Article Written by Vincent M. Bell - Upstream Consulting Group

Many law firms are engaging outside third-party consultants to do assessments of their current staffing and organizational structure. Like the patient who visits the doctor for the periodic stress test, blood work-up and physical examination, law firm management is eager to verify that the firm is organized effectively and efficiently, consistent with best practices in the legal industry.

The evaluation begins with a careful analysis of the firm’s non-legal organizational structure. Does it deliver the support the lawyers need to serve their clients? Are the staffing levels consistent across the firm? If different practice groups get by with leaner staffing, is there a reason? The consultant applies industry ratios to each group within the firm as the evaluation progresses. The staffing patterns ought to identify potential opportunities to reduce costs within specific groups, and across the firm altogether.

Another important inquiry of the analysis is the skillset levels of the managers running the various staffing functions. There are no ratios for these evaluations so, like the experienced physician who knows how to “ask the right questions,” the consultant probes how the attorneys make use of the firm’s shared resources and whether the managers’ capabilities meet the attorneys’ needs.

A proper analysis ought to answer two questions: 1) Is the firm (or particular practice groups) doing the best job possible in controlling internal costs? 2) Are the efficiency/staffing levels consistent across the firm, and consistent with industry ratios? With the consultant’s evaluations in hand, the firm is now prepared to choose which of them it would like to implement - either on its own or by engaging the consultant to oversee the implementation process.

The pricing for this evaluation should be broken down into phases. Phase 1 is the data collection analysis and recommendations phase which should be for a fixed fee. If the consultant is engaged by the firm to assist in Phase 2, the implementation process, then that work is generally priced on an hourly basis.

This type of internal stress testing is important for firms to do now. Like the overdue visit to the doctor, this type of internal self-examination might result in a prognosis that some firms may not want to hear, but it is essential to do on an ongoing basis. These examinations produce extremely useful information that ought to help the firm remain in good fiscal health.

If you would like additional information on stress testing for your law firm, please contact me on a confidential basis to discuss how we can assist you in designing a customized stress test for your firm.