17-18 June 2026 | London, InterContinental O2

LegalTech Diaries Volume 15

Gareth Hughes

Senior Director, Law Firm Advisory Group
PwC

LegalTech Diaries Volume 15

Casper Lauren

Senior Director, Law Firm Advisory Group
PwC

AI is simultaneously increasing productivity and threatening fees. From your vantage point advising law firms on strategy, are the firms that are moving fastest on AI adoption better off financially, or are they the ones most exposed to the price erosion problem?

The firms moving fastest on AI are definitely forcing the pricing question earlier. Once you can do parts of drafting, review or due diligence much faster, it becomes harder to defend pure time-based pricing on those tasks. That fee pressure is real. We are seeing that in market analysis and in firm diagnostics, where AI is expected to push more work towards fixed fees, value-based pricing and tighter scrutiny of routine work.

The firms that move early have more room to shape the economics. They can redesign workflows, change the mix of work, improve margin on the right matters and decide where to share efficiency with clients and where to reinvest it. The firms that move slowly face the same price pressure anyway, but without the productivity upside, without the learning curve and without the client message that they are modernising. That is usually the worst position.

As lawyers increasingly build and deploy AI agents, how should law firms be rethinking their compensation and incentive structures? Do traditional models risk dis-incentivising the innovation that will define the legal sector in years to come?

Yes, traditional models do risk disincentivising it, but again change here is difficult.

If partner reward and promotion still lean heavily on billed hours, personal utilisation and short-term origination, then you are effectively telling people not to automate too much, not to share efficiency too widely, and not to redesign work in ways that reduce time. That becomes a real problem once firms are trying to deploy AI agents that can remove or compress repeatable junior-heavy tasks. Several of the firm diagnostics we’ve reviewed make exactly that point… AI is pushing firms towards value-based pricing, different leverage models and more explicit links between pricing, profitability and partner behaviour.

The firms thinking seriously about this are starting to shift incentives away from pure hours and towards a broader mix of measures. That usually means rewarding profitable revenue, pricing discipline, matter margin, client outcomes, adoption of approved AI workflows, and contribution to building reusable capability across the firm. In other words, if someone helps create an AI-enabled way of delivering work faster, more consistently and at better margin, the system needs to recognise that as value creation, not treat it as lost time.

I do not think this means firms suddenly abandon current models or start paying bonuses for every prompt. But it does mean the old model needs updating. The most sensible approach is usually evolutionary – keep the parts of compensation that protect collaboration and firm culture, but add clearer weight for commercial performance, innovation, adoption, and client impact. Some firms are already experimenting with this more visibly, including linking part of reward to AI adoption and practical use of new tools.

When you’re advising law firm leaders on strategy, how honestly are they reckoning with the fact that their business model was built on billing junior hours, and what are the ones who are thinking seriously about it doing differently?

First, it should be said that this is really complex to change, we are talking about ripping up a 100+ year old business model.

The majority of leaders are acknowledging it now, but not all of them are acting on it at the same pace. Most know that parts of the traditional pyramid are under pressure. If AI reduces the time needed for routine drafting, research and review, and clients are less willing to pay for junior-heavy leverage on those tasks, then the old model clearly starts to wobble. That comes through very clearly in partner interviews and AI diagnostics.

The firms taking it seriously are doing three things differently. First, they are getting much sharper on pricing and profitability, rather than assuming hours equal value. Secondly, they are redesigning delivery, using legal tech, legal ops, flexible resources and more structured matter management. Thirdly, they are starting to rethink talent – what juniors are trained on, how they are paid, how leverage really works, and where human judgment still matters most.

Join 5,000+ legal leaders shaping the future of law for two days of insight, innovation and unmissable networking — now with your biggest saving!