The Next Step in Large Law Firm Low Cost Service Centers
Large law firms continue to open low cost service centers. That’s barely newsworthy after so many US and UK firms have done so. Firms with low cost centers in the US include Hogan Lovells, Littler, DLA Piper, Sedgwick, Kaye Scholer, White & Case, Pillsbury, and Wilmer Hale.
From the outside, it seems the savings always come from labor cost and occupancy. “Lift and shift” I’d say from my outsourcing days – transfer the work as is, just have lower cost people do it.
That leaves money on the table. Process improvement can yield big savings over and above labor cost arbitrage. A function that might have, say 40 people, given the right process improvement, might only need 25 or 30.
A ‘Difficult Day’ at DLA Piper as Firm Plots 200 Layoffs (Bloomberg Big Law Business, 11 May 2016) reports a 200-person lay-off at DLA Piper (UK). Those positions will shift to Warsaw. Newsworthy here is the COO going on record about process improvement. Andrew Darwin says the moves “tie into a modernization plan and were implemented with consultation from McKinsey & Co… We are a little embarrassed by the fact that we are still pushing paper around the world. It hasn’t been a priority before.” He mentions the example of shifting to digital CVs from paper in recruitment.
I assume that McKinsey identified many other process improvements. One should not need the most prestigious consulting firm to advise on leaving paper behind.
Most law firms still face largely flat demand. So they likely will continue to seek cost cuts. I expect to read about more low cost centers in the future. Perhaps firms that announce low cost centers in the future – and even ones that have already have them – can take a cue from DLA. Why stop with lower cost labor when process improvement adds significantly to savings? And if firms improve their processes, perhaps they can keep more of their existing staff in place.
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