You can only cut once: why process improvement trumps layoffs
Monday, June 20, 2016 at 9:23AM
Karen Dunn Skinner in Cravath, Efficiency, Lean Tools, Process Improvement. layoffs, Productivity

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.

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?

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