's about how we can be much more effective in supporting our clients and deliver service much more efficiently and effectively. We've seen firms also lately start to hire based off of AI, sort of like a legal AI sector role or roles that will help firms proliferate AI. And I know I think Baker this year announced it would embed like practice innovation lawyers and all its major groups, sort of sounded like what these people call a forward deployed engineer for to use the jargon. I guess what sort of new roles do you see the firm needing to advance an AI strategy? If I think about our strategy and certainly what I'm telling our lawyers going forward, they need to be leading much more into AI and technology. And so that requires having the right expertise embedded across the practice and across the business to help steer us in council us and guide us strategically. So one of the types of things that we've done, so we have had, as it happens with the first global law firm to launch an AI program and policy, which is back in 2017, or under the leadership of our excellent chief innovation officer, Ben Orgo is one of our practice and partners incredibly successful practice in the tech space. But he's also been closely following the AI trends over the last few years and he's been strategically guiding and advising the global management committee that I sit on. Do you see the AI allowing the law firm to provide different services or like new things that either were so expensive by virtue of the amount of, you know, human hours it would take that the clients wouldn't want, but now is efficient enough that they can, that the price points lower that they can actually say, yeah, that's worth it. I think litigation is a classic example of that lawy. There have been questions raised around whether we are going to need as many litigation lawyers going forward because if you think about what was bread and butter for even investigation's lawyers, like myself, when we were junior lawyers, we would churn through document reviews to try and assess whether there was an issue and what ultimately might need reporting to regulators or in litigation, you know, uncovering documents that were key to the issues being litigated. I think I've spoken to a number of GCs, you've talked about the fact that actually AI allows them to revisit the cost-benefit analysis of whether it's worth going through with litigation. So in the old world, because we're very mindful of the costs associated with reviewing terabytes of documentation and emails, when you leverage AI to churn through that much more rapidly, so that only key documents are being put up for human review, actually you can start looking at litigation in a different manner, what do you think? Yeah, maybe that was cost prohibitive in the past, but going forward, maybe this is something we consider. And I think it's too premature, much too premature to say that actually we won't need as many litigation lawyers. I think actually there is the opportunity to be growing the volume of litigation work that our team is doing globally. I think that's probably the more optimistic side for a law firm business leader. I think the challenging side there are still hard questions about how AI impacts. law firm business model. I think people worry about the idea of driving efficiency through AI in a business that's still on the whole or on the most parts sells billable hours, right? But I haven't seen many huge changes on that front. Do you have a vision for how the sort of traditional model should or will respond to a more efficient practice of law? So Roy, it weren't surprised you to hear that in many of the current conversations I'm having and that our relationship teams are having with cards. There is certainly much more of a shift away from the billable hour to alternative for your arrangements, okay? So that shift had already started. The trends that we're seeing play out in terms of technology evolution and AI will only accelerate that. Now that's not to say that the billable hour is disappearing or it's dead. You know, there will be some matters that you can't currently demarcate where you still need to operate in the billable hour. There were some cards who'd rather have the billable hour being used and leveraged on particular matters. But the trend is clear. The pricing and the commercial model will evolve over time and we are absolutely leveraging AFAs much more than we have been doing historically as well and that's in response to current demand and feedback. In terms of getting to that new commercial model, do you have to drive the AI efficiencies first? You have to get the lawyers using it. You have to get the clients used to it in order to get to that new pricing model. Given the size of our firm, as I said, we have around six and a half thousand lawyers and tax professionals globally. The benefit of having that sort of bench is we've built up a data bank of experience over recent times across different subject areas and across different jurisdictions as well. That has given us more confidence in terms of how to price for these types of scenarios. I recognize Roy, there's going to be a little bit of trial in error. So one of the things I say to clients is if you're up for walking with us on this journey, let's start going forward and moving on this. Not everything will work smoothly from day one, but I think for prepared to start having the right conversations with clients and understandings, then I think there's something really valuable to be exploring here as to how you leverage AI. It does seem like trends that have been existing for a while are just bound to sort of hit hyperspeed. It's going to be interesting to see how firms respond to it and how which clients prefer it and which don't. Because so many times you hear about the bill of the hour, it ends up that the clients are most comfortable with it. Yeah, you do get mixed views on that. Not every client is quite ready there yet. You know, you will find that legal ops teams are still very much leaning into things like how much would this cost if it were based upon the standard billable hour. And I think we all need to collectively move on in our thinking to get AFA's working in the right way as well. But you are right, Roy. AI is bringing about some pretty material changes. Of course, a lot of that is based upon the technology. We are engaging with many technology providers we've had, the largest wall out of co-pilot in the legal industry. But that's not where the differentiation really comes. The differentiator is how that technology is engaged with by your talent base. So when I speak to our talent, so I've been to 30 offices now in my time as chair, every time I host a town hall, I'm very clear. I want our people to be energized. I want them to be hungry. I want them to be excited by the opportunity. Because if we can get out there and clients can see that we are prepared to go forward with this to experiment a little bit and to try new ways of working, I think demand will also follow from that. Cance will start wanting to explore particular mandates that they're prepared to test us out on as well. So the opportunity is there. And I say to every single person, every morning you come in, just think about the one single thing that you're going to do to leverage tech or AI to be more effective to be more efficient. You know, these can be small baby steps, even if you are just finding a minute of streamlining or efficiency every single day across a year, 250 working days, it adds up to a lot. That then frees up our lawyers and our parts to get out to market much more, to spend time with clients and to go and generate more work. Despite all of the sort of geopolitical headwinds, the AI, Fervor, law firms have been performing very well in recent years. What are you expecting this year, in terms of revenue growth or profits for your firm? So we've only just finished our financial year in the 30th of June. It's still early. The number of crunches are still working. They're magic. You know, we're looking forward to another solid year of growth, both in terms of revenues and also in terms of profitability. We'll continue that process of compiling the figures and then releasing our results in a couple of months or so. But the prior year, we saw closer and 8% increase in our revenues and roughly 14% increase in terms of profitability. So we continue to see very solid growth. But for us, the focus in particular going forward is we want to see growth in our transactional team, but also growth in particular in our largest money markets, which are the client-rich markets. So markets like London, New York, California, Germany, Switzerland, off to Singapore, Tokyo as well. These are markets are incredibly client-rich where we see the greatest opportunity. And so going forward, you could expect to see me being much more present in those markets as well. That was Baker Mackenzie Chair, Sunny Man, speaking with Bloomberg Law's Roy Stram. And that'll do her for today's episode of On The Marits. For more updates, visit our website at news.bloomberglaw.com. Once again, that's news.bloomberglaw.com. The podcast today was produced by myself, David Schultz and Paul Dietrich. We had booking assistance from Alison Lake. Our editors were Chris Offer and Alice Hunter Rafferty. And our executive producer is Josh Block. Thanks everyone for listening. See you next time. Attention, smart litigators. When it comes to executing your case strategy, Bloomberg Law's continuous innovation is your secret weapon. And now we're taking it up a notch, introducing enhanced docket features with AI-driven search and analytics, lightning-fast customized alerts, and expanded state court docket coverage. Plus, we've substantially increased our litigation news coverage so you'll never miss a beat. Don't wait. Visit pro.bloomberglaw.com today and get get everything you need to secure big wins.