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Monday
Jun202016

You can only cut once: why process improvement trumps layoffs

I’ve been watching the mad rush to match Cravath’s salary increases with a sense of wonder. The market is (mostly) flat. Demand is (mostly) down. There are still far too many law graduates. It’s not like it’s a seller’s market. 

And then I saw the icing on the cake. Last week, law firms were raising salaries one day, and laying folks off the next. Talk about bad optics. Sure, the savings look tempting, but think about the costs.

You’ll have to pay severance. You may have to pay for outplacement services. But there are hidden costs as well.

  • You’ve put money, time, and energy into hiring and training that employee. When you cut her, she’s going to take that investment to one of your competitors.
  • Remaining employees may start dusting off their resumés and looking elsewhere. Even if they stay, they’re not going to be as committed or as loyal to you. 
  • Morale will drop as some of your best remaining employees leave for greener (and less uncertain) pastures. When you raise salaries for the attorneys the day before you cut receptionists and assistants, it sends a pretty clear message: this firm does not value support staff. And yet, if you asked most attorneys who they’d rather hire, a first-year associate or an experienced paralegal or assistant, they’d pick the “non-lawyer” every time.
  • Clients may notice their favourite employee, with whom they have built a relationship of trust and comfort, is no longer there. They may not think too highly of firm that's willing to sack people immediately after raising the salaries of associates—particuarly if those extremely junior associates are then making more than many in-house counsel.
  • Reducing your support staff pushes administrative work up to your attorneys. They may not want to do it. They may not be good at it. And in many cases, they won’t be able to bill for some or any of it. It will take them longer to do some of those administrative tasks than it would take a trained assistant. That’s going to frustrate your lawyers and eat into the time they have available to do valuable, billable work for clients. 

The thing is, you can only cut a person once. There are other, better ways to cut costs. 

If you improve a business or administrative process in your firm, you reap a cost or time saving (and let’s face it, time is money) every time you run that new, more efficient process. It may not have the instant, visible impact that chopping $45,000 off the books has when you cut an employee, but over time, it can yield far greater and more sustainable savings. It will also boost the intangibles: morale, loyalty, engagement.

If you want a great explanation of how you can calculate ROI on process improvement in a legal process, check out Kenneth Grady’s recent series, The Low Cost of Lean. Ken focuses on legal processes. For administrative processes, the ROI is even easier to calculate. Your employees are paid a salary. You’re paying them that salary and their benefits regardless of how efficient they are. Making them more efficient allows them to accomplish much more. 

So calculate your savings based on the number of times you run that new process, and the value you can reap from the time and/or money you’ve liberated by becoming more efficient. Maybe you can eliminate some overtime. Maybe you can free up a talented paralegal and get him doing more fee-generating work. Maybe you can repurpose good employees to do more value-adding work for the firm.

After all, you’ve put time and money into their training. Why let that investment walk out the door?

Want to learn more about how you can avoid layoffs? Contact us directly, subscribe to our blog, and follow us on Twitter and Facebook for practical advice on process improvement.

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