Thomson Reuters Institute releases 2022 Australia: State of the Legal Market Report

Growing emphasis on technology among law firms. Firms grew technology investment at 5.3% in FY 2022, with 59% of firms investing significantly or moderately in technology, according to the Thomson Reuters Tech and the Law 2022 Survey (2022 Survey).

Lawyer turnover is rising significantly. According to the 2022 Survey, 29% of lawyers said they would be prepared to leave their firm or legal practice for a more innovative firm, while another 32% said they were unsure.

Digital literacy is becoming a core skill for lawyers. Millennials and younger lawyers (aged 25-39) are "digital natives" with much less tolerance for mundane, repetitive work which can be instead automated (at page 18). Given the proportion of millennials overtook that of baby boomers (aged 55-74) according to the latest 2021 Australian Census results, law practices will likely be under increasing pressure to continue to respond to the demands of this younger generation. Some law firms have begun implementing graduate programs for legal technology and innovation teams.

Alternative legal services panels. Some legal service clients in Australia are deciding to opt for separate alternative legal services panels in addition to traditional legal services panels, which are mostly composed of law firms. For more information on alternative legal service providers and how they can improve legal department operations, see Practice notes, Sourcing legal services: identifying the business's needs and potential suppliers and Using alternative legal service provides to improve legal department operations.

Cybersecurity threats rise. Corporate law departments are looking to leverage existing in-house technologies to gain more easily obtained benefits, as cybersecurity compliance requirements become more extensive. With the rise of cybersecurity threats, information governance is becoming a key investment area as both law firms and corporate law departments continue to adopt hybrid-working models. For more information on cybersecurity and a list of resources relating to the legal, practical and commercial issues associated with cybersecurity, see Practice note, Cybersecurity issues for in-house lawyers and Toolkit, Cybersecurity.

Technology investment on the corporate side. Australian corporate law departments are starting to spend more on digital transformation and legal operations. Focus on technology investment has been within law firms as 59% of respondents reported they invested heavily or moderately in legal technology from 2020 to 2022. For further information on technology adoption for corporate legal departments, see Toolkit, Legal department operations: Technology adoption and implementation.

Challenges for technology adoption. Australian stand-out lawyers had much lower satisfaction scores with their firms' information technology (IT), innovation and knowledge management teams, in comparison to global and United States (US) averages. For example, the satisfaction rating for Australian stand-out lawyers in IT as a technology support function was 26%, in comparison to global averages of 34% and US ratings of 44%.

Increased time pressures on partners. Partners have been billing more but have also had to spend a greater proportion of their time recruiting new employees which has added to time pressures.

Lower wellbeing scores. Increased billables and time in recruitment have contributed to lower wellbeing satisfaction measures. Besides appreciating the level of income attained, Australia-based stand-out lawyers (91% being partners) measured lower than their global counterparts in other areas of wellbeing (for example, whether they felt a sense of purpose (32%) and were progressing towards personal goals (27%)). For helpful resources on mental health and wellbeing, see Toolkit, Mental health and wellbeing for lawyers.

More demands on partners. Partners in law firms essentially have four roles:

The four-role partner business model will continue to succeed in the long term if partners have balanced, healthy and sustainable roles. Given the end of FY 2022 demonstrated record-high utilisation and low wellbeing scores, many firms may have to consider foundational management theory which states that structure should follow strategy. Every firm should re-examine strategy at the practice-team level (clarifying aspirations, market focus, and competitive edge) and ensure team structure (roles, relationships, resources, capacity and operating systems) are clear, balanced and aligned.