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Management Briefings

Outsourcing as a Tool to Maximize Law Firm Profitablity

Outsourcing is a term which has been catching on during the last five or so years. Although its definition is difficult to find in a standard dictionary, for those of us who consult with law firms, it's a familiar term and offers an extremely effective way to cut the costs of delivering services while maintaining, if not improving, the quality of those services.

Just what is "outsourcing"? Outsourcing is the use of an outside professional or professional organization to perform a project or a series of related tasks for a specific period of time.

Law firms are accustomed to secretarial, legal assistant and other support function "temporary help". Outsourcing builds on that concept but does not require day-to-day management and direction from an on-site supervisor or manager. When a function is outsourced, the individual has total responsibility for the project or work and has the ability to take it from beginning to end with minimal, if any, direction.

Most of us are familiar with the typical functions which have been outsourced in the past, such as: year-end tax returns; cafeteria plan or other retirement plan tax returns; annual financial statements and audits. Today, outsourcing functions have expanded into many other areas - even as far as outsourcing attorneys.

This trend will continue for several reasons:

1. Client service demands that we exceed, not just meet, client expectations. How can we be an expert and 100% focused on everything?
   
   
2. The annual cost of an employee today is enormous when you consider the total compensation package; the risk and the downside can be equally as great.
   
   
3. Employers fear the ramifications of hiring the wrong person. How do I fire the individual if they don't work out? What happens if I get sued?
   
   
4. Advertising, interviewing, hiring and training are extremely time consuming. How do I find time to do those tasks and meet my clients' needs at the same time?
   
   
5. Often times we don't know all of the facets of a particular job - so how can we teach someone how to do it?
   
   
6. Law practice continues to become more and more specialized - is our time better spent focused on our specialty?

Even for those law firms that are large enough to have a human resources professional, the "people game" has become a tricky one. We all know employee loyalty is at an all time low. In times gone by, it was customary for a departing employee to provide an employer with two weeks notice when the employee was resigning from a position. Sometimes this happens today and sometimes it doesn't. And, even if an employee gives two weeks notice, it is not enough time to replace that individual and have them provide some training to the new employee to ensure a smooth transition. Did you know the average time to hire a new employee is one month and depending on the complexity of the position, it is generally six months before the new employee is fully functional? When you outsource, you relieve yourself of these problems because the person is not your employee.

Many legal employers don't know where outsourcing can effectively be used. Some areas are:

Accounting

Contract assistance is available for specific projects or regular tasks such as general ledger maintenance, invoicing, accounts payable and/or receivable maintenance and other related functions. By outsourcing any or all of these functions, the need for accounting employees can be reduced or eliminated.

Facilities Management

Typically this includes all functions related to reception, photocopying, messenger and/or file clerk responsibilities. There are several companies nationally who specialize in these areas of typically high turnover. Because of the size of these organizations, they can offer people in these positions a career path which a smaller law firm would most likely be unable to do.

Marketing

All lawyers recognize the necessity of marketing their legal services but many law firms cannot support or are reluctant to support an entire marketing function. Still other firms wish to remove the marketing function entirely from their cost structure. Law firm marketing has become big business; look for a marketing entity that has the legal experience and resources to meet your needs.

Human Resources and Legal Staff

Similarly, law firms often have trouble supporting or adequately staffing their human resources function. This often results in less than perfect employee relations, quality problems, and possible exposure to liability.

It is no secret that the opportunities for partnerships are shrinking and that the demands of making partner are increasing exponentially. Similarly, lawyer dissatisfaction continues to rise; many lawyers long for fewer billable and marketing hours and more family time. The key to successful outsourcing of the attorney function is to use an experienced service that has the ability to draw and retain the caliber of lawyers to maintain quality standards, versus a mere register of attorneys.

How do you know when it makes sense to outsource or hire a temporary rather than hire your own employee? Here are some questions to ponder. . .

1. Do you have a task or project of a specific duration?
   
   
2. Do you have a specific group of tasks (such as some accounting functions) which, if they would be done by an outside party, rather than your employee, would relieve you of administrative tasks and thus free-up your time for client matters?
   
   
3. Based on a specific group of tasks, do you feel you need to hire a new employee, but are uncertain of the actual job description at this time? Would it be helpful to develop the job description with a person who has inside knowledge of what the task or series of tasks will entail?
   
   
4. Are you tired of dealing with management issues which interfere with your client work?

If you answered "yes" to any of the above questions, your firm could be a candidate for outsourcing or, at a minimum, temporary staffing. While outsourcing is not the answer for every job in a law firm, it is increasingly becoming an alternative.