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The Business Case to Outsource Secretarial and Document Production Tasks

CBF retained Prism Legal Consulting, Inc. to write this article.

Abstract: There are many business reasons for large law firms to consider outsourcing some secretarial and document processing tasks.  This article explains the reasons, analyzes the costs of secretarial services, and proposes ways of thinking about recasting the role of legal secretaries.

See also the Future of Legal Secretaries (by Ron Friedmann), which proposes creating secretarial teams.

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 the relatively new opportunity presented by CBF Group, a company in Fargo, to outsource secretarial and word processing tasks.

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.  One large law firm, UK-based Lovells, farms out aspects of real estate matters to British firms with lower rates.

Why Firms Outsource

Firms outsource for many reasons.  Of course, cost reduction is important and oft cited.  In fact, however, 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. 

CBF, founded in 2001, provides outsourced secretarial and document processing services.  Based on client feedback, the company chose to build a US-based solution and selected Fargo, ND for its plentiful supply of low-cost office space and skilled but inexpensive labor.

CBF’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 CBF customers keep their secretaries.  By using CBF, however, firms lower the secretarial ratio by hiring fewer new ones, re-assigning some, and allowing attrition to occur.  Moreover, using CBF 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. 

CBF 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 CBF’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.

CBF customers reduce these costs.  Recruiting, hiring, training, and dealing with turnover become CBF’s problems instead of the firm’s.  As mentioned, Fargo offers a deep pool of educated and highly motivated workers.  CBF 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 CBF because quality control and performance appraisal is built into the process.  Before returning work to a law firm, CBF performs multiple quality control checks.  And performance reviews are part of each job.  For every project, CBF 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, CBF 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.[1]  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.

CBF offers a lower cost approach.  The hourly price for CBF support is less than the internal law firm cost but the CBF 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 CBF.  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 CBF so that they can help with higher-value tasks. 

Lower Costs

CBF 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.  CBF 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”, CBF 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. 

 

The Mechanics of Outsourcing

Outsourcing secretarial tasks to CBF is easy.  Firms can buy a subscription plan (fixed monthly fee for unlimited support) or a block of hours.  Either way, CBF 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 CBF by e-mail, telephone, fax, US mail, or overnight delivery.  CBF 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 CBF meets deadlines.  When necessary, CBF 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.

CBF 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 CBF 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.

 


[1] Staffing 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.