Features - Outsourcing in Law Firm LibrariesBy Rachel Pergament, Published on April 1, 1999
Rachel Pergament is the Collection Development/Acquisitions Librarian at
the University of Southern California Law Library. She graduated from
UCLA with an M.L.I.S. degree. This article is a summary of a paper
submitted to the 1999 Matthew Bender/AALL Call for Papers competition.
On March 31, 1995, the Chicago office of Baker & McKenzie fired the entire ten person library staff. The firm announced that it planned to close its library and replace the staff with a library management company.1 Although these events occurred almost four years ago, and Baker & McKenzie has since hired in-house library staff, they continue to receive attention from law librarians and influence discussions of library management practices and procedures. Moreover, Baker & McKenzie's actions provide important lessons about librarians' perceptions of outsourcing and the pitfalls of entering into an outsourcing agreement without considering its impact on the entire law firm.
The library community experienced a sense of déjà vu when, on January 21, 1999, Pillsbury Madison & Sutro announced that it was outsourcing its law library in its San Francisco office effective February 8, 1999. The firm was "looking at ways to modernize and update" its library operations and "engaged the services of an experienced library management firm" in order to do so. Though the circumstances of Pillsbury's outsourcing differed considerably from the situation at Baker & McKenze, comparisons were inevitable.
|Outsourcing in the law firm environment
has been around for many years. Originally, law firms turned to outsourcing to
reduce costs for routine copying and clerical functions such as messenger and mail room
operations.2 Costs were reduced without any negative
impact on overall operations, so with the economic downturn at the beginning of this
decade, law firms sought to outsource other firm operations. Larger numbers of law firms
are outsourcing more complex functions such as records management, computer network
maintenance and accounting.
Traditionally, law firm libraries have also outsourced routine operations. Most large law firm libraries have contracts with vendors for loose-leaf filing and temporary employees for special projects. But though outsourcing of library services has a historic presence in law firm libraries and has proven to save time and money, it is a poor and potentially dangerous substitute for the sophisticated legal research and library support services provided by highly skilled and educated law librarians.
Outsourcing in the Law Firm Environment
In the 1970s many large law firms "vended out" or "subcontracted" photocopying because of the complexity of reproductive equipment and the lack of skilled personnel needed to maintain the machines.3 Beginning in the 1980s small and mid-sized firms began to hire "facilities management" companies to run mail room and facsimile operations in addition to providing copying services. Firms that used these services expected to lower their costs and thus the costs to clients and to maximize the use of firm resources on legal work by eliminating the problems associated with managing support personnel and the maintenance of complex equipment.4
During the first half of the 1990s the term "outsourcing" developed along with an expansion of the support service industry. The use of outsourcing has spread to law firms of all sizes allowing all firms to respond to client pressures to reduce costs. Firms were reluctant to bring in-house sophisticated electronic and computer systems, choosing instead to outsource these needs.5
The practice of outsourcing professional support services developed from the federal government's attempt to privatize these types of services. During the Reagan administration the government attempted to increase contracts with the private sector for services traditionally provided by government agencies. Although contracting for tangible goods (i.e., weaponry and supplies) is a practice that dates to the founding of the country, the privatization trend started in the 1980s represented a radical departure from previous management practices.
In 1983, the Office of Management and Budget issued a revised set of guidelines governing contracting with private sector contractors. These new guidelines included outlines for the first attempts at contracting with private vendors for complex library services. Out of these and similar guidelines the term "outsourcing" was coined for use of competitive bidding to select private vendors to provide services in order to reduce operating costs.6
Outsourcing in both the federal government and law firms has been promoted as the best solution for the elimination of excess costs incurred by the continuation of spending practices left over from periods of greater prosperity. During the 1980s large law firms experienced unprecedented growth and expansion. During this time, the salaries of partners and associates rose dramatically and lavish spending became the hallmark of big firm culture.
This extravagant attitude ended with the economic downturn in the early 1990s. Baker & McKenzie's decision to dismiss the library staff exemplified this trend. The firm's management committee claimed that the decision grew out of attempts to restructure the entire firm.7 This rationale and the decision to outsource the library reflect the concerns of law firms nationwide. Outsourcing of support functions quickly became one of the trendiest law firm management practices of the 1990s.8
Currently, the American economy is experiencing a period of growth and prosperity, however, memories of the dramatic downturn in the economy during the late 1980s still linger and many management committees believe that their law firm survival depends on downsizing and cost cutting. Because of these concerns, library services, whose contribution is difficult to evaluate from a purely monetary perspective, have become an attractive target for outsourcing.
Outsourcing has become such a growth industry that previously sacrosanct aspects of law firms are now subject to outsourcing arrangements. One such area is legal research, once the exclusive domain of young associates.9
At a typical law firm, an attorney's time is billed by the hour. The result is that either the law firm will bill the lawyer's research time at the full hourly rate, in which case the client pays for whatever inefficiencies resulted from the attorney's inexperience, or the law firm decides to absorb the cost of all or part of the attorney's time. While there are some drawbacks of the traditional system, the client receives high quality legal research because of the safeguards created by supervising attorneys. As firms began to look closely at their costs, the legal research system was closely scrutinized because of high and unpredictable costs, operational inefficiencies and often the-repetitive nature of many associates' research efforts.
In addition to the growth in outsourcing research, three additional outsourcing trends are developing. These include outsourcing accounting functions, management information systems, and records management. Mid-size and smaller law firms (firms between forty and seventy attorneys) are increasingly turning to these types of outsourcing services.
The use of records management outsourcing ventures is also developing. Traditionally, administrators drew distinctions between records management and outsourcing messenger and duplicating services.10 Administrators were willing to outsource messenger and copying tasks because these services could be performed without reading the contents of files. However, individuals providing records storage and management services must read the documents to develop a records management scheme. Outsourcing firms are becoming more aggressive in promoting confidentiality agreements and open-ended contracts as solutions to anxieties generated by expanding outsourcing to the more sophisticated areas of law firms' functions.
The Baker & McKenzie Situation
..Baker & McKenzie's actions provide important lessons about librarians' perceptions of outsourcing and the pitfalls of entering into an outsourcing agreement without considering its impact on the entire law firm.
In January 1997, Baker and McKenzie made PC Magazine's "Abort, Retry, Fail" department with their statement on the hiring of an in-house librarian. "'She is not a librarian,' insists Cynthia Morris, an assistant in the firm's marketing department. That is to say, Ms. Schmid does not replace the librarians whose jobs were 'outsourced', explains Ms. Morris. Instead, Ms. Schmid will 'assist with online services as well as manage the library's hard-copy resources,' which are also known as books."
-- The National Law Journal
With the growth of outsourcing in the most sophisticated arenas of law firms' practices, it was inevitable that a major law firm would attempt to outsource its library services. What is surprising is the dramatic nature of this development and the potential ramifications for law firms nationwide.
In the fall of 1994, Baker & McKenzie assembled a new management team in the firm's Chicago office charged with improving the coordination of the firm's practice groups.11 The most significant team decision was to terminate 35 employees, approximately 10% of the Chicago office support staff, within this 10% was the entire library staff. The firm claimed the decision was made in conjunction with an evaluation conducted by Price Waterhouse. This evaluation determined that Baker and McKenzie's Chicago office was overstaffed with support staff compared to similar law firm operations. Most firms average 1.3 support staff per attorney. Baker and McKenzie's ratio was 50% higher, approximately a 2-1 ratio.12 The Price Waterhouse evaluation has not been made public. It is not known whether Price Waterhouse recommended the in-house library be closed and outsourcing be used.
Baker & McKenzie's decision generated tremendous interest in the nationwide legal community and concern among law librarians. There was wide spread speculation on whether this move signaled a dramatic change in attitudes toward law librarians or indicated Baker & McKenzie faced serious financial problems created by the closing of the Los Angeles office and two well-publicized law suits against the firm.
The decision to outsource the Chicago office's library is counter to the current practices of many large and financially secure law firms. The management of most law firms view the library as a high-technology area where the library staff play key roles as information and intelligence gatherers.13
After the storm of controversy over the Baker & McKenzie decision began to fade, many librarians gave serious thought to the issue of outsourcing. Many of the articles and books that have appeared in the library and business literature since 1995 deliver a mixed message. In the library literature, there is a wealth of information about selective outsourcing: approval plans, specialized cataloging projects, and selected technical services functions. However, the literature on total outsourcing is sparse.
|Although the Chicago office of Baker & McKenzie eventually hired a law librarian, speculation about the firm's decision to outsource its library continued for some time after this librarian was hired. The speculation centered on whether the firm's firing of its library staff was a way to remove a highly paid staff and not a means of redirecting the direction of the library as the firm claimed. Because Baker & McKenzie refused to comment on its decision to hire a law librarian, the firm left itself open to the idea that the management of the law firm used economic arguments to promote outsourcing when perhaps personnel issues were at the crux of the matter.|
|In response to
speculation that Pillsbury resorted to outsourcing because of difficulties recruiting
library staff, Bob Berring was quoted in the Feb. 22, 1999 San Francisco Daily Journal as
saying "If they couldn't recruit, then they are melon heads."
Deborah Schwarz of Library Management said in her statement concerning the Pillsbury outsourcing:
See below for text of press release from Pillsbury.
Pillsbury Madison & Sutro
On January 21, 1999, Pillsbury Madison & Sutro, a San Francisco law firm with 540 attorneys in 9 offices worldwide, announced that it was outsourcing its law library in its San Francisco office effective February 8, 1999.14 The outsourcing contract covers the San Francisco office only and is limited to one year. After the contract expires, it is uncertain what will happen.15
According to Mary Cranston, chair of the firm, the decision to outsource the library was made because the firm was "looking at ways to modernize and update our San Francisco based library operations and enhance our ability to provide our lawyers and clients with the information they need."16 Cranston added that the firm hoped to make the transition in a "timely and efficient manner" and to do so it "engaged the services of an experienced library management firm."17
The library management firm that Pillsbury selected was Library Associates; a Los Angeles based firm. Deborah Schwarz, the president of Library Associates said that her firm has reviewed the library's staffing needs and that three of the six people affected by this decision have been hired by Library Associates and have resumed working at the firm.
It appears that Pillsbury Madison & Sutro learned some valuable lessons from the events surrounding the 1995 Baker & McKenzie decision. Pillsbury's decision to outsource its San Francisco library was posted on the AALL's listserv on January 22, 1999. Unlike Baker & McKenzie, Pillsbury Madison & Sutro did not publicly criticize its current library staff nor create additional speculation by stating that it wanted to create a "showcase for global telecommunications,"18 rather the firm seemed to recognize the importance of legal information and resources to the firm's lawyers and clients. Pillsbury, Madison & Sutro recognized the value of maintaining a core professional staff familiar with the firm's needs and culture by allowing its current staff to apply for positions available under the outsourcing agreement.
A common sense approach that is based on a long range management plan for the entire firm embraces law librarians as an important part of a firm's operations. It would be foolish, however, to ignore the advantages offered by vending services to law firms. The strategic use of an outsourcing agency to staff portions of the library's operations is a prime example of taking advantage of the evolution occurring in law firm hiring and management practices without sacrificing the service offered by librarians.
Law librarianship is a profession with a deep tradition of public service and scholarship and with a proven history of importance to law firm operations. Clearly, this tradition did not matter to Baker & McKenzie's management committee. Baker & McKenzie had obviously embraced a vision of librarianship based on the stereotype that law librarians are simply "keepers of books" who are not prepared to embrace technological advancements. This firm envisioned a virtual library where computer equipment is ubiquitous and the legal professional population has the skill level to locate most information electronically without the assistance of a librarian.
The firm's actions demonstrated a poor understanding of the librarian's role in the unique culture of a large corporate law firm. Librarians provide services that are difficult to gauge by measuring the revenue that results directly from the library's activities. Baker & McKenzie's decision demonstrates a failure to factor in the importance of librarians in serving clients in an environment that avoids conflict of interest, maintains confidentiality, and produces high quality legal work.
While it is troubling that a firm of Baker & McKenzie's size and reputation made a decision to eliminate its library, it is time to recognize that in uncertain economic times outsourcing represents an important cost-saving tool. Law firms must consider how outsourcing can be integrated into the structure of a law firm library in order to create a balance between the professional librarians employed by the firm and the outsourcing companies that provide services at reasonable prices.
PILLSBURY OUTSOURCES SAN FRANCISCO
San Francisco, January 21, 1999 -- Pillsbury Madison and Sutro LLP has contracted with Library Associates, a Los Angeles-based library consulting and management firm, to operate its San Francisco law library operations, effective February 8, 1999.
Library Associates has provided law library management services to law firms since 1986 and is an acknowledged leader in this field.
"For some time we have been looking at ways to modernize and upgrade our San Francisco based library operations and enhance our ability to provide our lawyers and clients with the information they need," said Mary B. Cranston, chair of Pillsbury. "To meet our library service goals for 1999 and do this in the most timely and efficient manner, we decided to engage the services of an experienced library management firm."
Library Associates will review staffing needs for the San Francisco library operation, and those affected by this move may apply for available positions in the library under the management of Library Associates.
The firm expects the transition to the new Library Associates operation will be seamless and there will be no interruption of library services to attorneys, staff, clients or other Pillsbury offices.
Deborah Schwarz, president of Library Associates and an experienced law librarian, said, "We are excited about this partnership with Pillsbury. We look forward to helping the firm bring cutting-edge information technology to its library function. Our overall goal is to help Pillsbury deliver comprehensive, high-quality, cost effective information services to its attorneys and clients."
Library Associates is a California-based corporation owned and managed by librarians. It is a diverse, full service information management firm serving law libraries throughout the United States.
Pillsbury Madison & Sutro has been a part of California's legal and business
community for nearly 125 years. Pillsbury Madison and Sutro is a firm of approximately 540
attorneys practicing in over 30 different specialty areas. The firm now has seven offices
in California as well as in New York, Washington, D.C. and Tokyo.
- Veronica Anderson, World's Largest Law Firm Seeks Better Synergy, CRAIN'S CHI. BUS., Apr. 24, 1995, at 1. <back to text>
- Terry Gaschler, Trends: More and More Firms Outsourcing, ALA NEWS, Mar.-Apr. 1993 at 9. <back to text>
- Anne Woodsworth & James F. Williams, II, MANAGING THE ECONOMNICS OF OWNING, LEASING AND CONTRACTING OUT INFORMATION SERVICES (1993) at 12. <back to text>
- Monty Kaufman, Outsourcing Your Support Needs, PRAC. LAW., Dec 1994 at 35. <back to text>
- Id. at 35. <back to text>
- Woodsworth & Williams, supra note 5, at 15. <back to text>
- Carol McHugh Sanders, Baker & McKenzie Trims Support Staff 10 percent, CHI. DAILY L. BULL., Apr. 13, 1995 at 1. <back to text>
- Fred Strittmatter, Outsourcing Allows Firms to do What They do Best; Hiring Outside Help May Save More Than Just Money, THE LEGAL INTELLIGENCER, July 15, 1994 at 15. <back to text>
- Sarah McAdams, Move Over: Legal Research Firms Battle For Clients; with Billions at Stake, Market Could Boom, CORP. L. TIMES, Feb 1995 at 16. <back to text>
- Ed Finkel, Firms Hire Vendors for Efficient Support without Hassle, CHI. L., Feb 1994 at 56. <back to text>
- Sherrie F. Nachman, Baker & McKenzie to Librarians: Check Out, AM. L., May 1995 at 13. <back to text>
- Anderson, supra note 1 at 1. <back to text>
- Sever Bordeianu & Claire-Lise Benaud, Outsourcing in American Libraries-An Overview, AGAINST THE GRAIN, Nov 1997 at 1, 16. <back to text>
- Posting to Law Library Discussion List (visited January 22, 1999) ftp:[email protected]. <back to text>
- Pamela D. McClintock, Source Subject: Law Firm Staffers Are Still Smarting About an Outsourcing Decision. L.A. DAILY J., Feb. 22, 1999, at 5. <back to text>
- Posting to Law Library Discussion List, supra note 14. <back to text>
- Id. <back to text>
- Sanders, supra note 25, at 1. <back to text>