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Practice Innovations — Managing in a changing legal environment
Gray Rule
JULY 2017 | VOLUME 18, NUMBER 3
Gray Rule
Outsourcing Trends and Business Development
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IN THIS ISSUE:
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»Strategic Content Management, or How to Stop Being a Gatekeeper
»Retaining and Growing Clients—What's Next?
»The Emerging and Meaningful Role of the Corporate Legal Operations Consortium (CLOC)
»Tactics for Strategic Partnerships and Building Institutional Knowledge
»Learn Your Firm's Secrets: Conduct Exit Interviews
»Can An Attorney Be Replaced by a Machine?
»Outsourcing Trends and Business Development
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Outsourcing Trends and Business DevelopmentBy Bradley S. Christmas, Managing Director, Nsource, Chicago, IL
There is a long history of outsourcing back-office functions in the legal services industry. In most cases, the outsourcing provider has handled less complex back-office business functions. A law firm-consolidated Operations Center creates an opportunity to relocate more complex middle-office functions to take advantage of reduced labor costs. Some marketing and business development services could offer an example

A Very Brief History of Outsourcing in Law

There is a long history of outsourcing back-office functions in the legal services industry. Since the 1980s, law firms have relied upon established service vendors like Xerox, Merrill, Williams Lea, and Ricoh to staff and manage important office functions. Typically, these arrangements staffed basic office services like mailroom, document processing, housekeeping, and travel support. Over time, the range of outsourced services expanded to include collections, travel, and certain components of information technology support. In most of these cases, the outsourcing provider was handling the less complex back-office business functions. These were the labor-intensive tasks not core to the business of the firm.

Do It Yourself Outsourcing: The Operations Center

In 2002, Orrick attracted significant attention with the creation of its Global Operations Center in Wheeling, West Virginia. With most of its administrative support based in the San Francisco Bay area, Orrick struggled to attract and retain legal administrative staff and professionals in that increasingly expensive labor market. By creating a consolidated operations center in a comparatively depressed region, Orrick was able to take advantage of reduced operating costs and local government incentives.

Since Orrick's move to Wheeling, over 15 large US law firms have followed suit and created their own Operations Centers. In most of these new Operations Centers, the selected location was a low-cost labor market. The firm remained the employer and directly managed the staff in the new location — achieving savings mostly through labor arbitrage — lower-cost labor performing essentially the same core functions.

From the Back-Office to the Middle Office: The Challenge of Process Improvement

A law firm-consolidated Operations Center created an opportunity to relocate more complex middle-office functions to take advantage of reduced labor costs. Conflicts of interest research, human resources support, benefits administration, accounts payable, billing, and marketing are some of the middle-office functions that are being reorganized and relocated. These tasks are far more complex than back-office functions and require a greater level of management sophistication to achieve true benefit and savings for a law firm. Overreliance on labor arbitrage alone will not result in a satisfactory outcome. In many cases, middle-office functions require specialized skills that are not readily available in lower-cost markets. Unless there is a strategy for the recruitment, development, and training of human resources, the firms may find that there is no benefit in moving a middle-office function. To achieve a successful outcome, the core tasks comprising the function must be examined, analyzed, and improved.

Albert Einstein is credited with saying, "the purest form of insanity is to leave everything the same and at the same time hope that things will change." Similarly, law firm leaders and managers cannot expect a different result in outsourcing or consolidating middle-office functions without changing what is being done.

Marketing and Business Development: A case in point

The challenges and opportunities of process improvement are perhaps best illustrated with the marketing and business development function. Given the increasingly competitive environment, the need for effective, strategic business development and marketing support in a law firm has never been more acute. Law firms of all sizes are now facing intense competition and they need to take a more sophisticated approach to selling services. Process optimization—as part of an outsourcing or centralization effort—can be a powerful tool for improving a firm's business development effectiveness while controlling its costs.

Marketing and business development functions are two discrete disciplines, each of which requires a different skill set. However, they are often managed by a single team of marketing professionals who often have very little, if any, direct business development experience in the professional services industry. Outsourcing or centralization of tactical and transactional marketing activities creates an opportunity to unburden the marketing/business development department, allowing it to focus on more important strategic growth activities.

Step 1: Assessment

Firm leadership needs to conduct an honest and objective assessment of the current state of its marketing/business development functions. Questions to be addressed in the assessment include:

  • Is there a clear understanding of the difference between marketing and business development?
  • Are the internal consumers of service (e.g. the partners) satisfied with the quality of service?
  • What marketing activities are labor-intensive, routine, and tactical in nature?
  • Does the firm have an established brand standard and style guide?
  • Is the current mix of marketing and communication activities effective and achieving their stated objectives?

At the end of the assessment, the firm will have a clearer understanding of what activities the marketing/business development department is focused on, as well as the value received by the firm for those activities.

Table showing assessment options.

Step 2: Implementation Plan

The implementation plan can be formal or informal, but at a minimum should define how the marketing and business development functions are going to change and when. Depending upon the complexity of the proposed change, the implementation plan will identify who is performing the tactical functions under the new model, and from what location. It will identify the technology needed to support the optimized processes, assign and track work, and train staff.

The importance of the business development and marketing function requires that any changes that impact the firm's lawyers be carefully considered. The implementation plan should detail how the firm's lawyers will be affected. What will they be required to do differently? What can be done to ensure that any changes are viewed as a step forward? The importance of effective expectation management cannot be overstated.

Larger firms can enjoy an economy of scale that allows for the creation of dedicated support teams – typically housed in centralized operations centers. Smaller law firms lacking that same scale can achieve the same results through use of an outsourcing partner and shared support team.

Step 3: Launch

The launch of services will require a multi-disciplinary approach. Workflow technology is an essential ingredient to any process-improvement initiative. Consequently, full support from technology professionals is needed before, during, and after the launch of services. If new staff is needed to provide any services, then dedicated support and appropriate lead time are needed for recruitment and training. The complexity of this change requires involvement of a qualified and well-organized project manager for effective coordination.

Firms seeking to implement change of this type internally, relocating certain functions to their own Operations Center, may be able to draw upon their own HR, IT, and project management resources to make these changes. Smaller firms without the same scale and resources will need outside help.

Step 4: Management

Once services are launched, ongoing attention is required to ensure long-term success. As business requirements change, firm leadership and the management tasked with providing the tactical marketing services must constantly be looking for ways to improve processes and services. In most cases, a third-party service provider can be more effective in offering continuous improvement.

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