Strategies to Leverage Paralegal Capabilities
Strategies to Leverage Paralegal Capabilities
Apr 28 2011, 01:38 PM
Joined: 17-July 09
Member No.: 125
Strategies to Leverage Paralegal Capabilities
My Section colleague, Cynthia Mascio, has kindly shared with me a detailed analysis she will present to this year’s Annual Meeting on the cost and revenue impact that paralegals have in law firms. Her well-demonstrated point is that paralegals improve a firm’s bottom line. Like every other profession and trade, the practice of law is a business. That means we are governed by the formula: P = R - E. Profit (take home pay) equals revenue collected less expenses. For a widget manufacturer, this equation shapes the question, “Can I sell enough widgets to cover all my costs and have something left over?” Replace “widgets” with “hours” or “value” or “solutions,” and you have the question that goes to the heart of “The Business of Law®” for law firms.
This analysis will look behind the cost and revenue numbers and analyze the strategies that firms can use to maximize the bottom line impact of their paralegals. These paralegals may be in-house, or they may provide outsourced services in a virtual relationship. Either way, paralegals epitomize the highly effective concept of leverage as a way that law firms enhance their profitability. Leverage shapes the right strategies for maximizing paralegal capabilities.
Concept of Leverage
There are two ways to address an economic model: assess your revenue and figure out what your cost structure should be so you can turn a profit, or look at your costs and determine how much revenue you need to cover them and make a profit. Either way, the critical law firm cost factor for serving a client is staffing levels. Competitive conditions are forcing firms to reconsider handling a matter with two senior lawyers, each with high hourly rates and likely with personal assistants. Instead, more firms involve an associate and a paralegal and get by with one senior partner, or even use associates and paralegals exclusively, with proper partner oversight.
The questions here relate directly to the issue of leverage – hiring and using paralegals and associates as a cost-effective way to do billable work in a team setting while boosting partner profitability. Leverage through the use of paralegals is only effective when the paralegals themselves are effective. It must be profitable for the firm to keep or otherwise use paralegals on an ongoing basis. While new paralegals may not earn more than they cost the firm in the beginning, at some point that situation must change.
What should firms expect from their paralegals to justify keeping them? The fundamental question in this regard is obvious: is there enough work? In analyzing a paralegal’s worth to the firm, there is no formulaic expression that specifically depends on origination, billing or collection. To say that a paralegal is worth the amount of profit due to billing or the amount of profit due to business brought in does not take into account the subjective factors that should be considered, such as a desirable combination of skill and attitude. When all factors are present and positive, the paralegal relationship is most successful.
Leveraging In-House Paralegals
Lawyers should really only spend their time doing two things: practicing law, and lining up new clients. A paralegal’s fundamental task is to allow a firm’s lawyers to do more client or marketing work without running up against the danger of not properly addressing client needs. The extra business that paralegals allow a firm to do under the principle of leverage more than pays for added salary, in addition to reducing lawyers’ stress level. In-house paralegals enable the lawyers who hire them to break through time and income barriers and do the creative tasks for which lawyers are best suited.
The starting point for hiring a paralegal should be a precise definition of the areas the paralegal will handle (intakes, pleadings, research, deposition summaries) and the skills required to handle them. Lawyers and firms are well advised to use specialized employment agencies that focus on paralegal positions. Ask for the agency's detailed rate sheet, printed information in addition to a website, current references, samples of entrance testing, and requirements for employment. Once the parameters are set and the agency begins interviewing, a lawyer should make the final hiring decision after interviewing every recommended candidate to assess if the person will be a good cultural "fit" for the firm. Employment agencies typically charge 25 to 40 percent of the new hire's first year pay as their fee; this pays for the best contacts, the best screening process and the best knowledge of employment law to make sure the hiring process is done right.
Once they are part of the firm, paralegals can be leveraged not just through their technical abilities but also for their client service strengths. Consider such strategies as these:
Of course, lawyers must continue to exercise direct supervision of paralegals. Firms have faced disciplinary problems for including paralegals along with lawyers on their website under the category of "attorneys." The solution is not to remove paralegals from the website; it's to create a separate category for them. Including paralegals on a website gives clients additional contacts to help them. It also is formal recognition that enhances the morale of the entire firm.
Leveraging Outsourced Paralegals
Technology is an efficient alternative in leveraging paralegal contributions: the VA, or virtual assistant. VAs are paralegals who work offsite and online, creating work product customized to the firm’s specifications and practice. They represent an extension of the outsourcing that lawyers and law firms have done for years, but the relationship with a paralegal VA is more complex and more rewarding. As an independent business owner, the paralegal is neither employee nor subordinate. VA paralegals more closely resemble an accountant or any other business consultant with whom the lawyer has an ongoing, collaborative relationship. They become familiar with the firm’s practice and business needs as much as any service provider engaged for a substantial length of time.
When engaging a VA paralegal, look for an informative, well constructed web site, as evidence of technical skill and sophistication to conduct an effective online business relationship, but never initiate an engagement without a personal consultation. Beyond these business considerations, think through the professional qualifications that you want from the VA paralegal. Require a certificate of completion from an accredited educational institution. Vet that institution and don’t rely blindly on “ABA-approved” status. Make sure your VA paralegal can demonstrate knowledge of local rules regarding court and civil procedure, in addition to practical insights pertinent to your practice. Other relevant skills include the ability to:
A virtual assistant paralegal should be able to conduct all these activities electronically from a remote location. That assumes and requires compatible email, word processing, document management and database capabilities. One of the most important considerations about the outsourced VA relationship is to ensure that it is in fact an engagement of an independent contractor. Do not make the mistake of thinking that every part-time or offsite paralegal or legal assistant qualifies. The IRS has very clear guidelines to determine whether a hired individual is an independent contractor or an employee for federal tax purposes.
Leveraging the Team
This discussion of economics should not imply that paralegals, whether in-house or virtual, are only an economic adjunct of the firm. The successful legal practice requires a team approach between lawyers and paralegals and other staff. The team dynamic is a powerful tool to serve clients and market the practice to potential new ones. Inclusiveness will produce better results for all, increase productivity and therefore profitability of the firm. Lawyers, like managers everywhere, are most effective when they connect with and rely upon their staff. When that connection and reliance are real and reinforced, it creates a shared work ethic, values structure and belief that what is done for clients is worthwhile. Failure to do so will cause inefficiencies, create disharmony within the firm and result ultimately in the firm’s failure. No firm or lawyer should ever think of paralegals and staff in terms of “them,” as opposed to the lawyers’ “we.” For a firm’s survival in today’s business environment, the only group that matters is “all of US.”
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