Blog Post

How (And Where) Should Law Firms Reduce Expenses?

November 16, 2018

Law firms are under constant pressure to reduce expenses, do more with less, increase ratios and move from cost center to profit center.

This is according to multiple studies this year. And last year. And the year before that. So why aren’t law firms able to achieve this fiscal nirvana?

As you can imagine there are a plethora of reasons for this (certainly more than a single blog post could explain), however speaking to, and working with law firms and GCs day in, day out, we’re seeing a growing dichotomy in the market that is partly to blame.

Some firms – both clients and non-clients – faced with the challenge of reducing expenses and increasing profits are taking a long hard look at their businesses and redesigning them around value, using data and technology to help steer them in the right direction. And they’re not looking at this as a painful necessity, but instead as an enabler to help propel their business forward.

Others are, to put it bluntly, using a band-aid to cover the drip, drip, drip of revenue leakage through poor resourcing and using short-term cost-cutting measures without understanding the longer-term implications.

When budgets are cut, the easy option is to look at your expenditure and cut back. Quick and relatively painless. For those who have outsourcing, it’s often the case that they reduce the amount of work they contract out to achieve their cost reduction. Alternatively, those without outsourcing look to put hiring freezes in place or cut back on training, marketing, and even technology budgets.

But while they accomplish the immediate goal of cutting expenses, in reality, these actions achieve little in the long term; nothing has actually changed.

Taking a Step Back

As time-consuming as it is, the only way to effect real change is to examine your business and understand intimately what you are trying to achieve. While it might seem to be about cost cutting, for many clients we find it’s really about getting better value from what they have and having the right skills in the right places.

For example, when making a legal technology purchase, are licenses acquired for everyone in the department? But who actually needs the technology and will use it to maximum effect? The technology will also need upgrading – it can’t just sit on your servers or PCs forever without being touched or the benefits you deployed the software for in the first place (usually efficiency, project/matter management, documents production/workflow etc), will be lost. Giving the right technology to the right people has benefits beyond just saving money.

It’s a similar story with your support structure. Who actually does what across the business? If you’re aiming to achieve a 1:6 secretarial ratio (and who isn’t these days), do you know what skill set you have, where they’re deployed, by whom and for what? EAs and experienced legal secretaries can’t be experts in everything, so finding the gaps or crossovers are essential to running an efficient support team.

There is a human element to this kind of restructuring. And we’re not using this as a euphemism for letting people go, quite the opposite. While it’s more emotive than simply cutting external expenses – changing what people do and how they do it is always going to be met with some resistance – the longer term gains are worth it.

To give some examples, consider hourly productivity and sick days, how tricky are they to quantify in your business? Having secretaries sitting around late at night while lawyers prepare case notes isn’t a good use of anybody’s time or thrilling for the secretary whose work/life balance is way out of kilter. Career secretaries who are doing low-level tasks can be reassigned to casework, admin assistants can be more focused, skilled associates can be alleviated from doing formatting or other time consuming (and therefore money making) tasks, all supported by an external provider who can be monitored under strict SLAs. You need the right skills in the right place for the right tasks to achieve maximum value from your support structure.

Long-Term Planning

This is not a quick fix. It’s changing the way you work and most likely have always worked. Using data at the start of this process is crucial – it will illuminate the areas you need to change and help you focus on elements that can be quickly adjusted for maximum benefit in the short term while giving you a better understanding of the areas for longer-term consideration.

By shifting your mindset and seeing your support structure through a value lens, it not only helps you drive longer-term benefits, but it sets the department up as a powerhouse that is helping drive the legal team to success.

Find out more about how we helped one customer remodel their support structure to better enable their lawyers and increase efficiencies.

Download: GC's Guide to Making the Case for Technology

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