Just-in-Time Sourcing: Revisiting the Law Firm Delivery Strategy

How can firms better manage costs, optimise margins, and continue service delivery in a time of extreme economic uncertainty?

As the world continues to scramble in response to the coronavirus outbreak, the legal industry is preparing itself for an inevitable recession. Undoubtedly, the economic fallout will impact law firms as well as young associates who are just beginning to find their footing in the workplace.

A recession will serve another blow to many traditional law firms that are already struggling to differentiate themselves and justify high hourly rates. A reduction in corporate demand for law firm services is expected, as companies tighten their belts.

Price-sensitive clients now have more options available to them for legal services than they did during the Great Financial Crisis – particularly for commoditised work traditionally delivered by junior lawyers.

In the face of a protracted economic slowdown, how can firms better manage costs, optimise margins, and continue service delivery are critical? It’s time law firms seriously consider employing the long-standing “just-in-time” resourcing model.

The Right Resourcing Model?

Law firms generally keep large teams of employed associates to deliver legal services, with few deploying contract resourcing in any significant way.

Historically, firms have been reluctant to embrace any form of “just-in-time” production in thinking about how they build their teams. Keeping a full bench on a law firm’s books is costly; the fully-loaded costs of a full-time associate are significantly higher than the already high salaries.

This is generally not an issue, if the team is highly utilized, but this is unlikely in the anticipated economic environment for many firms.

However, laying off staff during an economic downturn isn’t necessarily an antidote. If firms pare down their associate ranks, they risk not being able to uphold their commitments to clients and discarding the benefits of leverage when work presents itself.

Deleveraging through layoffs also places significant pressure on remaining employees, ultimately leading to retention issues when the economy recovers. When the economy does finally recover, many firms who have laid off legal staff will scramble to find associate talent at different levels.

For associates, worries about the coronavirus aftermath loom just as large. Sweeping layoffs of junior-level lawyers are likely, with law firms hanging on to senior associates who bill out at loftier rates and can run deals or matters.

What’s worse, young lawyers who get derailed by economic declines typically find it difficult to get their careers back on a similar professional trajectory, as painfully evidenced by previous financial crises.

How can firms better manage costs, optimise margins, and continue service delivery in a time of extreme economic uncertainty?

During downturns, many practised lawyers are forced to take any work they can find. Even when the economy recuperates, firms can overlook junior-level lawyers who had been laid off, in favour of more junior associates or law school graduates.

Contract Resourcing: The Right Talent at the Right Time

In an age when clients’ budgets are shrinking but staffing costs remain high, forward-thinking firms are already realising the value of using contract talent to fulfil their service obligations to clients.

Whilst access to contract professionals has tended to focus on more seasoned lawyers to plug a specific knowledge gap, interim resources are useful at any level. This is particularly true for larger legal teams, where younger lawyers play a key role.

Instead of viewing contract resources for ad hoc needs, law firms can reap the economic benefits of leverage and cost management by incorporating contract attorneys as an integral part of their delivery strategy, particularly at junior levels.

Benefits include a flexible resourcing model to match service demand; pricing flexibility; reduction of the labour cost base; increased leverage (when work is won); and talent on a trial basis.

Benefits for Associates

While contract work was once seen as a last resort for attorneys who couldn’t find a permanent role, more lawyers are realising its unique advantages. Working on an interim or contract basis extends potentially significant benefits to young lawyers, including access to opportunities for a future permanent position and diverse training and development through a well-rounded work portfolio.

As their network of interim experience expands, younger lawyers can expand their professional connections and network, and gain more confidence in client interactions.

Staying Future-Ready

Permanent staff will likely always be the backbone of a law firm. However, firms need more flexible delivery solutions if they’re to ensure their continued success, faced with the current financial instability.

Integrating contract labour in its delivery model allows firms to be nimble in a changing market. This solution is not only economical and efficient; it empowers firms to meet clients’ needs in a tailored way.

Providing contract services to law firms is also a rich opportunity for young lawyers exploring new options or, in the unfortunate event they’ve been laid off, a viable path back to the law firm world.

In light of anticipated economic difficulties, it’s time to give serious consideration to some form of “just-in-time” resourcing practice, at scale—one that provides enormous benefits to both law firms and talented lawyers who are impacted by the current crisis.