A recurring theme in the legal industry is how law firms are trying to run more and more like corporations. In order to do this they are hiring CEOs, COO, and other professionals to mirror how corporations are structured.
Increased management expertise is great; however, the one area where I think firms have to be careful is that of procurement. More and more firms are establishing centralized procurement departments which can be beneficial as it may lead to more of a firmwide strategy. This is something we have always been a proponent.
However, there are some big differences between corporate procurement and legal procurement.
The first is ownership on site. In the corporations I have been to, I never saw the owner walking down the hallway, whereas in law firms you trip over them. Of course, I am referring to the partners of the firm. Does that make a difference? Absolutely. Many strategies you can employ in corporations are unfathomable in law firms. As an example: a few years ago when print for multi-functional devices (MFDs) was first coming online, we were meeting with the Penske Corporation in Reading. We were in the process of analyzing how much money they would save migrating print from printers to MFDs and eliminating all local and networked printers.
The management team was quite enthusiastic about the projected savings and proclaimed that they would have it rolled out in a month. Sure enough, they did. Can you imagine, in a month, taking printers from law firm partners who want them? Onsite ownership is a huge game-changer, ranging from the types of coffee you serve to the pens you buy.
The second area is that of cost recovery.
I have never met a corporation that was capable of recovering soft or hard costs from their clients; however, in law firms it is prevalent. Granted it is under pressure, but it is still enough of a factor to be taken into consideration when purchasing services or products.
A great example of this is a law firm procurement we were working with that was intent on rolling out print to MFDs. However, the firm did not have a strategy to recover print costs. We informed them about the erosion of copy cost recovery since attorneys and staff will just print what they need and forego the copy. This firm chose to focus only on the savings they would achieve on their print costs without incorporating cost recovery. We successfully rolled out print to MFD but the firm subsequently lost 32% of their billable copy volume to print, negating any savings with a net effect of the firm losing in excess of $25,000 per month.
It is imperative that any procurement exercise, whether you call it corporate or not, involves a thorough analysis of the cost recovery impact.
There are multiple positives that can be taken from instituting corporate procurement policies but with the understanding that there are two big differences: ownership on site and cost recovery. Without a full understanding of the impact of both, issues may result.