Law firms are like many other businesses in that payroll expense constitutes one of the largest areas of overhead. So law firms are often examining how to lower these costs. Options sometimes include outsourcing the work or some combination of lowering the number of employees and/or paying them less.
Just today two columns were posted examining the long term implications of both of those strategies.
Is Labor Arbitrage the Answer or a New Problem? (Part 1) is by Ken Grady, who is the Lean Law Evangelist for Seyfarth Shaw LLP, an 800 lawyer firm. (It seems like I have been citing his posts a lot the past several months.) There are unintended consequences to this labor arbitrage move, he states, and then provides a great history lesson on the move of shoe manufacturing outside of the U.S. There is a lot of food for thought here.
The Good Jobs Strategy by Joe Nogera appears today on the opinion pages of The New York Times. He outlines the negative consequences of attempting to pay employees the lowest amount possible. He quotes M.I.T. professor Zeynep Ton for the proposition that paying less often costs the company more. One example she pointed to was the Tulsa, Okla.-based QuikTrip convenience store chain.
Paying employees middle-class wages allows the company to get the most out of them. Employees are cross-trained so they can do different jobs. They can solve problems by themselves. They make merchandising decisions for their own stores. The ultimate result of the higher wages QuikTrip pays is that costs everywhere else in the operation go down. Id.
It is certainly true that a law firm may be overstaffed, but most law firms have had ample opportunity to examine that over the last 7 years. Outsourcing and cutting payroll are not always negative decisions. But. as the first article notes, you never want to allow your core expertise to escape the firm. Certainly most lawyers and law firm managers would prefer their staff behave like the description of the empowered QuikTrip employees noted above than employees just serving their time and checking the want ads over the lunch break.