Why the Next Five Years Will Redefine Law Firm Economics

Why the Next Five Years Will Redefine Law Firm Economics

Law firm economics have long been built on the foundation of the billable hour, a metric that ties value to the amount of time spent. However, according to a Best Era article by Ryan McKeen, in the next five years, AI will reshape the legal profession in ways that challenge not just how work is done, but how lawyers are valued and how firms must operate to remain competitive. For managing partners, this moment calls for bold leadership and a willingness to reinvent core aspects of firm strategy.

AI technologies are already streamlining tasks such as contract review, legal research, and document drafting, which previously required entire teams of junior lawyers. As clients recognize that machines can complete in minutes what once took hours, they are demanding new pricing models and greater transparency. In-house legal departments are responding even faster, leveraging legal operations and technology to build agile teams that sidestep traditional firm structures altogether.

McKeen says this shift signals a move from labor-based pricing to value based on insight. Clients will pay for judgment, experience, and strategic counsel, not for the hours it took to generate a memo. As a result, firms must restructure staffing models, elevate training, and reconsider compensation systems that have historically rewarded volume over impact. Boutique and AI-native firms will push the boundaries further, offering flat rates and agile services that legacy firms must match or risk obsolescence.

McKeen suggests that success will belong to law firms that embrace AI as a tool for transformation, not a threat to tradition. The future of legal services will not be defined by time spent, but by problems solved. Firms that recognize and act on this reality now will be best positioned to lead in the years ahead.