LEGAL. Trends & Opportunities in Law Firm Outsourcing survey

Transcription

1 LEGAL Trends & Opportunities in Law Firm Outsourcing survey

2 Trends & Opportunities in Law Firm Outsourcing survey TABLE OF CONTENTS 1.0 Introduction Methodology Survey Respondent Demographics Current Back Office / Administrative Functions Landscape Outlook for Back Office / Administrative Functions Back Office / Administrative Staffing Trends Back Office / Administrative Outsourcing 14

3 1.0 Introduction GLOBAL INDUSTRY, GLOBAL CHALLENGES This year s survey expanded the range of inquiry to include firms headquartered in the United Kingdom as well as the United States. While there were some reported differences in how firms were structured to support back office and administrative functions, the key drivers, concerns, and plans for future support remained the same across regions. GROWING INTEREST IN LAW FIRM OUTSOURCING The response rate for this year s survey was triple that of last year, which indicates a growing interest among the law firm community in understanding how their peers and leading firms are addressing the challenges associated with back office and administrative support. This survey was commissioned by Williams Lea, a global business process outsourcing company, and conducted by Sandpiper Partners LLC, legal industry consultants. It illuminates the priorities and challenges experienced by law firms in the United States and United Kingdom in 2013 as they manage their back office support and administrative functions, and highlights issues firms anticipate facing in As part of the survey, leaders of the largest firms in the United States and United Kingdom, in markets such as New York, London, Los Angeles, Pittsburgh, Chicago, Washington, DC, and Atlanta, were questioned. The aim of the survey was to gain an understanding of the current landscape for back office and support services as well as the factors impacting the cost and provision of these services going forward. Additionally, the survey examined law firm leaders understanding of outsourcing for back office and administrative functions and the impact on efficiency, service quality, and cost savings different types of outsourcing can help firms achieve. Highlights of findings: In 2013, a growing number of firms (79%) faced the challenge of reducing service costs, compared with 66% last year. In order to keep costs down, firms reduced their workforce, increased their use of technology, and improved their processes and procedures. More than half of firms surveyed predicted a budget increase up to 10% in 2014; yet at the same time 56% of respondents firms intend to reduce further their business, litigation and secretarial support and their back office head counts. Almost half of respondents cited a target secretary-to-attorney ratio of 1:4 and compared with last year, many more firms have achieved that goal (37%). One in eight respondents are considering the option of a captive center as a way to reduce costs; those that are not considering one think the initial investment would reduce too much of the eventual cost savings. Although most firms are planning to increase their outsourcing practices, some respondents cited resistance from the partnership and perceived lack of savings as the reasons their firms are not advancing plans for outsourcing back office functions. Once the business case for outsourcing is accepted, respondents see major challenges in addressing concerns about the quality and security of work performed off-site. Firms in 2013 continued to garner cost savings by outsourcing their mailroom and copy services, their reception and hospitality, and their document processing. Offshore outsourcing is not a prevalent practice for law firms. Finance / accounting and document processing tasks are most commonly outsourced offshore, but only a third of those jobs moved to a lower-cost location were actually moved abroad. PAGE 3

4 2.0 Methodology The Williams Lea Survey: Trends and Opportunities in Law Firm Outsourcing was conducted by Sandpiper Partners LLC in fall The Survey was sent to Managing Partners, Chairmen, and senior business executives of selected Am Law 150 firms and to registrants at Sandpiper Partners events. Not all respondents answered all questions. Respondents were contacted via and could complete the survey via fax, phone, , or online using Survey Monkey. The Survey asked questions in four categories: Background Information, Your Current Situation and Outlook, People, and Process and Outsourcing. For some questions, respondents could select more than one answer; in these instances, the total percentage for that question will be greater than 100 percent. Certain questions asked respondents to rank answers in order from most to least significant or greatest to smallest impact; for these questions we used weighted data to present the information in the most meaningful and effective manner. The charts were compiled from the completed survey data. PAGE 4

5 3.0 Survey Respondent Demographics Respondents completed the Survey on behalf of a wide range of firm types. Firm size ranged from less than 100 to more than 1,500 attorneys. Most respondents were either C Level administrators or held some other position in charge of back office operations. The vast majority of respondents were located in the United States, but this year approximately 10% were located in the United Kingdom. Size of Law Firm n % n % n % n % n % n 1,000-1, % n Over 1, % Respondent s Role n Other 22.0% n Director of Administration 14.3% n Executive Director 11.0% n Chief Operating Officer (COO) 9.9% n Chief Financial Officer (CFO) 8.8% n Managing Partner 8.8% n Partner 8.8% n Director of Facilities/ Operations 4.4% n Senior Partner 4.4% n Finance Director 3.3% n Chief Executive Officer 2.2% n Chief Talent / HR Officer 2.2% Location of Law Firm n United States 88% n United Kingdom 10% n Other 2% PAGE 5

6 4.0 Current Back Office / Administrative Functions Landscape Nearly half of respondents said their back office/administrative functions were centralized, and an additional 40% said they were a mix of centralized and regional. Of those, almost all were located onshore in large cities like New York and Chicago. In the UK, a smaller percentage of respondents firms have centralized their back office and administrative support functions. Location of respondents centralized back office / administrative functions US Respondents UK Respondents n Centralized 44% n Regional 17% n Mixed 39% n Centralized 22% n Regional 33% n Mixed 45% If centralized, onshore or offshore? n Offshore 6% n Onshore 94% Location of respondents centralized back office / administrative functions Boston Chicago Dallas Milwaukee Minneapolis New York California Ohio Philadelphia Providence Texas Washington DC Wheeling Belfast Leeds London Rio de Janeiro PAGE 6

7 4.0 Current Back Office / Administrative Functions Landscape Key challenges facing firms back office/administrative functions More than two-thirds of respondents cited reducing the cost of services as one of their key challenges. This year, a larger portion of respondents (almost 20% more than last year) cited resistance to change as a key challenge facing their firms' back office/administrative functions. Reducing cost of services 78.8% Resistance to change 53.0% Quality/timeliness of service 45.5% Management of security/confidentiality in workflow 27.3% Management of outsourced service vendors 22.7% Demands from firm expansion (regional, national, or global) 21.2% Real estate pressure 13.6% Impact of remote working 10.6% Respondents may select more than one checkbox so percentages may add up to more than 100%. Significant cost saving measures firms have achieved over the past 12 months In 2013, firms have saved money in administrative support (not including finance) by reducing their workforce, improving their processes and procedures, and increasing their use of technology. As last year, the largest area targeted for cost-savings measures was administrative support (other than finance), but in 2013 firms were more likely to find those savings in headcount reductions as opposed to process improvement and technology enablers, cited as the key strategies in n Administrative support other than finance 43% n Centralized services (HR, finance, marketing, etc.) 14% n Finance functions 15% n Litigation support 11% n Marketing and business development 9% n RFP, RFI, and proposal creation 8% *Weighted Data PAGE 7

8 4.0 Current Back Office / Administrative Functions Landscape Strategies most utilized to achieve cost savings n Reducing workforce 23% n Improving processes and procedures 19% (including use of project management, automated workflows, etc.) n Increasing use of technology 17% n Outsourcing services 9% n Vendor / contract renegotiation 8% n Eliminating services 7% n Consolidating services in one location 6% n Moving services offsite to a lower cost location 4% n Cross training staff 4% n Use of outside vendors or consultants 3% *Weighted Data PAGE 8

9 Outlook for Back Office / Administrative Functions Anticipated expense budget growth in the next 12 months After years of economic cutbacks, more than half of the respondents said they anticipated their firms budgets would grow, by up to 10%. Only 20% of respondents said they expected their budgets to decrease in Response percent n Increase 58% n Decrease 20% n Remain the same 22% Increase by 1%-5% 46.9% Increase by 1%-5% 46.9% Increase by 6%-10% 10.9% Increase by 6%-10% 10.9% Decrease by 1%-5% 15.6% Decrease by 6%-10% 4.7% Decrease by 1%-5% 15.6% Remain the Same 21.9% Decrease by 6%-10% 4.7% Remain the same 21.9% Top factors impacting back office costs over the next 12 months A large difference between last year s expected contributors to back office costs and the predictions for this year is the role transactions and litigation volumes have in driving up cost. Last year s survey respondents said this was the number one factor impacting back office costs. This year, respondents expect volumes to be the least impactful on 2014 back office costs. n Better command and more efficient use of process and data 25% n Staffing needs 18% n Increased use and investment in in-house technology and staffing 16% n Real estate / property requirements 14% n External technology investment 13% n Vendor / third party service fees 11% n Volume of transactions, litigation, regulatory matters, 4% and government investigations *Weighted Data PAGE 9

10 Outlook for Back Office / Administrative Functions Technology that supports back office functions Firms are looking toward increased efficiency as a way to manage their back office costs in Respondents expected the automation of processes and improved fee earner efficiency to have the greatest impact on their technology investments in The top factors changing back office costs are anticipated to be the better command and more efficient use of processes and data. Top factors impacting 2014 technology investments n Improving fee earner efficiency 29% n Automation of processes 27% n Cyber security risks 18% n Cost reduction initiatives 15% n Remote working 12% PAGE 10

11 6.0 Back Office / Administrative Staffing Trends Respondents plan to reduce business support, litigation support, or back office/administrative staff head count in the next 12 months Despite expected growth, more than 50% of firms said they are planning to reduce head counts in business, litigation, secretarial, and back office/administrative support. This is a continuing trend from last year s survey, where 47% of respondents said they had reduced headcount in those areas over the prior 18 months. Among UK respondents, a smaller percentage (20%) reported plans to reduce staff headcount in these areas. n Yes 55.7% n No 44.3% Areas of reduction by support function A significant number, more than 90% of respondents who said they planned to make headcount reductions, expected to make those reductions in secretarial staff. Area % of respondents Average reduction % Secretarial staff 92% 9% Back office / administrative staff 44% 8% Business support 16% 6% Litigation support 8% 53% PAGE 11

12 6.0 Back Office / Administrative Staffing Trends Planned back office/administrative staff reductions by areas and percentage The lion s share of back office/administrative cuts are expected to occur in mailroom and copy services, reception, hospitality, and facilities management. Department % of respondents Average planning to reduce staff staff reduction Reception, hospitality, and facilities management 38% 16% Accounting and finance 33% 6% Mailroom and copy 33% 22% Document processing 25% 10% Human resources 21% 7% Marketing and creative services 21% 8% IT/technology 17% 6% Forecasted areas of attorney support staff reductions in 2014 About one in 10 firms are looking at across-the-board reduction of staff support for attorneys in research, practice assistance, paralegals, and other functions. The biggest reductions will occur in litigation support (30%) and conflicts (29%). Department % of respondents Average planning to reduce staff staff reduction Conflicts 9% 29% Legal research 9% 13% Litigation and practice support 10% 30% Paralegals 9% 11% Records 10% 24% PAGE 12

13 6.0 Back Office / Administrative Staffing Trends Respondents current ratio of non-attorney staff (excluding paralegals) to attorneys More than two-thirds of respondents indicated a 1:1 or 1:2 ratio of non-attorney staff (excluding paralegals) to attorneys. Almost half of firms cited a target secretary-to-attorney ratio of 1:4 and, compared with last year, many firms have achieved that goal (37%). n <1:1 7.5% n 1:1 34.0% n 1:2 37.7% n 1:3 11.3% n1:4 9.4% Respondents current and target ratio of secretarial staff to attorneys Current Ratio Target Ratio n 1:2 7.4% n 1 : % n 1 : % n 1 : 5 7.4% n 1 : 6 7.4% n 1 : 7 1.9% n 1:2 1.9% n 1 : % n 1 : % n 1 : % n 1 : 6 3.7% n 1 : 7 7.4% PAGE 13

14 7.0 Back Office / Administrative Outsourcing Respondent firms that currently outsource any back office/administrative functions Approximately eight out of 10 law firms surveyed currently outsource some part of their back office/administrative functions. The most commonly outsourced tasks are in mailroom and copy services (67%), document processing (37%), and reception and hospitality (33%). Respondents did not indicate outsourcing functions such as contract administration, preparation of RFPs and RFIs, presentations, and transactions and mortgage processing saw growth in the percentage of firms that outsourced key support functions such as document processing and secretarial services. In 2012, our survey reported that only 19% of respondents outsourced document processing and 4% of respondents outsourced secretarial services, compared to this year s 37% and 9% respectively. n Yes 79.2% n No 20.8% Areas that are outsourced The majority of outsourced back office work is still performed onshore, although this year s survey marks an increase in the number of firms reporting they are sending work to offshore providers or Captives. This may be attributed to the fact that this year s survey includes respondents from the UK, where offshore outsourcing is a more common practice. % % % respondents Offshore Onshore who outsource this function Mailroom and copy 0 100% 67% Document processing 29% 71% 37% Reception and hospitality 6% 94% 35% IT 0 100% 26% Records management 0 100% 26% Marketing and creative services, 9% 91% 24% including web development Finance, accounting, and data entry 33% 64% 20% Secretarial services 25% 75% 9% Business intelligence and research 0 100% 7% Research library services 0 100% 7% Human resources 0 100% 4% CRM (Client Relationship Management) 100% 0 2% Travel Department 0 100% 2% Contract administration 0 0 0% Preparation of RFPs and RFIs 0 0 0% Presentations 0 0 0% Respondents may select more than one checkbox, so percentages may add up to more than 100%. PAGE 14

15 7.0 Back Office / Administrative Outsourcing Reported results/benefits achieved through outsourcing As expected, firms that outsource various back office/administrative functions enjoy cost savings and improved service in those areas. Last year, the biggest benefit firms reported through outsourcing was a reduction in workforce. This year, perhaps since workforce reductions have become more common, they are reporting that the benefits outsourcing delivers are more closely tied to process efficiencies and service improvements. n Cost savings 22% n Better service, efficiency 21% n Access to new technologies 17% n Improvement of processes and procedures 17% n Reduction in workforce 12% n 24/7 service capability 11% * Weighted Data Almost half of firms are considering an expansion of their outsourcing practice. These firms are looking at document processing, finance, accounting and data entry, reception and hospitality, and secretarial services as areas into which they would like to expand. The top benefits firm leaders see in outsourcing are increased profitability, productivity, and efficiency, higher service levels, and a reduction of head count and overhead. Respondents considering further outsourcing 48% of those surveyed are considering expansion of outsourcing, while the remaining 52% of respondents indicated they are not considering outsourcing additional functions. These numbers have held constant over the past two years. PAGE 15

16 7.0 Back Office / Administrative Outsourcing Stated reasons for not outsourcing Despite evidence to the contrary, numerous firms remain skeptical that they will find cost savings in implementing an outsourcing strategy. Partnership resistance to outsourcing has grown more than 30% from last year s survey as a key reason firms will not outsource. Perceived lack of savings 55.6% Perceived lack of savings 55.6% Partnership resistance 48.1% Confidentiality 37.0% Loyalty to staff 37.0% Service level risks 37.0% Too disruptive 14.8% Loss of control over processes 11.1% Partnership resistance 48.1% Confidentiality 37.0% Loyalty to staff 37.0% Service level risks 37.0% Too disruptive 14.8% Loss of control over processes 11.1% Respondents may select more than one category, so percentages may add up to more than 100%. Biggest barriers to developing an outsourcing strategy Even among those that recognize the profitability of moving certain functions to a lower cost location, respondents cited concerns about the quality and confidentiality/security of outsourced work. Respondents indicated a need for savings of 10% or higher to make outsourcing an attractive option. n Concerns about quality of outsourced work 35% n Confidentiality/security of client data concerns 22% n Not enough volume to achieve benefits from 15% up-front expenditures/investment n Gaining approval of the partnership 12% n Dealing with current employees 8% n Considerations related to exporting jobs offshore 4% n Up-front expenditures/investment concerns 3% n Office space, lease considerations 1% * Weighted Data PAGE 16

17 7.0 Back Office / Administrative Outsourcing Key drivers in the business case for respondents to consider additional outsourcing of a function Improved service levels 55.3% Cost savings of at least 20% (average response) 53.2% Reduced headcount 44.7% Access to new technologies 36.2% Centralized/standardization of processes 36.2% Respondents may select more than one category, so percentages may add up to more than 100%. Back office business models currently in place at respondent firms Outsourcing provider that supports services on-site at firm 70.2% Business Process Outsourcing (BPO) to a third-party provider 42.6% Captive (firm owned and operated) 23.4% Shared services 17.0% Hybrid or virtual captive 8.5% Respondents may select more than one category, so percentages may add up to more than 100%. Perceived benefits of outsourcing Increasing firm profitability and improving productivity and efficiency remain the top benefits that firms expect outsourcing to deliver. This year, respondents reported a growing benefit of headcount and overhead reductions through outsourcing engagements up 12 % from last year. n Increase in firm profitability 23% n Increase in productivity and efficiency 23% n Reduction of head count and overhead 21% n Achievement of higher service levels 20% n Utilization of state-of-the-art technology 7% n Improvement in business outcomes 6% * Weighted Data PAGE 17

18 7.0 Back Office / Administrative Outsourcing Respondents greatest areas of interest within outsourcing Two growing areas of interest for outsourcing this year are document processing and secretarial services. They have leap-frogged over reception and hospitality and mailroom and copy as the greatest areas of interest of firms considering outsourcing or expansion of outsourcing. Document processing 18% Secretarial services 13% Finance, accounting, and data entry 12% Business intelligence and research 9% Mailroom and copy 9% Reception and hospitality 8% Records management 7% CRM (Client Relationship Management) 4% Contract administration 4% Human resources 4% IT 4% Research library services 4% Marketing and creative services, 3% including web development Transactions and mortgage processing 1% Preparation of RFPs (Requests for Proposals) 0% Presentations 0% * Weighted Data Range of savings that makes outsourcing in a particular area attractive to a firm 85% of respondents suggest that a baseline of 10% savings is the minimum savings threshold for outsourcing a function. More than two-thirds of respondents would like to see savings between 10 and 20% in order to consider outsourcing. n 5 9% 15% n 10 15% 40% n 16 20% 29% n More than 20% 16% * Weighted Data PAGE 18

19 7.0 Back Office / Administrative Outsourcing Respondents who have explored the option of a captive (centralized) back office operations center 16% of respondents are considering the option of a captive center as a way to reduce costs, reduce staff, and achieve better business outcomes. This is a significant decrease from last year, when 40% of respondents reported exploring the option of a captive center in the past year. 40% of UK respondents stated that they will consider the option of a captive center this year. While cost savings is the greatest perceived benefit of a captive center, the biggest deterrent to a captive is the perception that the added overhead may offset any anticipated savings. The results suggest that respondents see value in centralizing back office functions for the firm, but have difficulty proving the business case for savings and improved service when measured against the initial investment to build and manage a captive center. US Respondents n Yes 16% n No 84% UK Respondents n Yes 40% n No 60% PAGE 19

20 7.0 Back Office / Administrative Outsourcing Perceived benefits of a captive center n Cost savings 29% n Staff reductions 22% n Better business outcomes 20% n Improve service to clients 16% n Maintain control 9% n Improve technology 4% * Weighted Data Perceived deterrents of a captive center n Added overhead may significantly offset cost savings 35% n Inadequate oversight of employees 23% n Initial resource and real estate investment 16% 16% n Initial time investment 16% n Relocation of employees 10% * Weighted Data PAGE 20