Is Outsourcing Right for Your Firm?

In recent years, several large law firms have gained attention by centralizing their back-office functions offsite — usually in locations with cheaper rent and labor costs than in the cities where they base their legal services.

Such setups generally are unrealistic for smaller firms. Nevertheless, you can reap similar advantages by outsourcing some of your functions. The same advances in technology that make centralization possible for big firms can make effective outsourcing possible for other firms.

When Expertise Matters

Law firm administrators and managers know that running a successful practice requires much more than legal expertise. Often the most challenging aspect of the legal services business is keeping the firm’s critical functions running smoothly, including:

• Payroll;
• Accounting;
• Human Resources;
• Food Services;
• Collections;
• Copying;
• Mailroom;
• Travel Services; and
• IT

Many of these functions come with numerous subfunctions. Human resources, for example, includes recruiting and retention, training, leave management, benefits planning and administration — not to mention an array of compliance responsibilities. All of these are labor-intensive activities where expertise matters and that expertise frequently can be obtained in a more cost-effective manner by turning to external service providers.

Reducing Costs

However, the potential benefits of outsourcing go far beyond expertise. The primary draw for most firms is reduced costs, which come from a variety of sources. For example, as with the centralized back offices big firms are establishing, vendors may be located in areas with lower overhead costs and their pricing will reflect that.

Vendors with multiple law firm clients enjoy (and pass on the benefits of) economies of scale and high-capacity utilization. They wield superior negotiating leverage when it comes to dealing with third parties like insurance carriers, and they provide early access to best practices, as well as the latest technology, without incurring the capital costs.

If you outsource functions, your firm may see reduced overhead and staff costs, including employment taxes, paid time off, benefits, salary and wages. Moreover, unlike internal staff, outsourced workers are paid only for work performed; you will not have to compensate them for idle time sitting at their desks.

Weighing Potential Vendors

Selecting vendors for outsourced services requires careful consideration. Not every vendor will be able to provide the functions and level of service you require. Begin by soliciting referrals from other attorneys and firms. Pay special attention to the experience of firms that are comparable to yours in terms of billings, number of attorneys and practice specialties. Among other things, ask about vendors’ customer service. How often do problems arise? When they do, is the vendor responsive and does it resolve issues satisfactorily?

Also, think about fee structures. Some vendors charge a flat fee that increases as you add employees to your payroll. And, fees aside, can the vendor adapt in case you expand or downsize in the future?

Liability is another significant issue. Mistakes by human resources and payroll providers in particular can lead to sticky and expensive compliance problems. Will the vendor assume liability or will you be on the hook for resulting costs? Similarly, be sure to check out the vendor’s financial stability and business culture. You do not want to outsource your critical services to a vendor that could go out of business without warning or with whom your firm clashes on issues such as risk tolerance and ethics.

Once you have selected a vendor, it is important to maintain frequent communication with the vendor through implementation and then regularly throughout the course of your relationship. In some cases, vendors might put one of their employees to work in the client’s office.

Good Business Sense

As clients continue to demand greater efficiency and lower costs, outsourcing arrangements not only promote savings but can also provide your firm with a competitive advantage. Regardless of size, the firm might find that outsourcing makes good business sense.

Sidebar: Software — An Alternative to Outsourcing

Outsourcing is not the only alternative for law firms interested in reducing their dependence on internal staff for key functions. More and more firms are implementing software solutions.

Some firms have reduced their HR staff by introducing an HR information system (HRIS). HRIS represents the intersection of HR and IT, with non-strategic, recurring and time-consuming HR tasks accomplished electronically. The program also easily generates reports. The systems typically include flexible designs and databases of employee information that can be integrated across features. Procedures such as requests for time off can be handled and tracked automatically. HRISs may also incorporate accounting and payroll functions.

However, replacing several of your firm’s functions at once with this software may not be the best choice. Discuss cost-containment options with your financial advisors. And, if you do decide to purchase software solutions, adopt them incrementally to ensure they fit your firm.

For more information on outsourcing at your firm, contact Kal Shiner at 312.670.7444. Visit ORBA.com to learn more about our Law Firms and Lawyers Group.

Foundation For Your Firm’s Future How to Set Goals and Achieve Strategic Objectives

Strategic planning is key to ensuring a law firm’s long-term viability, and goal setting is an indispensable ingredient. Unfortunately, firms often find themselves falling short of achieving their goals, which can undermine their overarching strategies and jeopardize their very survival.

Trouble reaching goals can usually be traced back to the time the goals were first set. Poorly conceived goals often result in their non-realization. But if you follow the tried-and-true SMART (specific, measurable, achievable, relevant and time-specific) approach to goal creation, you are much more likely to reach them. As we approach the beginning of a new year, setting SMART goals may be what it will take to set your firm apart from the others.

SMART Rules

The SMART system of goal setting was first introduced to the business world in the early 1980s and has since been embraced by millions of organizations. Although the acronym’s letters have been associated with different meanings over the years, they are commonly defined as:

Specific. Your firm’s goals must be precise, rather than general. Simply stating that you want to “grow the firm” is too vague and provides no direction. Do you want to grow revenue, your client base, the number of practice groups or something else? For each goal, define the “5 Ws” — who, what, where, when and why — as clearly as possible.

Let’s say you want to increase the size of your intellectual property practice. To make the goal specific, you will aim to add three attorneys before the end of the year to position your firm as a top option for IP clients.

Measurable. Setting goals is of little value if you cannot easily assess your progress toward them. So, your goals should include a way to measure progress and success. If you want to grow your client base, for example, specify the number of clients you would like to add over a certain period of time.

Setting measurable goals makes it easier to focus and track your firm’s (and its individual attorneys’) efforts. If steady progress is being made on a monthly or quarterly basis, you might decide to set the goal higher. Conversely, if your firm seems to be missing periodic benchmarks, take steps to boost the odds of success.

Achievable. Goals that are unrealistically aggressive can be extremely demotivating, because no one wants to put time and effort into something that is likely to fail. So it is important to ensure that your goals can actually be accomplished. By the same token, your goals should not be too easily accomplished. The best goals are somewhat of a stretch.

To strike the right balance, consider your firm’s strengths and weaknesses, as well as factors outside of your control that could affect you from achieving your goals. For example, it might be nice to increase the number of settlements reached. However, “it takes two to tango” when it comes to settlement, and circumstances may make it unlikely in some cases. Factors like the economy, competition and clients’ internal conditions can also impact your goals.

Relevant. Once a goal is achieved, how will it move your firm forward? Goals should support your strategic objectives.

For example, social media plays a significant role in today’s business world, so your firm might decide it wants to expand its numbers of Twitter followers to 5,000 by year end. This is a specific and measurable goal, and you may consider it achievable. But will it help your firm become a leader in a specific practice area or grow revenue? Goals should matter to your firm’s long-term viability and align with other objectives.

Time-Specific. Assign each goal a deadline. Deadlines motivate by creating a sense of urgency that spurs action. Also, once you have established a deadline, you can work backwards and set periodic milestones that will be essential to reaching the goal.

Some management experts have extended the SMART model to SMARTER. “E” and “R” represent “evaluate” and “re-evaluate.” You can apply these principles by regularly examining and reconsidering your goals. If necessary, adjust them to reflect internal changes such as attorney departures or hires, or external changes such as new competition or economic shifts.

Survive and Thrive

Goal setting may sometimes seem like a waste of time, particularly when you have more than enough client work. However, even if your firm is thriving now, it is important to keep an eye on the future, and meeting long-term strategic objectives starts with setting simple, straightforward goals.

Sidebar: Know Your Three Cs

Once your firm has set SMART goals, three additional “C” measures can improve the likelihood that you’ll reach them:

1. Chunk. Ambitious goals can become less daunting and more achievable when broken down into smaller chunks. This principle is particularly effective for goals with lengthy timelines because it provides participants with an ongoing sense of accomplishment.
2. Communicate. It is not enough for your firm’s leaders to believe in goals and understand the rationale behind them. Goals need to be shared across all levels of the firm — from the executive committee to the support staff.
3. Collaborate. One of the primary reasons for communicating goals to employees is to foster collaboration. Everyone within your firm should be working in the same direction.

For more information on how to establish benchmarking strategies at your firm, contact Bob Rifkin at 312.670.7444. Visit ORBA.com to learn more about our Law Firms and Lawyers Group.