Insights

Why Law Firms Should Consider Outsourcing Secretarial and Document Production Tasks

INTRODUCTION

Law is and has always been a learned profession. Practicing has always been a business as well, but in the last couple of decades, large law firms have evolved into big and sophisticated businesses. To boost revenues, firms have merged, gotten serious about strategy, invested in marketing and opened offices around the world.

It is fair to say, however, that firms have emphasized growing revenues over containing costs. The legal trade press reflects this. Articles about mergers, client service and practice group management abound, but good ones on managing costs are relatively rare.

Large firms in particular have untapped potential to improve profitability. Outsourcing reduces costs yet maintains service levels for clients and internally. Though outsourcing is already widespread, it still has tremendous potential to reduce costs further. Achieving cost reductions does not, however, require staff disruptions.

This article briefly reviews the logic behind outsourcing. It then explains why firms should evaluate opportunity presented by Integreon, a firm that provides high-value, complex BPO solutions (also known as Knowledge Process Outsourcing, KPO or judgment-based BPO), specializing in document, content and knowledge services.

OUTSOURCING TO IMPROVE OPERATIONS AND REDUCE COSTS
What Firms Outsource Today
Before examining “the why”, it is useful to inventory “the what”. Firms long ago realized the benefit of outsourcing back-office functions such as payroll, copy center, mailroom, food service and travel. Outsourcing is especially important in technology: IT departments outsource network operations, applications development, major systems upgrades, running software and help desks (a function with extensive lawyer contact).

Outsourcing even extends to law practice itself. Some firms rely on armies of contract lawyers to review the growing volume of discovery documents. Others turn to well-established companies for legal research.

Why Firms Outsource
Firms outsource for many reasons. Of course, cost reduction is important and oft cited. In fact, many firms are motivated more by doing the job right and by avoiding management headaches than by saving some money.

By focusing on one or two functions, vendors gain advantages over law firms:

They become truly expert at managing the functions since this is their only business.
Vendors can invest in efficiency-enhancing processes or technology and spread the cost over many customers.
Recruiting and retaining higher quality talent is easier because a large, focused company can create career opportunities that customers can rarely match.
Working for multiple customers means more consistent capacity utilization than any single customer can achieve; fewer peaks and valleys mean lower costs.

Beyond specialization, vendors have two other significant advantages. First, for functions that need not be performed on-site, they can locate in lower cost domestic or offshore markets. In contrast, customers often operate in high-cost cities. Consequently, outsourcing companies pay less rent and lower salaries yet can deliver work by Internet, phone or overnight shipping. Second, vendors achieve a scale that makes it easier for them than for their customers to operate around the clock, an increasingly important necessity for large law firms. Some firms skip outsourcing but try to replicate the advantages with an internal shared services model, centralizing in one place, functions previously distributed across locations. For example, shared services are a big trend in technology. Many law firms are consolidating servers and staff from multiple offices to a central place (some in low cost locations).

THE BENEFITS OF OUTSOURCING SECRETARIAL TASKS
Secretaries and document processing are typically the third biggest cost after associate salaries and rent. Though the ratio of secretaries to lawyers has fallen, few firms have fundamentally re-thought the role of secretaries and how best to meet lawyers’ administrative support needs. Integreon provides outsourced secretarial and document processing services.

Integreon’s outsourced, shared services model saves money relative to traditional secretarial staffing. It offers operational advantages and the opportunity to deploy secretaries in new ways. Outsourcing is not, however, an all-or-nothing proposition. Onsite support is critical and Integreon customers keep their secretaries. By using Integreon, firms lower the secretarial ratio by hiring fewer new ones, re-assigning some and allowing attrition to occur. Moreover, using Integreon creates the opportunity to recast the role of secretaries with a focus on higher value tasks.

Matching Resources to Needs
Large law firms face a widespread but little discussed and infrequently solved challenge:aligning secretarial support with lawyers’ needs. Secretaries’ skills vary as do lawyers’ needs – matching the right secretary to the right lawyer is hard, even on objective criteria. Throw personalities into the mix and the matching process is that much harder.

Another challenge is availability. Support needs vary by month, week, day and hour, yet staff assignments are fairly fixed; most secretaries work for a set number of lawyers during regular hours. Also, managing scheduled time-off (especially at holidays) and unplanned absences can be a big frustration. The result is that lawyers sometimes compete for secretarial time, especially on big projects where one secretary cannot produce all of the necessary documents. Floor coordinators, informal sharing arrangements and floaters help balance workloads but do not solve the problem. To provide the necessary back up and 24×7 coverage, firms must staff central departments, which is hard because of the shift work.

The solution is over-staffing. Most firms have a net surplus of available secretarial time – they pay for secretaries whether or not there is work to be done. Secretaries are not to blame; extra capacity is a response to the reality that workloads vary far more than the resources.

Integreon resolves these issues. It has a large pool of experienced staff, many willing to work during off hours or on holidays. The base skill level is high and many specialists are also available. Firms deal with a single intake contact (relationship manager) who assigns the work to the most appropriate person. And the principle of large numbers works in Integreon’s favor — at any given moment, both the capacity and the right skill is available. This means firms can align resources to needs and pay only for the services they actually need.

Simplifying HR Challenges
Recruiting, screening, hiring and training secretaries are costly and time-consuming activities. Whether a firm relies on ads or agencies, identifying candidates and screening them is a hidden cost in most firms. Moreover, these costs will likely increase over time. The pool of qualified candidates seems to be shrinking as a legal secretary career becomes less attractive. With fewer qualified prospects, the cost to find each one increases.

Integreon customers reduce these costs. Recruiting, hiring, training and dealing with turnover become Integreon’s problems instead of the firm’s. As mentioned, Fargo offers a deep pool of educated and highly motivated workers. Integreon invests in its employees, offers a stimulating team environment, and provides excellent career paths. This makes it an attractive local employer, which minimizes turnover, keeps service levels high and holds down costs.

Managing Quality and Performance
Most firms have trouble managing secretarial performance. Part of the problem is structural: administratively, secretaries report to a supervisor, but substantively, they report to a lawyer. Part of the problem is personality: an open secret is that many lawyers fear their secretaries. The combination makes monitoring quality and delivering performance reviews inherently difficult.

Skill mismatches, underperformance, quality control and personality conflicts often become chronic problems. Through no fault of their own, secretaries may miss opportunities to improve and work may need to be re-done or shifted to other resources. For example, some lawyers send complicated documents to central word processing even if their own secretary has time. These same issues make quality checking difficult. Secretaries usually work as individuals, so lack colleagues to review and correct work. That neighboring secretaries may help proofread is the exception, not the rule.

Firms avoid these problems with Integreon because quality control and performance appraisal is built into the process. Before returning work to a law firm, Integreon performs quality control checks and performance reviews. For every project, Integreon asks for feedback and receives it from around one-third (a very high response rate for feedback). On a 1 to 10 scale, with 10 being best, the results speak for themselves: 10 for deadlines, 9.7 for quality, and 9.9 on service and friendliness. In the rare cases where a score is under 8, Integreon calls to explore what went wrong and then takes corrective measures.

Reducing Costs
A conservative estimate of the direct cost (salary plus benefits and payroll tax) for a secretary in a major urban area is $85,000. Making reasonable assumptions about hours worked, the hourly cost is about $50. If, however, secretaries are utilized only 80% of the time, then the internal hourly cost is over $63 per hour. The table below presents these estimates in more detail.

Integreon offers a lower cost approach. The hourly price for Integreon support is less than the internal law firm cost but the Integreon team is available 24 hours per day, 7 days per week, 365 days per year. So firms can save direct costs by outsourcing. They can also reduce the indirect management costs described above.

Secretarial Cost per Hour for Large Law Firms in Major Cities

        Assumed Utilization  
 
        100%   80%  
 
  Days Worked Per Year        
    Business Days Per Year        
      Weeks per year 52   52  
      Business days per week 5   5  
      Business days per year 260   260  
               
    Time Off        
      Holidays 10   10  
      Vacation 20   20  
      Sick + personal days 5   5  
      Total Time Off 35   35  
               
    Total Available Working Days 225   225  
               
  Hours Worked Per Year        
    Working hours / day 7.5   7.5  
    Utilization 100%   80%  
    Hours Worked Per Day 7.5   6  
    Hours Per Year (Days * Hours/Day) 1687   1350  
               
  Cost Per Hour        
    Fully loaded costs $85,000   $85,000  
    Cost per hour $50.37   $62.96  
             

RESULTS TO DATE
Better Service
Several large, global law firms are customers. Initially, lawyers and secretaries were skeptical and concerned about Integreon. But quickly, both become eager users. Lawyers like the 24×7 availability, the fast turnaround time, and high quality. Secretaries like offloading onerous or document-intensive tasks to Integreon so that they can help with higher-value tasks.

Lower Costs
Integreon customers find that they use much less secretarial overtime, that central word processing departments shrink over time and that the ratio of lawyers to secretaries drops. Based on the actual experience and the direction customers are taking, with a subscription model in a 500-lawyer firm, a net savings of over $ 1.0 million per year is possible.

The Potential for Structural Change
These savings stem from relatively easy changes. Integreon and its customers believe that additional benefits will flow from re¬organizing how work is done. But this will not occur automatically. Firms need to consider new organizational structures and new job descriptions for secretaries. For example, outsourcing “heavy” document production tasks and dictation frees-up secretaries for higher value tasks such as relationship management, workflow and contributing to knowledge management systems. To help firms achieve these “re-engineering goals”, Integreon partners with Microsystems, which assists firms with skills assessment, document automation tools and training. The chart below provides a conceptual view of how outsourcing can lead to a new mix of higher value tasks for secretaries.

Secretarial Tasks

THE MECHANICS OF OUTSOURCING
Outsourcing secretarial tasks to Integreon is easy. Integreon starts by working with the firm to define its needs, learn its work practices and adopt its document formats and templates.

Lawyers or secretaries can send tasks to Integreon by e-mail, telephone, fax, mail or overnight delivery. Integreon team leaders receive all tasks and make sure the work is done right and on time. A customer relationship management system helps meet firm- and lawyer-specific work requirements. A project tracking system ensures Integreon meets deadlines. When necessary, Integreon splits up work among several people, calling in trained stand-by employees as necessary. As mentioned, when a job is completed, there is a thorough quality check.

Integreon carefully maintains confidentiality. Employees are bound by confidentiality agreements, undergo background checks and take legal ethics classes that emphasize confidentiality. Team structure and space are both designed to isolate a project to a single team. Customized computer systems prevent the wrong document going to the wrong firm.

CONCLUSIONS
The legal market has steadily evolved and adopted ever more business-like approaches to operations. Low cost computing and inexpensive, reliable, high-speed communication allow many tasks to be performed off premises. The outsourced, shared services model is well proven and Integreon has succeeded in meeting law firm needs. Firms that seek to improve operations, offer their lawyers and clients a higher level of service, and reduce costs should consider outsourcing some secretarial work and word processing.

ABOUT INTEGREON
Integreon focuses exclusively on legal and financial outsourcing, where we have deep domain know-how. We offer a full line of knowledge support services from multiple, low cost delivery centers in India, the Philippines and the USA. Our transition planning and program management teams work from New York, London and Los Angeles.

Our customers include 6 of the 10 largest investment banks, 2 of the 3 largest global law firms, several top-tier private equity firms, hedge funds and many Fortune 100 and FTSE 100 corporations. Integreon has been in business for a decade and has around 2000 employees.

1Staffing company Ajilon Legal surveys law firms across the US. The company’s 2006 Salary Guide reports that the average salary in NYC, DC, Chicago, and Minneapolis for secretaries with 3+ years experience is $65,000. An old rule of thumb for additional costs is 25%. With higher health care costs and the generous law firm benefits, the percent is probably higher. In fact, a recent Bureau of Labor Statistics press release reports that benefits for office workers are 40% of hourly wages. Applying a conservative 30% benefit factor yields a fully loaded cost is $85,000.