How Law Firms are Keeping a Competitive Edge Back by Moving Back Office Operations
Many large law firms have moved their back office service centers and staff from high cost of living, high cost real estate environments to more competitive cities in the United States. It’s no surprise for law firms who were significantly affected by the Great Recession to take a hard look at their fixed costs and make some changes.
This article will address which back office functions are being relocated or even outsourced, the criteria for selecting markets, findings based on a related survey and some of the law firms who took the leap.
Anecdotes of Back Office Relocations
Pillsbury Winthrop reduced their overall real estate costs by $10 million a year via their service center in Nashville.
Key benefits of outsourcing include: cost savings (77%), better, more efficient service (65%), and improvement of processes and procedures (60%).
Orrick operates a service center in Wheeling, West Virginia saving them between $10-15 million annually.
Define Back Office
What back office operations did law firms relocate?
Let’s take a look.
- Human Resources
- Accounting & Finance
- Technical Support
- Marketing
- Document Production and Review
- Secretarial support
- Legal Recruitment
- Client Relations
- Litigation Support and Research
- Information Technology
- Library Services
Outsourcing Functions and Adding New
According to this Wall Street article, business-services company, Williams Lea, has been assisting some of the law firms noted below in outsourcing employee tasks whether on-site or off-site. These responsibilities being farmed out range from hospitality and reception, mail room management to expense reports, copying and other secretarial tasks. Law firms see this as a way to cut costs, reduce fixed overhead count and streamline digitizing their documents.
Law firms are laying off these employees and then quickly encouraging the same employees to reapply with Williams Lea. Its almost seamless.
With firms reducing administrative headcount and expense, they are reinvesting in other emerging critical areas such as data protection, cybersecurity, technology and technology staffing.
Key Criteria for Back Office Markets
Some law firms have analyzed hundreds of potential markets for the most optimal scenario for their administration team and what we have found are these key criteria.
- Time Zone Advantages
- Financial Incentives
- Tax Incentives
- Lower Cost of Living
- Work Force Capacity
- Diverse Talent Pool
- Ability to Attract Talent
Most large law firm service centers employ 100-300 employees.
Survey Findings
Williams Lea produced a 2014-15 survey called “Trends and Opportunities in Law Firm Outsourcing”. Here’s some findings they list in the survey.
Back office centralization has caught on: 40% of respondents have centralized back office/administration functions. Almost one-third (27%) indicate they use a combination of venues including centralized, mixed, and local. Only 6% use global locations.
Of those utilizing centralized services, 19% are performing those services in shared service centers, and these numbers are likely to grow even higher in 2015. For global firms, 46% have onshore facilities and 32% use captive/shared services centers. Overall onshore facilities account for 92% of outsourcing while offshore facilities are used by 8% of firms.
A majority of firms (56%) say the chief strategies they employ to achieve savings are increased use of technology, automation of workflow and project management. Last year, headcount reductions were the strategy most firms cited they used to achieve savings.
A majority of respondents (64%) say better command and more efficient use of workflow processes will have the greatest impact on back office costs in 2015. Last year only 25% said this would make a difference.
A majority of firms (57%) are still reducing headcount in back office functions. 90% of firms are reducing support staff in the area of records management. Top areas where firms are reducing staff include accounting and finance document processing and mailroom. Almost one in five firms are increasing headcount in cyber security and data protection.
Firms are pushing ahead with their plans to reduce attorney to secretarial ratios. The survey showed 45% of firms have achieved the most often mentioned ideal ratio, 1:4.
Barriers to expanding outsourcing strategy include concerns about quality of outsourced work (65%) and not enough volume to achieve benefits (53%).
Law Firm Examples
Allen and Overy relocated 300 jobs to Belfast, Ireland planning to save 10 million pounds over 5 years.
Baker & McKenzie opened back office locations in Belfast, Ireland and Manila, Philippines employing 850 employees.
The late Bingham & McCutchen opened their global service center in Lexington, Kentucky creating 250 jobs with a $22.5 million investment.
DLA Piper keeps their back office service center open despite closing their Tampa, Florida office of attorneys.
Fish and Richardson opened an administrative hub in downtown Minneapolis, Minnesota employing 150.
Hogan Lovells will open a global services center in Louisville, Kentucky employing 250 with a $9 million investment.
Kaye Scholer has their accounting, document services, graphics, technology, marketing, etc in Tallahasse, Florida.
Latham and Watkins supports their European offices with a finance and technology team in Manchester, England.
Littler opened their back office in Kansas City with 25 relocated employees and employing 275.
Orrick operates a service center in Wheeling, West Virginia saving them between $10-15 million annually.
Reed Smith has a back office operation in Wheeling, West Virginia as well that employs a 300 e-discovery team and 75 staff attorneys.
Sedgwick opened in Kansas City and hired almost all 100 employees locally.
White and Case launched a Tampa back office with 45 employees along with their Manila, Philippines back office.
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