In the last quarter of 2008 America faces economic challenges never imagined a good few months ago. How will businesses manage and survive the limitations on credit, demand and growth? So how exactly does the economic downturn impact lawyers and law firms which service the business enterprise community?
It is an obvious proven fact that businesses can only look at modifying two revenue streams, income and expenses, in order to increase profitability. If income is down and not expected to increase markedly in the near term, clients of law firms shall take the hatchet to expenses in order to survive. Legal fees will be under extreme scrutiny. Legal outsourcing, while a nascent industry still, is gaining momentum, being considered in more corporate boardrooms. Because the pressures to outsource build, lawyers ponder whether they should embrace outsourcing legal work or resist it offshore. When confronted with global economic challenges coupled with the loss of American jobs why would a U.S. law firm want to even consider legal outsourcing? Is there valid reasons why targeted legal outsourcing should be considered by every U.S. law firm?
Weeks ago I received a contact from the lawyer who was simply considering outsourcing some of the legal work of his law firm. Facing challenges and resistance from many in his law firm who wished to maintain the status quo, he asked for my advice in regards to what he should tell his partners. Why if the firm outsource legal work offshore, a practice seen by some as adventuresome and risky, instead of staying the course, doing it “just how we’ve always done it.” I answered him with the very best ten reasons why every law firm should think about selective legal outsourcing:
1. PRUDENT, TARGETED OUTSOURCING WILL RESULT IN REDUCED LAWYER OVERHEAD
Outsourcing some legal work to qualified providers in India will result in significantly lower overhead to the outsourcing law firm. In assessing the comparative costs the law firm will undoubtedly be wise to carefully calculate the true costs of employing one lawyer or paralegal. Those costs include salary and bonus, health insurance, vacation and holiday pay, sick time expense, FICA, office equipment and space for the lawyer, secretarial and paralegal staff assigned compared to that lawyer, pension and profit sharing, auto and parking expense, CLE seminar costs, and other employment benefits such as for example life and disability insurance. The real annual cost of one lawyer earning a base annual salary of $150,000-$175,000 is more likely in the number of $250,000 to $300,000 per year. non-e of the customary expenses accrue to a statutory law firm utilizing supplemental offshore legal providers.
2. OUTSOURCING WILL ENHANCE LAWYER EFFICIENCIES
Selective outsourcing will improve the efficiency of your law firm. Because Indian lawyers work while American lawyers sleep, it will be like your law firm has a regular, fully staffed night shift. Some work could be assigned by way of a partner at 6 p.m. in the evening and the completed task on his desk when he arrives at the office another morning. Litigation cases shall move more rapidly through the court system with less need for extensions of time.
3. OUTSOURCING WILL RESULT IN IMPROVED LAWYER MORALE
As a child few of the sermons I heard from my pastor stuck with me. But one, when I was fourteen years of age rings a bell still. He said: “Ninety percent of any worthwhile endeavor is pack work, plugging, day in and full day out. Only 10 % of our work tasks are fun and enjoyable necessarily. ” I have remembered that statement always. In a lot more than 2 decades as an effort lawyer I enjoyed strategizing and trying cases to juries. But I did not enjoy all of the trial and deposition preparation necessarily, research and briefing, document review, and other mundane essentials of the practice of law. A law firm which incorporates outsourcing into its practice will inevitably foster more contented lawyers who devote their time and energies to the more challenging, fun and rewarding elements of the practice of law. Only the “chore” legal work is outsourced with the “core” work staying onshore. This enables more time for client interaction and development by the firm’s lawyers.
4. OUTSOURCING WILL RESULT IN OVERALL SAVINGS IN LEGAL FEES TO CLIENTS
Clients of law firms, business clients particularly, are searching far and wide for ways to cut their legal expenses. Many ask why they should pay, for example, $200 to $300 hourly for document review. Gone are the days when legal bills are paid without scrutiny simply. Likewise, the annual increases in hourly rates will not be well received by clients seeking to cut costs. Wise law firms put the interests of these clients above their own. What is good for the client will ultimately be good for the law firm itself.
5. THE GUIDELINES OF PROFESSIONAL CONDUCT REQUIRE OUTSOURCING CONSIDERATION
The Rules of Professional Conduct of require that: a. “An attorney should seek to achieve the lawful objectives of a client through reasonable permissible means.” (Rule 1.2) b. “An attorney shall explain a matter to the extent reasonably essential to let the client to create informed decisions about the representation.” (Rule 1.4 b) c. “An attorney shall make reasonable efforts to expedite litigation in keeping with the interests of the client.” (Rule 3.2)
A lawyer must explore and discuss with his client all reasonable means of accomplishing the client’s objectives. An attorney is not permitted to charge an excessive or unreasonable fee. It could seem a lawyer is arguably necessary to discuss selective outsourcing as a means of reducing the client’s ultimate fee obligation and furthering the interests of the client.
6. OUTSOURCING “CHORE” LEGAL WORK PROMOTES CLIENT RETENTION AND DEVELOPMENT
Clients have long questioned ever-increasing legal fees for basic, “chore” legal work. However, they felt as though no alternative was had by them. They needed the legal representation and wanted top quality work. As there is not a significant degree of fee variance from law firm to law firm, clients tended to “stay put.” This trend is beginning to change as clients learn that they have options. Lawyers who outsource selectively are reporting a more contented, loyal client base. Clients who perceive that their lawyers are looking out for the entirety of the their interests, including fee costs, have a tendency to remain committed to their existing law firms and even refer other clients (whose lawyers refuse to outsource).
7. YOUR COMPETITION IS OUTSOURCING
If your law firm is not outsourcing, be certain that your rivals is. On August 21, 2007 Bloomberg. com reported that even long-established AMLAW 100 law firms like Jones Day and Kirkland & Ellis are outsourcing under pressure from clients.
8. OUTSOURCING U.S. LAWYERS might CHARGE A REASONABLE SUPERVISORY FEE
It is reasonable and acceptable for U.S. law firms outsourcing legal work offshore to charge a reasonable supervisory fee in conjunction with outsourced legal work. It is axiomatic a lawyer who outsources legal work, whether to an associate, contract lawyer or offshore provider, ultimately remains responsible to his client for the quality and timeliness of delivery of the legal product. In case a lawyer assigns the research and writing of a short to a junior associate, the assigning lawyer won’t customarily submit the final work product to the court without supervision and review. So it’s with offshore legal outsourcing. Published ethics opinions of the San Diego, NY and American Bar Associations indicate a lawyer who outsources offshore may charge a reasonable supervisory fee. Find more information related to employment layer, employment laws and why you need employment lawyer, read this http://www.law.uci.edu/faculty/faculty-scholarship/employment-law.html.
9. CLIENTS ARE INSISTING ON SELECTIVE OUTSOURCING TO ACCOMPLISH COST SAVINGS
Clients talk to each other. Executives of major companies golf and also have lunch with one another. Corporate General Counsel attend meetings and CLE seminars, sharing ways and information to improve efficiencies and spend less. They find out about offshore outsourcing and the dramatic cost savings which can be achieved. It is unacceptable, therefore, to ignore legal outsourcing and, as one managing law firm partner explained, have “no appetite” for it.
10. OUTSOURCING MAY HAPPEN.
Doing there is nothing not an option. Some are outsourcing. Many more are thinking about it, whether prompted by keen business sense or financial realities. Outsourcing is similar to a big, ominous wave several miles offshore. It is preferable to surf the wave than wait to be engulfed, overwhelmed by its power and left wondering what happened.
British economist Herbert Spencer is credited with originating the term “survival of the fittest” in the mid 19th century. Although having application to biology also, Spencer applied the concept of survival of the fittest to free market economics. In a free market, businesses and companies will do what is essential to survive. If which means outsourcing some U.S. legal jobs for the greater good of survival of the entity itself, so be it then. The style of increasing salaries and expenses for law firms accompanied by even higher legal fees charged clients cannot sustain itself any longer. Legal outsourcing is here to stay. The wise will need notice, survive and flourish.