Outsourcing to Protect Law Firm Profits

What’s the best strategy for large law firms to protect profits in a tough economy?   Law firm management usually focuses more on growing the top line than on controlling costs.  Until now.

Rampant BigLaw lay-offs show that management wants to reduce costs.  So we read with interest Just How Much Do Law Firm Layoffs Save? (Leigh Jones, National Law Journal, 9 Feb 2009 ), which suggests that laying off 5% of associates saves just 1.5% of revenue.  We have found that a firm can save about the same amount by re-thinking its Middle Office and relying more on outsourcing.

Outsourcing does more than just save money.  It converts fixed costs to variable costs, which means avoiding painful lay-offs in the future.   It also forces management to re-think how to support lawyers.  That re-think is important because in most firms, lawyer support is an accident of history rather than a result of analysis and design.  Outsourcing solves this problem because the transition requires systematic analysis and consciously deciding what support is appropriate.

Associate lay-offs may be a painful necessity now but do not change a firm’s business approach for the future.  In contrast, outsourcing saves money, provides better lawyer support, and improves a firm’s long-term cost structure.