By John W. Olmstead, MBA, Ph.D, CMC
Q. As the administrator of our 17 attorney law firm, I am charged with the responsbility of managing and controlling costs. Our management committee is always complaining about our overhead - and then looking to me for solutions - with the focus usually on cost reduction. Do you have any recommendations?
A. I am often asked to help law firms design and implement profitability improvement programs. In most of my engagements the real problem is insufficient gross income and lack of sufficient investment (spending and time) on marketing and initiatives designed to stimulate client and revenue growth. For most firms increasing revenues is the most effective way of impacting the bottom line. However, we do find that there is waste and unnecessary overhead that eats away at profits and a cost control program is also recommended and implemented. During recessionary times such as we are currently facing – drastic cost controls are often the only option. Reducing overhead can immediately and effectively improve a firm’s bottom line.
The first step in an expense control program is to identify those areas where potential savings exist. Review your profit and loss statement. Resist the temptation to arbitrarily cutting costs which could cut the muscle with the fat and result in revenue loss as well. You have to spend money to make money – so if cost cutting is the appropriate strategy – cut the right costs. Think strategically about cost reduction.
After you have identified areas where savings can be made prioritize and develop specific strategies and implement action plans to achieve the savings.
Here are a few ideas: