Scale up to stay Ahead

Outsourcing. The commercial world has been doing this for decades to great effect. WhatsApp and Google are two such examples. But why on earth would these two giants want to outsource services ?

Growth and customer experience. Because they saw they may stagnate. That not outsourcing could be a restriction to growth and customer base.

Google – outsourced IT services, software development and ended up contracting out to a thousand people across the globe to take over customer support and client service. The result of this was that through this outsourcing to specialists Google were able to gain important feedback and market intelligence that allowed them to form a strategy that put them at a competitive advantage. 

WhatsApp realised they could not grow without professional developers – they outsourced this to professionals and they shot to the top of the Google Play and App Store charts. They were able to scale cheaper than they otherwise would have and then outgunned traditional text messages to be a market first mover and leader.

As a strategic business decision it is taken to reduce cost and increase efficiency in a firm and drive increased revenue. Tasks, services or operations that would previously have been done in house are instead outsourced to professional specialists in the sector. Employees can then concentrate on the more critical aspects of the business whilst less critical, time consuming and non-profitable (or non-chargeable) aspects are spun out to professionals.

Utilising outsourced solutions at a lower rate than your in house staff allows your staff to invest more time in your clients and service delivery. Put simply – when done well outsourcing delivers top line growth.

Coming back to the legal sphere there are services, such as the ones that Taborns deliver, which are not what a law firm specialise in, so from a fiscal point of view it makes sense to dispense with these areas of operations within a firm to allow a firm that does specialise in it to take over.

 ‘Law’ and ‘innovation’ as words are not easy bedfellows. However, the firms that are prepared to innovate know they are more than just the sum of their services. The recent huge shift in a very small time window has caused law firms to define their firm NOT by what they sell i.e. legal advice, but through their assets and skills.

In a quite heavily regulated sector, such as the legal one, reducing the risks you take whilst providing a modern, client centric service is a juggling act. However, firms that learn to embrace choices outside their comfort zone are able to really make large gains, stand out, and succeed. In other words – operate from a growth zone.

Demonstrating this in some way holistically and expanding this firm wide, recent findings produced the interesting fact that most of the top 20 law firms are not more efficient. The average profit margin remains around 30 percent. This is not an issue as a client base grows and produces a nice pile of cash on the table, but masks the problem when the sector suffers stress – such as the type we’ve recently seen. To react, some of the bigger law firms have set the pace in terms of efficiency by hiring Chief Operating Officers – just look at Macfarlanes and Fladgate’s hires as an example.

The problem is that there is no correlation between size and efficiency in a law firm and so adding partners is not the answer. COO’s and firm law leaders must now look at ways of doing more with other resources such as outside specialists. The future is servicing clients, current and new, at a lower cost – Legal as a Service, if you like.

The other element is talent retention and the current stress on legal resource. Whatever technology emerges, law remains and will remain a people-driven profession. Retaining your high billing fee earners will be key. With this comes the fight to give the right opportunities for fee earners. There is a lot of competition out there now, in different forms. Motivating your people to stay for the long term should form a firm part of a law firm strategy.

In the typical firm, fee earners do far too much – case work, marketing, sourcing, BD, fee chasing etc. One of our clients has recognised this and in an effort to provide that little bit more support and free up fee earner time, has included Taborns as a partner on their case management platform. Their people can access services straight through this channel.

Look at the in house functions of large corporates. They have set up innovation hubs and the like. Smaller firms have to learn to pick up on these practices and investment in products such as outsourcing should not be a barrier. 

Put succinctly – reducing risk and increasing efficiency.

I was lucky enough to be leading the London arm of one of the most successful SRA ABS firms during a time of high growth and this business started with the founders saying “How can we do this better by say 20% ?”