Flexibility Is Key to Managing Staff Headcount
By Anthony Davies
This article originally appeared in Legal Management Magazine Here: here
In today’s economic uncertainty, firms are challenged to understand how layoffs and escalating levels of support staff attrition are affecting efficiency and performance in the delivery of legal services. The question is, can current support models meet the needs of lawyers and clients?
First, let’s look at the three very powerful market forces that are impeding firms’ abilities to run world-class, efficient and productive legal operations:
The first of these forces is the effect of the down economy. By the end of 2022, overall demand for legal services had contracted by 0.1%, causing lawyer productivity to decline, which translated into a loss — on average — of $98,000 in fees per lawyer. This was on the heels of a 24-month-long war for talent that resulted in the highest associate pay increases on record and related record increase in overhead expenses.
It came as no surprise, then, that firms started announcing layoffs of attorneys and staff at the end of 2022 and the beginning of 2023: Cooley, Strook, Goodwin, Kirkland, Procopio and Gunderson are just a few of the marquee-name firms that have been public and transparent about their layoffs. No firm likes to lay off staff, but when they do, one concern is that institutional knowledge is also walking out the door with them, which can impede the delivery of legal services. If a law firm is still modeled in a traditional attorney-secretary model, this can be especially true.
2. Talent Shortage
Law firms have known about the support service attrition time bomb for years. In a 2020 survey by BigHand, firms were expected to lose 58% of their “traditional” legal secretaries in the next five years due to retirement and attrition. That number has risen dramatically post-pandemic; 75% of firms based in the United States say increased churn is affecting support services staffing.
The pandemic has triggered a need for a new skillset from support staff, creating emerging gaps in skills and expertise. While the total full-time equivalents for support staff declined in 2021 and 2022, the total compensation for and the compensation per role increased. This is because firms were decreasing the numbers of lower-level staff and increasing staff in higher functional areas while paying the compensation differentials necessary to do so.
3. Increased Competition
Fifty percent of buyers have adjusted their law firms in the last 12 months, and that will continue through 2023. Add to this shrinking demand an expanded playing field of competitors that now includes an array of midsize law firms, boutique and specialty firms, accounting firms, new law companies, and the proliferation of other well-funded alternative legal services providers who are taking significant client and market share away from traditional law firms.
So how can firms pivot legal operations to succeed in this environment?
FLEXIBLE SUPPORT MODELS CAN HELP FIRMS SUCCEED
Many firms are taking the opportunity to restructure their legal operations models altogether. Some firms have taken the path of reinventing it: Fish & Richardson announced the elimination of its litigation secretary role. Morgan Lewis offered a buyout package to all its legal secretaries nationwide. Fox Rothschild offered 300 support staff separation packages as part of a practice-specific support model. And Reed Smith reduced its secretarial personnel and aims to retrain its remaining secretarial staff into an executive assistant role.
Another way that firms are successfully navigating the market is leveraging a flexible staffing support model — including a range of delivery models from temporary staffing to modern, flexible outsourcing arrangements. Where traditional outsourcing was historically locked in with long-term contracts, many firms don’t realize how some providers have shifted to a flexible outsourcing program that provides firms the traditional benefits of expertise and cost cutting but does so outside the traditional parameters of long-term contracts. With a malleable support model, firms can gain flexibility when and where they need it and ramp up or down as needed without burdening the operation with lengthy and expensive recruiting and training processes.
When working with a service partner, the burden of recruitment and training shifts from the law firm to professional recruiters who are able to find the right talent even in challenging markets. Not only is this shift in risk from the firm to the service provider a benefit to the firm, but it also can be especially helpful as firms are challenged by identifying the new skillsets required of their support professionals.
The importance of flexibility is one of the predominant lessons firms have gleaned from both the pandemic and today’s competitive market. As the support model of legal operations continues to evolve amid economic uncertainty, leveraging the flexibility, recruiting prowess and expertise of a service partner can help firms remain competitive without incurring risk — a powerful win-win!