Key insights:

• • • Branches too, not just trunks, drive growth 鈥� Across firm segments and US regions, litigation and corporate work still anchor demand, but they are not always the main sources of new hours.

    • Soil conditions vary sharply by region 鈥� The Southwest US and international markets led all regions with 5.2% and 6.1% demand growth, respectively, driven by niche and transactional practices, while the Midwest and Eastern regions grew more modestly.

    • Midsize firms are growing through specialization 鈥� Struggling to compete on volume with the Am Law Second Hundred or on rates with the Am Law 100, Midsize law firms posted 2.6% demand growth powered primarily driven by smaller, specialized practices.

The first quarter of 2026 arrived with law firms still standing on solid ground, although the footing is beginning to feel a little less certain beneath the surface. As the 成人VR视频 Institute鈥檚 recent听Q1 2026 Law Firm Financial Index (LFFI) reported, the score landed at 55 鈥� exactly the historical average since 2006, which is a modest place to be when you consider that Am Law 100 firms pushed worked rate growth to nearly 10%, and overall demand came in at 2.7%, roughly triple the long-run average. Those are not average inputs. Something is absorbing the gains.

The story beneath the headlines is one of diverging strategies, uneven soils, and the quiet question of whether a tree can keep growing by strengthening only its trunk 鈥� or whether it needs to extend its branches.

Reading the soil: Regional demand across the US

Just as trees grow differently depending on the nutrients available in their soil, law firm demand across different regions of the United States reflects the distinct conditions shaping each local market.

The western half of the country set the pace. The Southwest posted the strongest domestic growth at 5.2%, driven not by the dominant practices of litigation or corporate work, but by a constellation of smaller practices (labeled 鈥渙thers鈥�) that collectively delivered the largest single contribution to new hours 鈥� 12 of the 52 additional hours worked per 1,000 compared to Q1 2025. Labor & employment and litigation followed, but the headline is that niche practices 鈥� treated by many firms as secondary concern 鈥� carried the region.

The West grew at 4.8%, with labor & employment as its leading driver, although intellectual property imposed a meaningful drag: Law firms in the West are currently working 27 fewer hours per 1,000 on IP matters than they were a year ago, a loss that鈥檚 partially masking an otherwise healthy broad-based expansion.

International operations led all regions at 6.1% growth, but with an important asterisk. This region, which captures demand generated by US-headquartered firms operating abroad, was recovering from a period of contraction. The surge was powered almost entirely by corporate general and M&A, making it the most transactionally concentrated region in Q1. The flip side 鈥攔eal estate, litigation, and 鈥渙thers鈥� practices all contracted, meaning growth here is reliant on a narrower set of practices than it may appear.

The Eastern and Central regions told a more measured but arguably more durable story. The Midwest grew just 2.0%, but with a notable quality as no practice area contracted. Every discipline contributed at least marginally to new hours worked, with litigation doing the heaviest lifting. The Northeast and Southeast each came in at 2.8%. In the Northeast, growth was similarly broad, with no practice in retreat; while the Southeast offered a small twist as corporate general led for the first time among the regions examined. Litigation followed close behind, and together the two practice areas accounted for 18 of 28 new hours worked. Those two practices 鈥� the trunk of any large firm鈥檚 business 鈥� pulled more relative weight in the Southeast than anywhere else in the country.

The story beneath the headlines is one of diverging strategies, uneven soils, and the quiet question of whether a tree can keep growing by strengthening only its trunk 鈥� or whether it needs to extend its branches.

What stands out across this regional picture is that for most of the US, the new growth is not coming just from the traditional core. Corporate general and litigation remain the largest absolute contributors to demand 鈥� the sturdy trunk 鈥� but in the West and Southwest, it is the branches that are responsible for incremental gains: labor & employment and a diverse mix of smaller practices. In US regions in which the trunk remains the engine 鈥� such as the Midwest, Southeast, and Northeast 鈥� growth is still real but narrower. The more resilient growth stories tend to be the ones in which no single branch bears all the weight.

The tree type matters too: Demand by firm segment

Regional soil explains some of the variation in Q1 demand, but not all of it. The type of firm shapes how growth is structured just as much as geography. And in Q1 2026, the three segments grew in ways that were as different from one another as oaks from aspens.

The Am Law 100 posted demand growth of 1.2%, the lowest of the three segments, but this is consistent with a strategy built primarily on rate power rather than volume. Of the 12 additional hours per 1,000 worked compared to Q1 2025, transactional practices contributed 8 hours, and counter-cyclical practices added 5 among Am Law 100 firms. The one drag came from intellectual property, which contracted by 1 hour. For the largest firms, demand is supplementary to rate growth 鈥� the trunk is wide, and thus, the tree does not need to grow tall to be profitable.

The Am Law Second Hundred grew 4.0%, the strongest demand performance of the three segments, and the composition of that growth is striking. Of 40 new hours per 1,000 worked, counter-cyclical practices 鈥� led by litigation at 15 hours and labor & employment at 7 鈥� contributed 22 hours. Transactional practices added 9. No practice contracted. This is a segment with unusually full canopy coverage: growth is broad, and every branch is pulling upward. The Second Hundred鈥檚 continued 鈥渕oat of demand鈥� in this area remains one of the more durable stories in the legal market.

The most instructive case, however, is the Midsize segment. Midsize firms grew demand 2.6% in Q1, roughly in line with the industry average. However, the source of that growth tells a different story than the numbers suggest. Of 26 new hours per 1,000 worked, the largest contributor was 鈥渙thers鈥� 鈥� a category of smaller, specialized practices 鈥� at 8 hours. Corporate general added 6, real estate and litigation 4 each. No practice contracted.

What that picture reveals is a segment finding its footing not by competing on volume 鈥� where the Second Hundred has structural advantages 鈥� or on rate increases, where the Am Law 100 holds the leverage. Midsize firms appear to be carving out a third path: specialization. The tree is not the tallest, and the trunk is not the thickest, but it is filling out its canopy with branches that larger competitors have left largely unattended.

Growth is in the canopy

As the LFFI showed, Q1 2026 produced broad-based demand growth, but the data is clear on one thing: A healthy trunk is not enough. In some regions, the incremental gains came from practices that many firms still treat as secondary 鈥� labor & employment and a rotating mix of smaller specialties. In most segments, the firms building fuller canopies are outperforming those relying on a narrower set of core practices.

Midsize firms are perhaps the most visible example of a segment adapting to its conditions. Unable to out-volume the Second Hundred or out-price the Am Law 100, they are finding ways to grow through diversification. Whether that strategy can close the widening performance gap against their larger competitors remains to be seen.

However, the Q1 data suggests that for firms at every level, the next phase of growth is likely to come not from further strengthening what is already strong, but from investing in branches that have yet to reach their full height.

You can download a full copy of the 成人VR视频 Institute鈥檚听Q1 2026 Law Firm Financial Index here

Key insights:

• • • Law firms and clients are both redesigning for AI 鈥� Both sides are rethinking how legal work gets done, including thoughts on operating models, talent, technology, and the role of automation in delivering services.

    • There鈥檚 a communication gap despite shared dependence 鈥� Even though each side鈥檚 AI choices directly affect the other, many law firms and legal departments are still planning separately, without enough transparency or coordination.

    • There are 5 critical shared questions they need to address together 鈥� Law firms and their clients need joint conversations about pricing, work allocation, trust, talent development, and wider industry standards to better shape a sustainable future together.

A law firm choosing its 2030 strategic business model without knowing how its clients are evolving is navigating blind 鈥� and vice versa.

And yet, across the legal profession, that is exactly what is happening. Law firms and corporate legal departments are each embarking on significant transformations 鈥� redesigning their operating models, reimagining their talent models, and making decisions about technology. What is striking is how often they are doing so in isolation from each other, retreating into their respective silos at precisely the moment when their futures are most deeply interconnected.

The pace of change raises the stakes. Ninety-one percent of corporate C-Suite leaders say the rise of AI will have a significant impact on their five-year business strategy. Further, AI adoption has nearly doubled across the legal sector over the past 12 months, and half of legal professionals say they expect agentic AI to be central to their workflow within two years.

Clearly, the decisions being made today about talent, technology, pricing, and relationships will lock in outcomes that are hard to reverse.

The AI view from corporate law departments

On the in-house corporate side, General Counsel are contending with broadening mandates, increasing demand and complexity, and a pace of business that shows no signs of slowing. Not surprisingly, AI is increasingly the strategic response: , up from 25% who said that last year. And for most that means AI-enabled capability to do more, faster, and at greater scale.

成人VR视频 Institute鈥檚 GCO 2030 research maps out what the transformed legal department could look like 鈥� from tech-forward functions that scale routine work through automation, to seamlessly integrated teams that blend internal and external expertise, to legal departments that actively supercharge peer functions like HR and Finance.

The common thread through all of this is a shift toward strategic selectivity: Doing more with sharper focus and engaging outside counsel differently as a result.

The AI view from law firms

Among law firm leaders, AI is unavoidable 鈥� in every leadership conversation that 成人VR视频 Institute researchers held with managing partners in recent months, the issue of AI came up. For many, it is seen as a lever for growth, although law firms vary considerably in how far they have moved from consideration to execution.

In fact, our recent research points to four possible models emerging on the horizon that have AI-native disruptors built around agentic automation, elite advisory boutiques in which senior judgment is the product, integrated powerhouses that combine top-tier brand with AI-enabled delivery at scale, and those that hold back from AI adoption (although the research suggests this is a delay, not a strategy). What unites the more progressive scenarios is that strategy requires genuine commitment: A firm simply cannot pursue all models at once, and the choices made about talent, pricing, and client relationships will compound over time.

You can access the full feature article,听The 2030 legal department: 5 ways AI will transform how in-house teams work听here

The problem, of course, is that both sides are designing futures that will inevitably shape the other 鈥� yet two-thirds of GCs say they do not know how their outside firms are approaching AI, and law firms report genuine uncertainty about what their clients want. This shows a clear communication gap at the heart of the legal ecosystem, and it is opening at precisely the moment that demands coordination.

The futures being designed in those silos are not mutually exclusive. When a corporate legal department shifts its model 鈥� whether automating routine work, restructuring how it engages external counsel, or reorienting toward strategic advisory 鈥� it changes the demand profile that law firms face. When a firm repositions itself around premium complexity or agentic delivery, that changes what clients can rely on externally, and therefore what they must build internally. Each side鈥檚 choices narrow or expand the options available to the other.

Addressing 5 critical questions together

Against that backdrop, there are several questions the legal profession cannot answer from within a single organization 鈥� questions that require genuine conversation between firms and the clients they serve.

The first is the question of value and pricing 鈥� In an AI-enabled legal market, how is value defined and paid for, and can the answers be fair to both sides while still encouraging innovation? If AI dramatically accelerates the delivery of advice, does efficiency become the new floor or the new ceiling? Are clients paying for outcomes, risk reduction, speed 鈥� or some combination of all three? And which side absorbs the productivity dividend?

The second question concerns where the work lives 鈥� As both law firms and legal departments expand their AI capabilities, the traditional allocation of work between in-house and external counsel will shift. Determining what genuinely belongs in each place and why 鈥� based on, for example, risk, complexity, relationships, and strategic importance 鈥� is a conversation that requires honesty from both sides.

Third is the question of trust and transparency 鈥� How can firms and their clients build shared frameworks for disclosure, governance, and accountability around AI use in a way that strengthens relationships rather than undermines them? Without these frameworks, AI integration risks eroding the relationship foundations upon which legal advice depends.

Fourth, the talent pipeline question 鈥� As the type of routine work that historically served as the apprenticeship model for past generations of lawyers rapidly disappears, both firms and legal departments face a shared responsibility for how legal talent is trained and developed.

Fifth, and perhaps most structurally significant, is which challenges are ecosystem-wide? 鈥� Data standards, interoperability, shared risk frameworks, and ethics and assurance are not problems any single organization can resolve alone but rather, are ones that require coordinated action across firms, legal departments, technology providers, and academia.

Indeed, none of these questions can be resolved in isolation, and avoiding them does not preserve the status quo, it simply locks in poor defaults. Leadership in this moment doesn鈥檛 mean having all the answers, but it does mean being willing to ask the questions out loud, with the people who need to be in the room.

The firms and legal departments that come to these questions together, rather than arriving at the table with entrenched positions already locked in, will be better positioned to build a future that is resilient, transparent, and sustainable.

To start, pick one of the five questions above and put it on the agenda for your next client or firm meeting. Not as a negotiation, but as an open conversation worth having.

That is how the communication gap between law firms and corporate legal departments gets closed 鈥� one honest conversation at a time.

Start your legal department鈥檚 future planning using our reimagine guide from the Value Alignment Toolkit

Key highlights:

• • • The theory-practice gap is now an AI-era crisis鈥� Integrating legal training with hands-on pro bono experience is the future of legal education.

    • A collaborative model merges learning and doing into a single platform鈥� The model connects law students with vetted pro bono opportunities from legal services organizations, while also offering targeted, skills-based training at the moment students step into those matters.

    • Pro bono work is uniquely suited for responsible AI training鈥� On-demand programs led by expert faculty are available to help students sharpen pro bono skills, understand the use of AI in today鈥檚 legal practice, and stay on top of developments in numerous industry and practice areas.

Legal education has operated on a familiar, decades-long divide that saw students spend their first years learning the law in the classroom and then after graduation, gaining substantive experience practicing the law in the real world. This gap has always been costly for both students and legal employers, and now it鈥檚 emerging as untenable in an era in which AI is rapidly reshaping what junior lawyers do.

Pro bono and skills training close this gap

A new partnership between , a pro bono management platform, and the (PLI), a nonprofit provider of learning resources for legal professionals, is designed to close this gap while showing something larger about where legal education must go.

The partnership is designed to equip students with on-demand, actionable training that supports effective pro bono engagement by offering access to PLI’s training programs directly through Paladin’s platform. Since launching with 30 law schools in August 2025, students have signed up for thousands of pro bono cases through the platform, according to , Co-founder and CEO of Paladin.

For years, experiential learning in law schools was something students had to piece together on their own by hunting across spreadsheets, clinic listings, and externship postings for opportunities, says Sonday, adding that too often students were given little guidance on what they were walking into.

The partnership is designed to equip students with on-demand, actionable training that supports effective pro bono engagement

“What’s fundamentally different is the integration and centralization of learning and doing,” Sonday explains. “Historically, legal education has separated theory, training, and practice.” Now, she notes, a student can learn a concept, build confidence through targeted training, and apply it in a real-world setting within a short amount of time.

, Chief Strategy Officer at PLI, describes the experience from the student’s perspective: 鈥淲hen a first-year logs into the Paladin platform, they are not thrown into the deep end. Instead, they can access skills-based programs, such as a PLI program specifically on how to interview a pro bono client before they ever sit across from someone in need. This leads to a better experience for the student, the law school, and especially for the client.”

Pro bono work suited to responsible AI training

The urgency behind this partnership is inseparable from the impact AI is having on the entry-level legal market.

“We’re already seeing AI reduce the time spent on tasks like initial legal research, document review, drafting memos, and summarizing case law,鈥� Sonday says. 鈥淭his is work that has traditionally formed the foundation of junior associate training.鈥� The skills AI cannot replicate 鈥� such as judgment, issue spotting in ambiguous situations, client communication, and ethical decision-making 鈥� are what students need to develop deliberately earlier in their legal careers.

Indeed, those human skills are essential to the effective use of AI, Talmage says. The lawyer of the future will be a strategic advisor and creative problem solver, which are the very attorney roles that AI cannot fill, she explains, adding that those must be cultivated through experience. “You always need to be questioning and verifying and authenticating 鈥� and that’s generally a lawyer鈥檚 role.鈥�

For years, experiential learning in law schools was something students had to piece together on their own by hunting across spreadsheets, clinic listings, and externship postings for opportunities.

There is a particular logic as to why pro bono work is the right fit for learning to use AI responsibly. Pro bono is “a built-in, humans-in-the-loop model” in which students are always supervised by attorneys, Sonday says. And this supervision creates a structured environment in which to learn how to use AI tools, apply them to real matters, get feedback, and iterate. The result, Sonday argues, will be more attorneys who are AI-fluent early on and throughout their careers.

A message to law school leaders

For law school leaders, both Sonday and Talmage highlight that AI use has already changed the legal profession. The choice then for law schools is whether they evolve by design or by default.

Students know the legal profession has changed and so do employers, CLE providers, and clients, Talmage explains.

Sonday agrees. “The pace of change in the legal profession is accelerating, and students need to be prepared not just for the law today, but also for the practice of law in the future,鈥� she says. 鈥淚ntegrating pro bono platforms and AI-specific training aligns legal education with reality.”

The Paladin/PLI partnership offers a blueprint for what legal education must become in the future, transforming itself into a space that鈥檚 grounded in applied legal knowledge, human-supervised, and AI-informed. Indeed, the best way to train the next generation of lawyers is to give them real clients, real cases, and real responsibility while they still have room to grow.

You can find more about the challenges facing law schools and legal education here

Key takeaways:

• • • Falling behind on worked rates 鈥� Midsize firms grew worked rates by just 5.3% in Q1 2026, roughly half the Am Law 100’s 9.8% growth 鈥� a structural gap that has widened with every passing quarter.

    • Underinvesting in the tools that will define tomorrow 鈥� Midsize firms also invested 6.2% more in tech and knowledge management in the quarter 鈥� the lowest of any segment 鈥� leaving them at risk falling behind as larger peers accelerate their investment.

    • Sitting out the talent race 鈥� With recruiting expense growth at -0.2%, Midsize firms are virtually absent from the lateral market while their closest competitors saw 5.6% growth in their investment.

In Q1 2026, demand growth across all segments landed at 2.7% year-over-year, with 听Midsize firms coming in at 2.6%, essentially in line with the market average and comfortably ahead of the Am Law 100’s 1.2%, according to the 成人VR视频 Institute鈥檚 recent Q1 2026 Law Firm Financial Index (LFFI).

Based on this metric, Midsize firms are not underperforming, as they are capturing work at a pace that outstrips the elite tier; however, a deeper look shows a more nuanced story. The Am Law Second Hundred led all segments with demand growth of 3.9%, posting a notable advantage over the Midsize segment. That growth was enough to make up the ground ceded by the Am Law 100 that the Am Law 200 as a whole still managed to outstrip the Midsize segment in terms of demand growth.

That makes the demand story a very mixed one for Midsize firms. While they are holding their own against the very largest firms, the Am Law Second Hundred 鈥� Midsize鈥檚 most direct competitive set 鈥� is pulling significantly ahead on volume. If that gap persists, it could further shut the gates to demand gains. Of course, that would be made all the more impactful because of how rising demand influences firms鈥� ability to raise rates.

Rates are the most consequential gap in the data

If demand tells a moderately positive story for Midsize, worked rate growth is the point at which the data turns slightly more negative for the segment. In Q1 2026, Am Law 100 firms posted worked rate growth of 9.8%, the highest of any segment by a significant margin. The Am Law Second Hundred recorded 6.9% growth, while the overall market average was 7.0%. Midsize firms, meanwhile, came in at 5.3%.

That is a gap of more than 4.5 percentage points between Midsize and Am Law 100 firms, a magnitude outstripping the entirety of the Midsize segment鈥檚 demand gains.

What makes this especially significant is that the gap is not new 鈥� one year ago, in Q1 2025, the same hierarchy held, with Am Law 100 firms seeing worked rates grow at 9.4%, Second Hundred firms at 7.1%, and Midsize firms at 5.9%. In other words, the rate divergence between Midsize firms and the rest of the market has been consistent and is widening even further. The end result of this is stark: Midsize firms are growing revenue per hour of work at a pace roughly half that of their Am Law 100 counterparts, and that differential compounds over time into a meaningful profitability disadvantage.

Expenses diverge in the wrong direction

On the expense side of the ledger, the pattern reverses in a way that creates a genuine squeeze for Midsize firms. Looking at direct expenses 鈥� the costs most closely tied to delivering client work 鈥� Midsize firms recorded growth of 5.4% in Q1 2026, the highest of all three segments. This compares to 4.8% for the Am Law 100 and just 4.4% for the Am Law Second Hundred. That means that Midsize firms are generating the slowest rate growth while simultaneously growing their client-delivery costs the fastest. That combination reflects a textbook margin compression dynamic.

Overhead expenses per FTE tell a different story. Here, Midsize firms showed lower growth at 4.0%, well below the Am Law 100’s 6.7% and the Second Hundred’s 5.8%. On the surface this looks like cost discipline, but it is worth reading carefully: lower overhead investment, especially when coupled with the market鈥檚 high tech and talent expenditure pressures may actually reflect forced underinvestment rather than efficiency. Midsize firms may simply have less capacity to expand their infrastructure spending, not less need for it.

Making an opposite bet on talent

Indeed, one of the sharpest contrasts in the “Q1 2026 LFFI ” data involves recruitment expenses. The Am Law Second Hundred is investing heavily in lateral talent, seeing recruitment expense growth of 5.6%. The Am Law 100 has sharply pulled back, growing recruitment costs at just 0.3% 鈥� a signal that the largest law firms may be consolidating their existing talent base rather than expanding it aggressively. Midsize firms sit at the opposite extreme, with recruitment expense growth of -0.2%, essentially flat to slightly negative.

This difference is notable because the Am Law 100 and Midsize segments are pursuing fundamentally different headcount strategies. As Am Law firms focus on leaner headcount powered by rates, Midsize firms have finding much more of their revenue growth comes from growing aggregate hours worked by hiring more lawyers. Midsize firms鈥� decision not to leverage as much investment in this area could signal a shift in strategy, simple cost pressures, or perhaps a greater focus on which areas they spend their recruiting money. Whichever the driver, it鈥檚 a sizeable shift across a segment that鈥檚 already feeling pressure across multiple facets of their business.

The compound effect of this divergence

The “Q1 2026 LFFI” data highlights several reinforcing challenges facing Midsize firms: slowing demand and lagging rate growth, the highest direct expense growth but the lowest technology investment, and minimal lateral recruitment investment. While no single factor is critical, together these divergences show a widening gap between earnings and costs.

Of course, this is not to say that Midsize firms are going bankrupt 鈥� far from it. Midsize firms鈥� profitability, on average, is growing at a solid pace as demand and rates continue to power them forward, even as expenses weigh on their numbers.

What may be more concerning is what this means for the future potential of Midsize firms, especially as the market bifurcation grows and the Am Law firms increasingly pull away. As this continues, it鈥檒l become harder and harder for Midsize firms to break into those ranks, compete for talent, and compete for the kind of bet the company work that is some of the most profitable in the legal industry. Reversing this course isn鈥檛 about Midsize firms鈥� 2026 results; rather, it鈥檚 about what they can achieve in 2030, 2040, and beyond.

You can download a full copy of the 成人VR视频 Institute鈥檚 Q1 2026 Law Firm Financial Index here

Key insights:

• • • UK law firms face a more selective growth market in 2026听鈥� Client demand remains steady, but external legal spend expectations have cooled, with growth concentrated in areas such as Regulatory, Labor & Employment, and international work.

    • Legal expertise alone is no longer enough 鈥� UK legal buyers increasingly favor law firms that combine technical excellence with commercial judgment, business understanding, and practical guidance aligned to client priorities.

    • AI adoption is becoming a client expectation听鈥� Corporate legal teams are moving faster than their outside law firms on GenAI, and many UK legal buyers now expect outside counsel to use AI to improve efficiency, workflows, and the quality of legal work.

The legal market in the United Kingdom today has shifted into a new normal. While law firms saw an explosion of demand and spending immediately following the pandemic, increasing client caution has resulted in a shift in priorities. Today鈥檚 law firms cannot simply rely on their old ways of providing legal service to succeed, as UK clients expect firms to combine expertise, commercial judgment, international reach, and visible AI-enabled improvements in how legal work is delivered.

Jump to 鈫�

2026 State of the UK Legal Market

A new report from the 成人VR视频 Institute, “2026 State of the UK Legal Market,” reveals how the UK legal market is shifting, as more judicious clients are beginning to force law firms to reassess their strategy. Overall anticipated net spend from legal clients has seen declining growth rates in recent years, and while some practices like Regulatory and Labor & Employment continue to see strong demand growth, other practice areas such as Insurance, IP, and Disputes face potential contraction.

This shift is also guided by emerging buyer preferences. The report reveals an increasing commerciality to the UK legal market, one in which clients increasingly favor advisors that combine legal excellence with commercial judgement, and those that are leveraging AI to bolster not only efficiency but improve the overall legal work product.

You can find out more about

Taken as a whole, the report paints a picture of clients that now are moving faster than their outside legal advisors, strengthening their internal capabilities, and setting clearer (and higher) expectations. This means that UK law firms cannot rest on their laurels, as clients increasingly push their outside firms to keep up with new business challenges.

The market is cautious, but opportunity remains

The report reveals that UK legal buyers are more cautious about external legal spend than they have been at any point in the last five years. That may mean law firms can no longer rely on the broad-based demand that defined the post-pandemic period and instead need to be more precise about where opportunity exists 鈥� and where it doesn鈥檛.

The report tracks buyer sentiment through net spend anticipation (NSA), which measures the share of buyers expecting to increase external legal spend over the next 12 months minus those expecting to decrease it. Since its 2021 peak, UK NSA has fallen steadily to +5 percentage points in 2025, returning the market to the more stable, single-digit baseline that was seen before the pandemic.

For those law firms looking to capture increased business, the report makes clear that legal expertise is now the price of entry, not the point of differentiation. The firms that stand out will be those that know how to apply their expertise in ways that reflect the client’s business realities.

Indeed, that is becoming even more important as corporate legal departments face growing pressure to demonstrate their own value to the wider organization, and they鈥檙e increasingly pointing to improvements in their own quality and effectiveness even before mentioning cost savings, efficiency, or time savings. Not surprisingly, more than one-third of UK legal buyers now cite business savviness as a reason they favor a particular law firm.

To help demonstrate their internal value, clients are pushing their outside law firms to leverage advanced technology to improve the overall effectiveness of legal work. Of course, this has resulted in a clear gap, the report notes, between how corporate legal teams are moving and how law firms are responding. For instance, the report shows that more than half of UK corporate legal respondents say their organizations are already using GenAI tools across the business, compared with just about one-third law firm respondents who said this.

That difference in outlook matters because clients increasingly believe AI will become a larger part of how legal work is delivered, and they鈥檙e not content to simply wait and see whether their outside counsel will fully adopt the technology. Indeed, corporate legal departments are expecting their outside law firms to keep pace with how legal work is changing, and they will reward those firms that do.

You can download

a full copy of the 成人VR视频 Institute’s “2026 State of the UK Legal Market” by filling out the form below:

Key findings:

• • • Pricing and demand are exceptionally strong, but profits aren鈥檛 keeping up 鈥� Despite worked rate growth reaching above 12% for the largest of the Am Law 100 firms and demand growth hitting almost three-times its historical average, the LFFI landed at a flat 55, its own long鈥憆un historical average.

    • Rising costs, falling productivity, and geopolitics are quietly offsetting gains 鈥� Overhead expenses climbed, productivity slipped back into contraction, and a widening performance gap between large firms and the rest dragged on overall results; meanwhile, the Iran war appears to be dampening demand on the edges of both transactional and counter-cyclical work.

    • The market is splitting sharply by segment 鈥� Am Law 100 firms continue to drive pricing power and lead technology investment, while Midsize firms have seen rate growth slow, demand lag, and costs rise faster than revenue, all reinforcing an increasingly scale鈥慸riven competitive divide.

The 成人VR视频 Institute鈥檚 Law Firm Financial Index (LFFI) for the first quarter of 2026 landed at 55, exactly matching the long鈥憆un historical average since the Index began tracking the market in 2006. On its face, that may sound unremarkable; but dig one layer deeper, and Q1 2026 becomes one of the more puzzling quarters we鈥檝e seen in years.

Jump to 鈫�

Q1 2026 Law Firm Financial Index

Let鈥檚 start with the inputs. Am Law 100 firms pushed worked rate growth to almost 10%, building on an already record鈥憇etting 2025 and marking one of the strongest pricing environments in recent memory 鈥� and at the very top of the market, the largest law firms cleared 12%-plus rate growth. Meanwhile, demand clocked in at 2.7%, nearly triple the industry鈥檚 long鈥憆un average.

Clearly, these are not average conditions by any stretch. And yet, the LFFI score 鈥� a composite output of law firm financial performance 鈥� remained stubbornly ordinary.

So, what鈥檚 eating the gains? It turns out that the answer is multifold. For example, the report cites climbing overhead expenses, productivity that has slipped back into contraction after six months of gains, and a growing performance gap between the largest firms and everyone else 鈥� all joined forces to drag down the LFFI score.

On top of that, a new geopolitical variable 鈥� the ongoing war in Iran 鈥� weighs heavily, darkening the storm clouds further. Early indicators suggest the conflict is blunting both sides of demand at once, the report notes, freezing both the transactional M&A work that thrives on confidence and the counter-cyclical restructuring work that thrives on distress. When both the upside and downside stall simultaneously, strange results likely will follow.

The segments鈥� strategy split

Indeed, one of the clearest stories of Q1 is how sharply law firm segments are splitting apart. After years of moving largely in lockstep, pricing strategies diverged in Q1. Am Law 100 firms, for example, leaned hard into rate growth, while Midsize firms slowed their rate growth, marking the first deceleration in rate growth for any segment since 2021. Meanwhile, the Second Hundred held steady, neatly threading the middle.

This nuance matters. Large firms continued raising standard rates faster than worked rates, accepting deeper discounts to move the prices clients paid higher. Midsize firms did the opposite 鈥� allowing standard rates to lag while negotiated rates rose 鈥� signaling restraint. Midsize firms鈥� strategy may have been to capture price鈥憇ensitive demand migrating down鈥憁arket; but in practice, it hasn鈥檛 worked. Midsize firm demand growth now trails the Am Law 200 average, expenses are accelerating faster than revenue, and productivity per lawyer is declining. As a result, profit growth for the segment is running at roughly half the pace of its Am Law peers.

Rain in the forecast?

Demand, meanwhile, still remains above historical norms, even as a few raindrops are starting to fall. While several practice areas contributed meaningfully, the mix of transactional and counter鈥慶yclical practices are growing at nearly the same pace, signaling not balance, but simultaneous deceleration. Add in tough year鈥憃ver鈥憏ear comparisons against early鈥�2025鈥檚 demand surge, and the growth picture going forward becomes more stormy.

As the report makes clear, the takeaway from Q1 is not that the market is in trouble, but rather that momentum is slipping under the surface. A score of 55 isn鈥檛 a storm warning siren; it is, however, an odd resting point for a market with inputs this strong. The question for the legal market moving forward is simple: Is this just a passing sprinkle 鈥� or the first sign of a heavier storm?

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Key insights:

• • • AI is changing how lawyers develop judgment and expertise 鈥� As AI takes over more legal tasks, firms must ensure that lawyers still gain the experience, reasoning skills, and confidence needed to become excellent practitioners.

    • Law firm leaders must redesign training for an AI-enabled profession 鈥� Beyond adopting AI, law firms need intentional systems for mentorship, feedback, workflow, and evaluation so AI supports lawyer development instead of weakening it.

    • The best firms will use AI to build better lawyers, not just faster work 鈥� Long-term success will depend on whether firms use AI to strengthen human judgment, critical thinking, and client service, rather than replacing them.

For law firms looking to deliver greater value, AI taps into an obvious opportunity to enhance efficiency, accelerate work product delivery, and reduce expenses. With clients as our guiding North Star 鈥� shaping our decisions and defining our purpose 鈥� this is an opportunity that we enthusiastically embrace.

It is tempting, however, to focus only on how AI is changing the way lawyers deliver legal services as legal teams today publicize their deployment of AI tools and track utilization rates. However, firm leaders also need to ask more fundamental questions: How is AI changing the way attorneys learn? Are the assumptions that we have historically made about how we gained expertise and judgment still accurate, or were we conflating causation with correlation? Fundamentally, what does it mean to be a great lawyer, and how will law firms like ours continue to create great lawyers?

A new model for learning

Law firm leaders are facing a far deeper challenge than driving efficiency through technological adoption. We are now tasked with that produce excellent, client-centered attorneys in an environment in which many traditional development pathways are being transformed.

The core apprenticeship model for lawyer development has existed for thousands of years. The case method of formal legal education 鈥� created around 1869 by Harvard Law School Prof. Christopher Langdell 鈥� is a relatively newer phenomenon, but it is hardly new. Roughly six generations of lawyers in the United States have been on the receiving end of the same basic inputs: Case-based instruction followed by apprenticeship, grounded in repetition and increasing complexity over time.

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It is tempting, however, to focus only on how AI is changing the way lawyers deliver legal services. However, firm leaders also need to ask more fundamental questions.

We reasonably assume that this is how one learns to think like a lawyer 鈥� and how we move talented junior lawyers from 1Ls to senior, expert practitioners. The prevailing belief is that lawyers can only learn judgment by muscling through thousands of genuine problems and through the friction that comes from making and fixing mistakes. Yet, these beliefs are largely inferential. We know how we were educated and how we practice, and we know what resulted. We have evidence about the conditions under which expertise developed, but not definitive proof of causation.

With the advent of AI, truly understanding how we make exceptional lawyers matters enormously. Much of the time-consuming work associated with lawyer development can now be completed, or at least materially assisted, by various AI tools. If these tasks were simply an inefficient use of our time, then nothing much is lost. However, if those efforts were integral to developing legal judgment, then their disappearance creates the real risk that we are weakening the very capabilities upon which our profession depends.

We are, in other words, interfering with a developmental system without understanding which component parts are essential to retain.

Leadership in an AI age

That shift reframes the role of leadership. Leaders cannot simply roll out AI tools and tout productivity gains 鈥� to do so risks losing essential developmental opportunities to gain judgment and expertise and produces lawyers that are little more than a set of hands for AI systems. Yet, ignoring the extraordinary capabilities of AI is not an option, either. Instead, leaders must become systems design architects, structuring legal work, training, and feedback in ways that preserve the conditions most likely to produce exceptional, client-centered lawyers.

To do this, leaders in which AI supplements but does not replace effortful thinking, creates opportunities for reflection and feedback, and ensures that lawyers remain active participants in reasoning rather than passive editors of machine-generated output. All the while, law firm leaders also must create environments of trust and connection, without which great legal teams cannot be built.

Clearly, AI introduces both risks and opportunities into our historical education and development models. Beautifully crafted AI work product can create the illusion of competence but may create scenarios in which lawyers fail to grasp fully the underlying reasoning. Over time, this can lead to cognitive offloading and shallow understanding.

If attorneys rely excessively on AI tools, they risk becoming mere managers of AI-generated outputs. Unless human expertise and judgment are fully integrated with the AI tools, those outputs run the risk of being homogenized. AI can also create fear for the future, a condition under which it is nearly impossible to learn, and which would reduce human engagement from which essential observational learning occurs. Without internalizing knowledge and gaining genuine expertise, future lawyers may never learn the fundamental judgment needed to solve clients鈥� most complex problems.

At the same time, AI deployed well can become . AI can play devil鈥檚 advocate, create mock negotiation simulations, identify examples created by the profession鈥檚 greatest advocates, and offer access to data sets far too large for human review. Well-trained, bespoke AI tools can also supply immediate, tailored feedback on work product 鈥� something universally seen as essential to growth but too often in short supply.

We may learn that expertise can be developed with AI-enabled tools far faster than our traditional model has suggested, given that few legal work environments have ever been able to provide feedback with the speed and frequency that AI could supply.

Indeed, we may learn that expertise can be developed with AI-enabled tools far faster than our traditional model has suggested, given that few legal work environments have ever been able to provide feedback with the speed and frequency that AI could supply. AI should be able to expand access to guidance previously limited by time, ego, and hierarchy, effectively supplementing traditional mentorship structures.

These tensions point to a central conclusion: Leaders, and not AI alone, will determine the future of the legal profession. Strong leaders will engage deeply with the question of how we create great lawyers, critically examining to gaining expertise, creativity, passion, and judgment. They will simultaneously challenge the notion that how the last six generations learned is the only way to learn, using AI as a catalyst for reconsidering how we can become even better at our craft.

The new rules of professional growth

Some design elements already seem essential. First, legal work should be performed in a manner that preserves active, deep thinking. This may impact the sequencing of when and how AI is used, and whether AI serves as a reviewer or a starting point. Second, legal education and development should emphasize the importance of critical thinking, of understanding the questions to be answered, the rule of law, and the meaning of justice. Indeed, attorneys should be judged on their work quality, not just quantity, with emphasis on sound judgment and nuanced, client-centered advice. Because you get what you measure, evaluation and compensation systems should overtly take expertise, creativity, and deep analytical skills into account.

Third, legal teams should be purposeful about developing the most human of skills 鈥� connectivity, trustworthiness, integrity, and resilience. This inevitably means spending time with other people, not just machines. Finally, organizations must maintain robust feedback loops, ensuring that human mentorship remains central even as AI tools become more prevalent.

At its core, this is a question of professional identity. The goal is not simply to produce lawyers who can use AI to deliver passable work products, but to develop lawyers whose judgment, adaptability, and commitment to client service are enhanced by new capabilities. AI has the potential to elevate the profession by enabling deeper analysis, access to greater knowledge, and more efficient, responsive service.

Law firm leaders can determine which of these futures emerge in their organizations. The pace of change is breathtaking, requiring us to move at light speed while answering truly fundamental questions. Leaders must embrace AI with optimism, but not uncritically, and build systems in which AI serves as a tool for learning and growth rather than a substitute for human development.

In the age of AI, we can continue to think like lawyers and be even better ones.

You can find out more about the challenges law firms face with

Key insights:

• • • Lawyers need two types of judgment 鈥� AI is exposing gaps in legal judgment and business judgment, both of which attorneys need to differentiate their value as automation increases.

    • Legal and business judgment are not the same skill 鈥� Legal judgment produces lawyers who reason well about the law; business judgment produces lawyers who can translate that reasoning into something a business partner can understand and act upon.

    • Business judgment is essential in the AI era 鈥� Business judgment is the translation layer between legal analysis and business action, and it has emerged as a key part of the value proposition for lawyers in an AI-powered profession.

Every conversation about AI and its impact on how lawyers will learn judgment that is happening right now assumes the profession knows what judgment is. Yet, we鈥檝e spoken to two practitioners who demonstrate how differently they interpret what judgment is: One is talking about the ability to reason like a lawyer; and the other is talking about the ability to act like a business partner.

Both of these interpretations matter, and both are in the spotlight because of AI. Yet, the legal profession’s near-total focus on legal judgment, while remaining almost entirely blind to business judgment, may be a consequential mistake.

Significant discussion about legal judgment

The question about how to teach legal judgment in the age of AI within legal education is urgent and well-founded. For decades, junior lawyers have learned by doing, with legal instincts accumulated through repetition and proximity to experience.

鈥淭he whole model that corporate clients would subsidize the learning of junior lawyers is all going away [because of AI],鈥� says , founder of Creative Lawyers, a consulting and advisory service dedicated to transforming the future of legal practices. 鈥淐orporate clients already hated it, and now they have a way to say, 鈥業’m absolutely not paying for this.鈥欌��

The research, drafting, and document review tasks that once served as the informal training ground for legal judgment are those that AI is absorbing the fastest. The profession is right to sound the alarm. AI-powered simulation and knowledge tools are emerging as credible responses, and Leonard herself sees genuine promise in them. Now, firms can use decades of document management data to create AI-powered coaching environments, pattern-matching a partner’s stylistic preferences so associates can calibrate their work before it lands on a senior lawyer’s desk, she explains, adding that, unfortunately, inertia and the industry鈥檚 resistance to change have emerged as structural obstacles to this advancement.

Development of business judgment is lacking

, CEO at TermScout, a general counsel and product builder of legal and decision systems who has spent years developing tools for legal and business teams, looks at judgment from a completely different place, framing the issue as a practice problem instead of an education one.

The legal profession’s near-total focus on legal judgment, while remaining almost entirely blind to business judgment, may be a consequential mistake.

“Judgment isn’t one skill,鈥� Mack states. 鈥淚t’s a set of small decisions happening quickly: prioritization of what matters, articulation of trade-offs, mapping consequences, and translating all of that into something a business partner can act on.鈥� Her description of judgment is executive decision-making that happens to operate inside a legal constraint. More specifically, she refers to it as the translation layer between legal analysis and business action, or decision-making under constraint. 鈥淚f that translation doesn’t happen, the legal work doesn’t have much effect,鈥� she adds.

Comparing these two viewpoints side by side, legal judgment is focused on producing lawyers who reason well about the law; business judgment goes one step further by describing lawyers who reason well and who can translate that reasoning into something a business can act on.

AI has shined a spotlight on both judgment gaps even as it showcases the value of the AI-enabled lawyer. AI may give you answers, but judgment is deciding which answers matter and what to do. And at a time in which AI can deliver output with some legal reasoning faster, cheaper, and at greater scale than any junior associate, the translation layer is no longer a complement to a lawyer’s value proposition. Thus, that value proposition has to be addressed in an AI-enabled profession.

Why both views need to be addressed

The two judgment problems are equally urgent on the same timeline. New lawyers entering practice right now are expected to be AI-enabled immediately, and if they arrive with only legal reasoning capability and no translation layer, they will be outcompeted by the lawyers who have both legal and business judgment.

The good news is that legal judgment is already taught, but it is not taught evenly. The key question at play is whether the profession is willing to make teaching such judgment more explicit and consistent. Business judgment, like legal judgment, has always been distributed unevenly with the proper understanding of it going to those with the best mentors, the most consequential early experiences, and the greatest proximity to senior decision-makers. Explicit teaching of judgment frameworks, through deliberate simulations could level that playing field in ways the osmosis model never could.

The profession has one word 鈥� judgment 鈥� to teach as two different cognitive capabilities. Closing the gaps on both types requires the profession to stop treating them both as a natural byproduct of legal experience and start treating it as a foundational competency that must be taught deliberately, early, and at scale.

鈥淲hat humans bring to the partnership with AI is judgment,鈥� Mack says, demonstrating the kind of clarity that tends to arrive only after years of building things that work. 鈥淭his is not optional 鈥� it is mission critical.”

You can learn more about听the challenges facing legal talent here

Key insights:

• • • Capital and human resource drains 鈥� Managing the billable hour model is seen as wasting capital and time for both law firms and clients.

    • The billable hour and talent retention听鈥� The billable hour may be contributing to a talent drain in litigation defense and other practices.

    • Data may be the answer 鈥� One firm is pivoting to data-driven pricing based on key performance indicators (KPI), which it views as a win-win for both the firm and its clients.

鈥淭he billable hour is a gigantic waste of time for everyone involved.” That is the blunt assessment of founding partner Bob Kopka. 鈥淚t stifles innovation, penalizes efficiency, and has grown into a status quo that costs more than it benefits.”

The administrative-industrial complex

The primary target of Kopka鈥檚 critique is the massive administrative overhead required to manage the billable hour. On the client side of the firm鈥檚 work in defense litigation, insurance companies employ vast departments and third-party vendors specifically to review, audit, and cut legal bills. In response, law firms like Kopka have had to build their own payment departments to counter this, represented by teams of billers trained on dozens of different platforms and appeals departments dedicated to what Kopka describes as “chasing payments on appeals, most of which are both unfair and unsuccessful.”

This administrative-industrial complex, Kopka argues, creates a world in which lawyers spend as much time justifying their work and subsequent compensation as they do practicing the law.

“The time to set up new matters, add timekeepers, approve budgets as well as approve invoices, and cut separate checks for every matter is arduous,” notes Kopka Law COO Donna Markus. By moving to a monthly retainer or portfolio-based alternative billing model, Kopka Law aims to dismantle this bureaucracy, freeing up significant capital and human resources for both the firm and the client.

Killing the profession 6 minutes at a time

Perhaps the most provocative aspect of Kopka鈥檚 stance is the link between billing models and the legal industry鈥檚 talent crisis. The traditional model requires attorneys to feverishly capture every one-tenth of an hour, documenting their day into six-minute increments with hyper-specific narratives and present-tense verbs.

According to Markus, this isn’t just an annoyance; it鈥檚 an existential threat to the defense bar. 鈥淭alent is leaving the defense side because of the tedious nature of capturing their time,鈥� she warns, adding that when a lawyer鈥檚 value is reduced to a billing code, the “most valuable time a lawyer can spend” 鈥� engaging in free thinking 鈥� is often treated as a non-compensable activity because it doesn’t fit into a standard billing code.

This administrative-industrial complex, Kopka argues, creates a world in which lawyers spend as much time justifying their work and subsequent compensation as they do practicing the law.

“We are professionals,” Kopka states. “Our performance should be reviewed and judged by our KPIs [key performance indicators], not on whether a billing entry ‘appears excessive’ or whether the attorney obtained permission to do a jury verdict search”.

Why the billable hour hates AI

Kopka and Markus also highlight a dangerous paradox in the modern legal market: The billable hour actively penalizes law firms and their lawyers for becoming more efficient. As AI increasingly automates routine legal tasks, firms that use AI to finish a task in 30 minutes that used to take three hours are effectively cutting their own revenue under the traditional model.

And as AI starts to replace some billable activities, many insurance clients are refusing to pay for software or AI costs while simultaneously expecting to reap the benefits of the efficiency and cost-savings that those tools provide.

Kopka sees alternative billing models as flipping this incentive. Under a well-constructed billing arrangement, a firm has every reason to invest in cutting-edge technology. If they can achieve the client鈥檚 desired outcomes faster and with fewer resources, they are rewarded for their efficiency rather than punished for it.

Data as the solution for the 鈥渋nertia of fear鈥�

If the benefits are so clear, why then has the rest of the industry been so slow to follow? Kopka and Markus attribute the delay to “inertia born of fear” 鈥� including the fear of being underpaid or simply not knowing how to measure value besides using the clock.

They argue that this fear is no longer justifiable because the data exists to solve it. “Fear not,鈥� they insist. 鈥淲e have metrics.” Between the insurance company’s data on frequency and severity and the firm’s own data on litigation categories, there is more than enough information to fashion a mutually beneficial pricing arrangement.

The Kopka model focuses on key performance indicators (KPIs), rather than simply time spent on a matter. These KPIs include:

• • • cycle time and case disposition
    • early evaluation and consistent communication
    • indemnity outcomes relative to injury type
    • strategic collaboration and value added

Kopka believes this approach restores the firm-client relationship and moves it toward a true partnership. The law firm is finally treated as an independent contractor, rather than a legal services vendor that needs to be micro-managed. This gives the law firm the autonomy to focus on delivering legal services that achieve the client鈥檚 goals, instead of having to hold endless discussions about how the firm is managing itself as a business.

A call to action for the defense bar

Kopka Law sees its success with these models as a challenge to its peers. The firm uses the term alternative billing arrangements, arguing the legal industry鈥檚 attempts to use what are commonly called alternative fee arrangements (AFAs) actually focus on the wrong objectives. 鈥淎FAs are often designed solely to save the client money,鈥� explains Markus. 鈥淭hey鈥檙e destined to fail because they potentially force the law firm to compromise or cut corners to meet a low-cost bar.鈥�

Instead, Kopka aims for a win-win model that appropriately 鈥� and perhaps even generously, if structured and executed properly 鈥� compensates the law firm for excellent service and the achievement of specific, agreed-upon goals.

Kopka Law is actively encouraging other firms and insurance carriers to enter these negotiations. The firm sees it as a necessary evolution to stabilize budgets and make legal spend more predictable for clients.

For Kopka and Markus, the message is clear: The legal industry has the metrics and the tools to do better. And the better approach, they argue, is a firm-client partnership that鈥檚 driven by data, aligned incentives, and a commitment to results over activity. And with AI and advanced data analytics, that model is within reach for most law firms.

You can find more about how law firms are managing their billing and pricing issues here

Key highlights:

• • • Three emerging business models, one unresolved tension听鈥� AI is compressing time, which directly threatens the logic of billing by the hour, but the smartest law firms are not waiting for a winner to emerge before building their strategic foundation.

    • Technology strategy and talent strategy are the same conversation 鈥� The talent model must be designed in tandem with the business model, even amid uncertainty, because many of the structural conditions of legal work are changing all at once.

    • The next great lawyer will lead with human skills, not tool proficiency听鈥� Forward-thinking firms are doubling down on their lawyers鈥� curiosity, judgment, client skills, and relationship-building as these capabilities are those that AI cannot replicate.

Every law firm is asking how AI will change the way legal work gets done; but , Chief Legal Operations Officer at , is asking a more consequential question: How will AI change the way legal work gets听paid for?

Planning around 3 law firm business models in the AI era

AI is making law firms more efficient, of course, but efficiency alone does not answer the harder question of how to capture value and how AI-enabled legal services get priced. Olson Bluvshtein sees three paths emerging in law firms:

1. 1. 1. Billable-hour (still) 鈥� The first is the path of least resistance. Firms stay anchored to the billable hour, raise rates, and use AI to move faster and handle more volume, with the idea that more volume will make up the revenue losses of faster work. With this model, however, the client-firm incentive misalignment remains intact, and the fundamental tension between billing for time and AI compressing that time never gets resolved.
      2. Value-based pricing 鈥� The fixed fee pathway also is likely to gain further traction, as it鈥檚 one that many AI-native law firms are pursuing. In this model, value-based pricing creates a natural meeting point between firm and client interests because when incentives align, everyone wins, Olson Bluvshtein explains.
      3. Frontier models rule 鈥� The third scenario is more speculative but worth watching. As foundational models improve, the need for expensive legal-specific tools may diminish. “I could see a scenario in the future in which we don’t necessarily need all the legal-specific tools that are out there,” she says. Even though technology costs historically come down, cheaper tools do not make the business model question disappear, Olson Bluvshtein notes.

Candidly, Olson Bluvshtein admits that 鈥渢he truth is probably somewhere in the middle,” and the firms best positioned for any of these futures are the ones building the strategic and operational foundation now rather than waiting for the answer to become obvious.

Indeed, the most thoughtfully designed business model will fall short without the right talent foundation to support it. 鈥淭echnology strategy and people strategy are not separate conversations,鈥� Olson Bluvshtein says, adding that they are key parts of the same strategy.

Legal innovation consultant reinforces this point in , noting that many aspects of the structural foundation under which the legal profession has operated are changing all at once. This means that addressing the technology strategy separately from the human side, slice by slice, does not make sense.

Boyko says she encourages law firms to take a step back and approach the problem by identifying what the firm will need first in the future and then plan the talent and tech part for that reality.

Aligning the talent model to the future business model

Not surprisingly, a key challenge for law firms right now is that the future is uncertain. Therefore, it is difficult to design a talent model for an uncertain future and an unknown business model. At the same time, there are some known facts, but the unknown aspect is when these certainties will occur.

More specifically, what is known is that there is mounting pressure on the three possible law firm business models because AI is automating the tasks of past junior associates, clients do not want to pay for tasks completed by junior associates, and clients are bringing more legal work in-house, often until the time when the almost final deliverable is handed over to outside counsel for final review.

To explore the right talent model, one experiment that Boyko suggests is to expand the junior associate experience to include rotations through back-office functions, such as knowledge management, professional development, and technology functions.

At law firm Fredrikson & Byron, Olson Bluvshtein says its associate development program is evolving to prepare for the uncertain future based on three current tactics:

• • • Building AI fluency 鈥� This is a near-term imperative that will soon become table stakes. The goal is to move past basic adoption into something more sophisticated and durable. To enable this, the litigation and M&A practices at Fredrikson are actively working with a variety of tools to test prompts that they can then share more broadly with other teams, while also identifying how AI policy guidance will evolve.
    • Accelerating the development of legal judgment 鈥� Shortening the learning curve for developing legal judgment, which includes the ability to supervise and efficiently validate AI-produced work, is the second essential part of the firm鈥檚 talent development framework. Olson Bluvshtein is candid about where things stand. 鈥淚t has not fully happened yet,鈥� she says. 鈥淏ut building the training infrastructure to operationalize this is a stated goal for the year ahead, including formalized curriculum around effectively and efficiently supervising AI output.鈥�
    • Being hyper-focused on the development and recruiting of human skills 鈥� Doubling down on the human skills 鈥� including client development, negotiation, relationship-building, and sound judgment 鈥� that technology cannot replicate are the capabilities that will define the next generation of great lawyers, regardless of which law firm business model ultimately prevails.

This same philosophy is shaping how Fredrikson recruits. Rather than screening candidates for a checklist of AI tools, the firm is prioritizing curiosity, openness, and the ability to demonstrate human skills. Indeed, the firm is looking for lawyers “who are really good at those human skills鈥� and who bring the kind of judgment and adaptability that compounds over time, explains Olson Bluvshtein.

Boyko underscores a similar approach to skills. 鈥淩ight now, the skills needed to be a good lawyer are no longer those rote skills that AI can automate,鈥� she explains. 鈥淚nstead, they are the people skills, the operational skills, and the client skills.鈥�

Of course, moving from broad experimentation to disciplined, firm-wide maturity takes time, and the gap between early movers and late adopters is already widening. Those firms that will define the next era of legal services already are asking how AI changes the way it delivers value and what skills its lawyers will most need 鈥� and not just looking for the next tool to buy.

You can learn more about the challenges facing legal talent here