Norwegian law firms do not fear digital disruption

KNOWLEDGE KRISTIANIA: Innovation in law

Existing literature about digitalization and innovation in law companies is almost exclusively focused on the Anglo-Saxon sphere, generalizing trends observed there to the global level.

In the US and England, we see that new Digital Law companies are recruiting highly qualified lawyers to work for them in spite of lower salaries. They are now representing a competition to the more prestigious and expensive traditional law firms.  

But what is the actual impact of digital transformation in the Norwegian legal sector?

Innovation takes different forms

We may talk of innovation as a single phenomenon. But innovation takes wildly different forms depending on the context of reference: the sector, the nation, the culture – they all shape the way in which innovation works.

Digitalization is no exception. While this innovation wave may be relying on similar technological solutions, their application and consequences are quite diverse.

Take the legal sector for example. Law firms are not exactly famous for their innovativeness. And yet, their structure and entire model of operation has been subject to several revolutions in the last century.

Currently, most top law firms operate with a partnership structure, with younger lawyers competing to gain partnership status, and the accompanying prestige. The fact that partners are the only ones to receive the firm’s profits doesn’t hurt the appeal either.

Long hours–high salaries–low satisfaction

While the model is very successful in promoting excellent performance, which translates into very high lawyers’ salaries, even at the entry level, it is also an explicit rat race. Young lawyers are pitted against each other in a “tournament” for partnership status, a contest that only few can win.

Thus, despite the high salaries and the nice suits, US and UK lawyers are among those working the longest hours, with the lowest average job satisfaction to boot.

Work-life balance is out of reach for all those competing in the tournament, and burnout a constant companion.

New digital law companies  have a more friendly approach

But something has happened in the last few years. Some new digital law companies have launched, leveraging digital technologies to automatize routine tasks. They offer much more affordable legal support in niche areas poorly served by the prestigious and expensive traditional firms. Crucially, digital law companies have a managerial structure, with no partnership tournaments.

Despite a lower wage, by offering reasonable hours, a friendlier atmosphere and reasonable career paths, these companies have succeeded in getting hundreds and thousands of highly qualified lawyers to work for them. Greatly propelling their development, and creating the conditions for direct competition with the established law firms soon.

Better work-life balance

What about Norway? As mentioned, existing literature focuses almost exclusively on the Anglo-Saxon sphere, generalizing these trends to the global level.

Norway is famous for their focus on work-life balance and their harmonious work relationships after all. Therefore, we proceeded to identify and interview several established traditional law firms and new digital firms alike, to figure out what was happening here.

The good news is that Norwegian lawyers appear to be less overworked and happier than their English-speaking colleagues. This is great for the lawyers, but what about the Digital Law firms?

Norwegian digital law firms are different

We found that the Norwegian digital law firms cannot rely on a large supply of well-trained and frankly desperate lawyers willing to bail ship. Norwegian lawyers in fact require higher salaries to consider switching jobs to less prestigious and riskier employers.

Consequently, most Norwegian digital firms are focused instead on developing better digital supporting instruments to be bought and implemented by traditional law firms.

Rather than undermining the dominance of the traditional firms, these firms appear to play an important supporting role, facilitating the adaptation of partnership structures to present conditions.

Lawyers are clearly better off in Norway

Is this better or worse? Well, Norwegian lawyers are clearly better off. They get to retain their high salaries, their prestigious employment and to enjoy the support of an ever-increasing suite of digital solutions facilitating menial and time-consuming tasks.

Customers, however, may beg to differ. It is unlikely that the savings brought by digital technologies will be passed on to them. As, after all, a sizable bill is often used as a signal of the legal advice’s quality, according to exicting literature on price elasticity.

So, while legal costs are projected to decline in the Anglo-Saxon sphere, Norwegian high legal fees are probably here to stay. One important reason for that is that the job market for lawyers in Norway is good, there is much less competition compared to England and the US.

A few digital law firms, however, are committed to eventually upscale their activities to compete directly with the established players.

Norwegian lawyers can still sleep tight

Traditional firms are downplaying this risk, stating that, after all, they could always reach in their deep pocket to acquire any troublesome new entrant. Yet the partnership structure put some severe constraints to mergers and acquisitions activities.

If a new digital law firm could succeed in developing a killer solution and securing significant venture support, things may turn around quickly. Until then, however, Norwegian lawyers can sleep tight, in fancy pajamas too.

Reference

Callegari, Beniamino; Rai, Ranvir Singh (2023). Digitalization and Law: Innovating Around the Boundaries. Journal of Professions and Organization. HK ONH

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