(Note: This post was initially published on LinkedIn, and the following iteration is a syndicated and updated version of the same.)
The buzz about law and AI is disproportionate to the realities of smaller companies.
While a big business legal department may have a headcount of 100 or more, most small businesses have no legal resources whatsoever.
In the U.S., 33 million small businesses employ nearly 62 million persons, totalling about 46% of private sector employees (U.S. Small Business Association, 2023).
Although many small businesses have lawyers, legal departments or outside law firms, the reality is most do not. And many of our small business customers ask whether they need them to prepare and manage documents like contracts.
The Legal Needs of Smaller Companies
We’re reminded of studies that provide insights into the legal needs of smaller companies. Among their chief findings was that ‘no’, smaller companies don’t always need relationships with lawyers, legal departments, or outside law firms.
For example, in its survey of 10,000 companies with 50 or fewer employees across a variety of industries, the authors of “The Legal Needs of Small Business: An Analysis of Small Businesses’ Experience of Legal Problems, Capacity and Attitudes” (Kingston University, 2020) concluded there are alternatives to lawyers for matters like contracts.
Among the types of legal issues reported by the authors, the greatest proportion – more than one-third – involved contracts.
Contract-related issues included loss of income, loss of customers, damage to reputation, inability to take on work, loss of employees, and even closing the business. Contract-related issues not only caused these measurable damages but also caused small business owners to suffer from mental health and physical illness.
The Kingston study turns the spotlight on small businesses’ search for legal solutions for services like contract management. However, it does not exclusively focus on lawyers or law firms as the only solution.
Half of those surveyed said lawyers were not a cost-effective means to resolve legal issues. Half of those surveyed said they would turn to lawyers only as a last resort. And half said they were as likely to ask friends or family to resolve an issue as they were to ask a professional.
What Are We to Make of These Findings?
The media reports almost daily on developments in legal services and disruption caused by artificial intelligence. That paradigm may be on the minds of big business and its lineup of lawyers, but as we’ve seen that’s not what small business owners are thinking about.
Our small and medium-sized business customers tell us they want support who know what their companies do and how they operate.
For contract management that means directly addressing specific commercial legal needs; being reliable, predictable, and cost-effective; packaging the right services together; answering questions immediately; maintaining dialogue; hand-holding; and 24/7 availability, among other demands.
This contract support doesn’t need to come from a formal lawyer, legal department, or outside law firm relationship. It can be provided by professionally trained and experienced contract service providers.
Wrapping It Up
For over a decade, the American Bar Association rules and guidelines have lent support to outsourced services for tasks like contract management.
This isn’t about AI “reimagining” contract management for the largest companies. It’s about being authentic by providing the necessary, practical, and affordable resources required by small businesses to overcome contract issues quickly.
Come to think of it, it’s like having a friend or family step up when you need help.