We’re in the midst of revamping our outsourcing e-book and turning it into a full-blown course. Of course, that’s got me thinking about outsourcing quite a bit.
Then, out of the blue, I got some really good questions from Joseph Bahgat, who just bought the book. He wanted to know more about outsourcing projects other than website development.
You see, the e-book focuses on the website development. We used that project to illustrate our best ideas on how to use Elance effectively. We’ve used Elance to outsource all kinds of projects (application development, document indexing, legal research and drafting, etc.), but websites provide a pretty good example of how the service works. The concepts apply to outsourcing most anything.
When it comes to outsourcing, our driving principle is variable costs. We always (and by “always,” I mean always) strive to keep all costs variable in our firm. We want nothing fixed, and outsourcing is the quickest path from fixed to variable. We want our costs to increase when revenue goes up. We want our costs to decrease when revenue goes down.
What to Outsource
With variable costs, we remain profitable in upturns and in downturns. We eliminate the uncertainty from month to month. We keep our profits steady with only minor deviations. When revenues go down, we’re still profitable. It’s wonderful and allows me to keep breathing (and I like breathing).
In our effort to keep our costs variable, we’ve outsourced a range of functions. Some things are easier to outsource than others. Let me give you a sense of how hard it is to outsource each piece of the law firm:
Easy
Some things are easy to outsource. Projects like completion of tax returns, websites, mobile app building, video production, design work, and customizing products (e.g., Salesforce, XpressDox, NetDocuments, etc.) are commonly outsourced. These are easy because it’s not that hard to find experts to take the project on in its entirety. We post a project on Elance and get a bunch of interest. We check out the reviews and claimed experience and pick a vendor. We’re usually up and running on these projects within days.
Moderate
Some functions are a bit more difficult to outsource, such as phone answering, accounting, bookkeeping, document filing/indexing, accounting, and IT support. These are a bit harder because they require some integration (like creating workflows for all incoming/outgoing invoices, help-desk requests for IT, etc.). But they’re not that hard because there are so many vendors looking for this work and equipped to help you outsource it. The key to making this kind of outsourcing work is finding a good match between your internal people and the vendor.
Hard
Some functions are downright difficult to outsource. For instance, legal work, systems and process development, executive assistant functions, and client-facing interactions all present challenges. These are the hardest tasks, projects, and functions to outsource. They each require a fair amount of interaction/supervision between the person assigning the work and the person doing the work. There’s a need for training, management, and lots of communication. Over time, with good system development (and/or experience by the worker), you can scale the management time commitment back, but outsourcing these pieces is a learning process, and some of it requires repeating when the players change.
How to Succeed With Outsourcing
The biggest outsourcing challenge faced by a law firm is handing off the client-facing legal work. That’s never easy. It requires tight systems, high-quality people, and comprehensive quality control. The first step in the evolution is shifting some of the existing legal team to a commission-based compensation model. Changing the compensation starts the ball rolling and changes mind-sets.
But finding a way to outsource the hard stuff is worth doing. It pays off even when it fails to work out. Struggling to move these complicated functions out of the firm forces systems development work. You figure out which systems are strong and which are weak. You tweak the weak parts and identify the assets you need to redesign or replace. You quickly find out who’s on the team and who’s resisting progress. These struggles provide big insights.
Outsourcing gives you:
- variable costs,
- the freedom to focus on what’s important,
- the flexibility to quickly shift direction,
- a reduced management time commitment, and
- the opportunity to expand your offerings without adding to your overall cost structure.
For those reasons and more, we’re always striving to get rid of our responsibilities. One of the primary responsibilities of every person working in our firm is to eliminate his or her job. Each of us is always seeking to find a way to move our responsibilities to someone outside of the law firm so we can take on more valuable opportunities within the firm.
When you’re starting with outsourcing, it makes sense to begin with easy tasks and projects. The learning curve is steep, and reorienting your thinking requires time and experience. Start small and finish a project. Expect false starts and struggles. Expect some disappointment, but persist regardless. In time, you’ll find yourself focused on higher-value work while surrounded by systems that keep your business functioning smoothly while you generate ever more value.
