Law firm leaders are entering the new year navigating a fast-changing legal industry shaped by rapid expansion, evolving workplace culture and the accelerating use of generative artificial intelligence.

The past year brought a mix of opportunity and disruption for large law firms. Major mergers reshaped the competitive landscape, global political shifts created uncertainty, and new executive actions targeting law firms triggered deep concern across the sector. At the same time, generative AI moved from experimentation to daily use, altering how legal work is performed and delivered.

Despite the turbulence, firm leaders say they are approaching the year ahead with cautious optimism, focused on growth strategies, talent retention and the practical integration of technology.

“We will always have challenges, whether geopolitical or internal,” said Jamie Lawless, chief executive of Husch Blackwell LLP. “The most exciting part about leadership is taking on those challenges and approaching them in a way that’s opportunistic.”

Competition for talent remains intense as firms look to expand. Leaders say nearly every large firm expects to grow, driving fierce demand for lateral partners and practice groups. Consolidation among the largest firms has added pressure by allowing some competitors to offer higher compensation packages.

Jaime Drozd, managing partner at Davis Wright Tremaine LLP, said the firm is prioritizing strategic hires rather than sheer scale. “That competition for talent is increasingly fierce,” she said, adding that the focus is on lawyers who strengthen existing capabilities rather than growth for its own sake.

At Norton Rose Fulbright, global managing partner Jeff Cody said the firm’s approach reflects its long-term vision. Having already achieved scale through past mergers, the firm is now focused on smaller, targeted lateral additions while protecting its culture. “We look at lateral partners on a 10-plus-year horizon,” Cody said.

Retention has become just as important as recruitment. K&L Gates global managing partner Stacy Ackermann emphasized that people remain a firm’s most valuable asset, requiring sustained investment in both lawyers and professional staff.

Workplace flexibility continues to shape those retention efforts. Many firms reassessed hybrid work policies over the past year, with a growing number requiring more in-office days. Leaders say the goal is balancing flexibility with mentorship, collaboration and firm culture.

Ackermann said increased in-office time supports training and professional development, particularly for junior lawyers. Duane Morris chair and CEO Matthew Taylor echoed that view, noting that in-person collaboration strengthens teams and client relationships.

Others see flexibility as a competitive advantage. Norton Rose Fulbright requires fewer in-office days than many peers, a policy Cody said supports retention without sacrificing productivity. Husch Blackwell has taken a more radical approach, with its largest “office” operating entirely virtually, allowing the firm to recruit talent unconstrained by geography.

Technology, particularly generative AI, sits at the center of both opportunity and uncertainty. Leaders agree that AI is reshaping legal work, from document review to client service models.

“We need to think not only about how to use AI, but how it changes how we work,” said George Casey, chair of the Americas at Linklaters LLP.

Some firms are using AI to standardize processes and improve efficiency, while others see it as a way to accelerate the development of junior lawyers by automating repetitive tasks. Drozd said AI allows younger attorneys to engage in substantive legal work earlier in their careers.

At the same time, AI is influencing hiring itself. Lawless said many firm leaders expect to hire fewer associates in the future, with greater emphasis on lawyers who combine traditional legal skills with technical expertise.

“It’s not just about how many lawyers we hire,” he said. “It’s about the prototype of the lawyer going forward.”

As firms move into the new year, leaders agree that success will depend on adapting quickly while preserving culture, client trust and long-term strategy in a rapidly evolving legal market.