Legal Outsourcing - The white paper implications
Why Outsource? The 2005 White Paper
The UK Government has long felt that rigidity in operating practices was hindering the delivery of “efficient, effective and economic” legal services to the consumer and recently sought to address the issue. Sir David Clementi was appointed to carry out an independent review of the legal regulatory framework in July 2003. The subsequent recommendations found their way into the October 2005 White Paper, The Future of Legal Services: Putting Consumers First, which has profound implications for the future structure of legal entities. One of the key elements of the Government proposals is the creation of Alternative Business Structures (ABS’s). The predicted benefits for consumers from the creation of ABS’s are:
- more choice in obtaining legal and non-legal services
- reduced prices from economies of scale and lower transaction costs
- better access to justice through the internet for those rural and less mobile
- greater convenience of one-stop shopping for related services
- increased consumer confidence
The UK Government White Paper will have far-reaching implications for all aspects of the legal profession. Cross-company interdependence is fast becoming the norm, a process that will speed up with the introduction of the recommendations contained within the White Paper. The network-based value-chain will be a direct result of more organisations working closely with suppliers of support services. Full integration of internal and external operating systems is now a practical option for the forward-thinking legal firm.
Decisions before Implementation
It is a matter of fact that the practical application of outsourcing is now an essential tool in the legal armoury. However, that application is something that must be seen as part of a coherent forward business plan on the part of the whole organisation. Management should take into account a number of issues that arise when off-site resourcing is being contemplated. There appear to be 4 main drivers in the move towards outsourcing:
Employment – with the associated fixed staff administrative and legislative costs being seen as an inflexible unwelcome part of the new business model
Recruitment – with the associated difficulty of securing high quality staff at the right salary and high agency fees being seen as an obstacle to further business growth
Cost/Savings – with a reduction in fixed costs from moving to an off-site resource delivering instant bottom-line savings and increase in profits
Space – with a freeing up of valuable office desk space for use by more productive assets in a rapidly expanding organisation.
The application of simple cost/benefit analysis should identify those departments who will benefit most. However the key factor to any successful outsourcing operation is how it is accepted by the remaining staff. It the individuals who are to use the service that are most important piece of the jigsaw puzzle. If they reject the service, or fail to use it efficiently, any gains from outsourcing will quickly dissipate. Besides the obvious questions of which parts of the organisation and which personnel it would suit best, an additional ‘tick list’ of points for consideration before implementation should include the following:
- Constancy and quality of the service - does the outsourced work go to the same individual or team every time?
Accuracy and understanding of the work process are assumed to be of a high standard for internal staff. An off-site resource will have to at least match the quality of an existing in-house team. Internal resistance to change will be exacerbated by poor quality of returned work which will countermand the supposed benefits of outsourcing. A poor quality service will not deliver savings – it will lower staff morale and can cause serious long-term damage with key personnel departures.
- Reliability of the service - are the hardware and software systems robust? For example, some file transfer programs can rely on email which is extremely unstable. A support service that is constantly breaking down will quickly lose the internal goodwill necessary for it to operate efficiently. ‘Uptime’ is a crucial factor in the assessment of any off-site resource.
- Support and Relationships - can you submit the work at any time and get support during normal office hours? A help-desk in India with no direct understanding of office operations will lose the support of in-house staff if it is not able to address problems quickly. An outsource company that has personally visited the client in their offices and built up a relationship with key members of staff should be able to resolve issues more efficiently and generate the support necessary to ensure the outsourcing exercise is a success.
- Off-site location. A UK-based off-site resource may often be more acceptable to in-house staff than an overseas one. Negative media attention and publicity about exporting jobs abroad can make the decision a political as well as economic choice.
- Software installation requirements. Do you need to install additional software and will it clash with existing systems? Programs that are familiar to staff and easy to use will be more acceptable to them. There can be a great deal of in-built resistance to new working practices, particularly from older and more valuable team members.
Management must ensure that staff are willing participants in the process, rather than reluctant observers. The benefits should be clearly demonstrated to be for all in the organisation, rather than a select few financially. Successful application of outsourcing will be as much an art as a science in the legal profession. People skills will be as highly valued as the latest automated software package in the post-White Paper world of ABS’s.