The downward trend of law firm profit margins over the past decade – with flat demand, declining productivity, and continuing downward pressure on realization rates – has by now been well documented, as has the impact to firm profitability by increased client pressures to control legal costs, and increased competition from alternative legal service providers.
The need to further identify efficiencies and cost savings is greater than ever.
For several decades now, the legal community has been utilizing some form of outsourcing to obtain a competitive advantage. Early adopters outsourced noncore onsite functions (i.e., mail and messenger services, duplicating centers, records, food services) in an effort to gain operational efficiencies and cost savings. Over the last decade, outsourcing in the industry has evolved to include core business areas and offsite outsourcing (i.e., legal process outsourcing, eDiscovery, financial services, onshore/offshore service centers), essential to the strategic direction of many of the AmLaw firms. As Firms continue to seek ways to reduce operating costs, onsite outsourcing providers can look to new staffing models and real estate as further avenues for our clients’ desired results.
New Staffing Models
The legal marketplace is changing, and clients now seek legal assistance from a growing number of
non-lawyer professionals while concurrently pushing to keep expenses low for tasks that can be performed by non- attorneys. As a result, 50% of firms have significantly changed their strategic approach to lawyer staffing to respond to client pressures.
The use of contract attorneys and offsite shared service centers have provided firms with greater flexibility to meet client demands. Web-based software solutions and enhanced mobile devices allow legal professionals to work virtually. Outsourcing providers in law firms can aid their client partners by enhancing their onsite and offsite capabilities to support these new staffing and virtual models: one size does not fit all in the area of quality outsourcing.
Potential enhancements include providing enhanced litigation support services within traditional reprographic centers, converting fixed costs to variable, and introducing automated workflow solutions such as job submission tools. Onsite service providers must be prepared to accommodate these new demands and emerging service areas, and know when to introduce strategic partners to further enhance the service delivery to the client. By outsourcing some of these legal administrative functions to a provider with a demonstrated ability/expertise to recruit top talent, firms’ Recruiting/HR teams can focus on the recruitment and retention of the revenue-generating legal professionals so critical to their business.
The biggest challenge for law firms on the real estate side is the escalation of rent, which is forcing firms to reevaluate real estate strategies and explore how a more contemporary workplace can aid in talent acquisition /employee engagement, productivity and profitability. Changes include increased use of teams to manage projects, smaller private offices, fewer in-house staff, and increased outsourcing of routine legal activities. With substantive hard dollar savings in the millions associated with reducing attorney office size by just 100 square feet, the possibilities for savings are seemingly endless when strategically managed.
The number of conference rooms and breakout areas has increased, while individual workspaces continue to decrease as demands for more efficiency, collaboration, and attracting new talent continue. Onsite outsourcing providers can help law firms by implementing and managing new support personnel and technologies that allow firms to effectively manage these new workplaces. Such tools include meeting room and desk booking systems, delivery systems such as digital lockers, and enhanced Floor Hosts, Concierge and Meeting Support Services to support internal and external visitors. Firms will increasingly demand outsource service providers that provide a hospitality approach and a greater focus on the user experience for existing traditional service offerings.
Onsite outsourcing providers can also assist with electronic document work flows to further reduce real estate needs. This includes digitization of paper documents and document indexing, which reduces paper, improves efficiency, enhances document security and automates processes throughout your organization. As law firms continue to evolve their business models, so will nimble onsite outsourcing providers. An onsite outsourcing provider can help with changing firm delivery service models to deal with reduced budgets while maintaining service quality, staying abreast of innovative technology and identifying new value-creating initiatives. Onsite outsourcing service providers will have to take a holistic review of the firm, and partner with other organizations that specialize in their respective disciplines to bring the greatest value.