Is your firm part of the current state of cost recovery? Discover the answer in the 2012 Matter & Associates Cost Recovery Survey.
Of all the areas that we consult in, the soft cost recovery area is the one undergoing the greatest amount of change both from an internal viewpoint and, most importantly, from an external one. Clients are on the offensive to reduce or eliminate soft costs, internal constituents are fighting them, and the whole support service workflow is going through dramatic changes as a result of decreases in copy and increases in scan, print and litigation support.
Well, we are about to get the answers. It is time for the bi-annual Mattern & Associates Cost Recovery Survey. The comprehensive information collected in this survey lays the groundwork for many firms’ cost recovery strategies for the coming years.
This is what Nicholas J. Willmott, Chief Financial Officer of Kirkland & Ellis LLP, says of the value of participating in the Survey:
“The Mattern & Associates Cost Recovery Survey is the most comprehensive snapshot of cost recovery trends and practices available in the legal field. Kirkland participated in the Survey in 2008 and 2010 and will again in 2012. It is well worth the time and effort, and benefits our firm.”
In 2010 we had responses from 81 Firms; this year, we expect to double that response. Everyone participating in the Survey receives a customized, web-based summary of the Survey results along with a non-obligatory debriefing from a Mattern & Associates consultant.
We hope to see your firm participating in the Survey—and becoming part of the answer.
The Impending Demise of Cost Recovery
By Rob Mattern
This article was first published in ILTA’s June 2011 issue of Peer
to Peer titled “Law2020TM: One Year In”
The recovery of costs associated with managing a legal matter is as old as the legal profession itself. However, as we sit here in 2011, changes to the traditional model are already taking place, and by the time 2020 arrives, law firms will have completely changed their approach to cost recovery.
My company has conducted the Mattern Cost Recovery Survey for the past six years, most recently in 2010. Shared here is information based on the results of that survey and on my daily interactions with law firms on an operational and strategic level.
Click here to read the full article.
Maximizing the Efficiencies of the New Office Designs
By Rob Mattern, Published NYC ALA May-June 2011
Office Design: This article will focus on the structuring of the support services to maximize the efficiency of the new wave of the legal office environment. Areas of focus will be deployment of multifunctional equipment, exploration of the services that should be offered and the concept of off-site services.
The role of support services in the new wave of law firm space design is critical to the success of maximizing the efficiencies and effectiveness of the new layouts. Equally, if not more important, is the technology utilized to support these services. The move to dedicated conference center floors, increased usage of print and scan technology, flex space, and the use of pod type layouts necessitates a thorough understanding of the new role of the support services in supporting these initiatives. Another role is the firm’s strategy on cost recovery and the relationship with the support services.
To read the full article click here.
McCarter & English restructures Support Services to Minimize costs and Maximize Litigation Support Billable Revenue
As with many firms, McCarter & English, has begun to offer more and more litigation support services to their staff through their outsourcing provider Williams Lea. The only problem was that the staff was not actually using the on-site services, due to issues with quality and the rates the firm had to charge for these services to cover costs. Compounding this was the fact that a large percentage of the staff received better quality and pricing from a local overflow vendor.
Mattern analyzed McCarter’s outsourcing/litigation support situation along with the firm’s cost recovery strategy as it related to the litigation support area.
Our recommendations were as follows:
1. Instead of having the cost of the litigation support department part of the outsourcing agreement as a fixed cost, turn the litigation support function into a transactional priced model.
This accomplished the following:
o Lowered the firm’s overhead costs
o Forced the vendor to improve quality and services since it was no longer “sheltered” under the firm’s outsourcing agreement
2. Because of the transition to the transactional model, the firm also changed the way they recovered these costs. Instead of the traditional method of cost recovery, we structured the contract so that these costs were billed directly to the client as a hard cost (Mattern Plan B Cost Recovery™ - US Patent Pending). This resulted in a lower cost being charged to the client and higher realization of these costs for the firm.
In summary, McCarter & English took a cutting-edge stance on their litigation support and how they recovered their costs associated with this function.
Based upon the data in the 2010 Mattern & Associates Cost Recovery Study, more and more firms will be choosing a similar strategy as their realizations continue to decrease.
For more information about the Cost Recovery Study or how Mattern can assist your firm, contact Maria Herron at mherron@matternassoc.com.
A penny billed is a penny earned?
In the December 31st posting to the blog “Above the Law”, Elie Mystal writes about how Hughes Hubbard (a Mattern Client) has just implemented a new policy as of January 1stthat implements a 5% pay cut for the first time an Attorney is late entering their time. This increases to 10% for the next instance and 20% for the third time. Lateness is defined as more than five (5) days of time prior to any pay date. The reduced salary will continue in effect until the timekeeper is no longer five (5) days in arrears. There is also no retroactive payment for the salary reductions. Hughes Hubbard is not the only firm attacking this problem, Simpson Thatcher and Akin Gump are also taking steps along the same lines?
Is this harshness necessary? According to an Adam Smith and Smart Webparts survey in May of 2010, the average Attorney underbills anywhere from $20,000 to $40,000 annually. So a firm with 100 Attorneys this underbilled amount could equate to $2,000,000 to $4,000,000 dollars per year. In our 2010 Cost Recovery Survey, one of the most astonishing bits of data that came out was the amount of internal write-offs (amounts deducted from the bill by the billing Attorney) . For example, in the case of black and white copies alone, for a 100 Attorney firm the amount that does not even make it to the invoice ranges from $195,000 to $477,000 per year. Keep in mind this amount does not factor in what the clients are not paying. Granted this is not in the same neighborhood as $2 to $4 million dollars but it is still a chunk of change. In addition this is only black & white copies, if we added in color copies, prints, scans, etc. this amount would easily exceed $1 million dollars. Again in my world, quite a chunk of change.
Is it good that Firms are addressing this issue and taking such drastic steps to do so? Is the stick better than the carrot? Should the same steps be taken to address the internal write –offs of soft costs?
