The kindest cut

Kate Swann is one of the UK’s most respected chief executives. Formerly boss of WH Smith, she gained a fearsome reputation for cost-cutting, and has taken this ruthlessness into her current role, running the international catering group SSP. Some measures, such as slicing an inch off Upper Crust baguettes and ordering that a large tea at Cafe Ritazza should have one teabag, not two, were greeted with amused disdain at the time, but nobody is laughing now. The company’s value at flotation in 2014 was just under £1 billion. Under her leadership, it has risen to £3 billion.

Most law firms have their own versions of baguettes and surplus teabags. Left unattended they are a recipe for trouble. The question for leaders is not whether cost savings are possible – they will be – but how aggressive they want to be. Most departments should be able to find savings of 10% without causing significant disruption. Go up to 20%, and some redesign of lower value activity will be needed. For savings of 30% or more, substantial innovation is called for, involving a major redesign of how the work is done. I want to focus here on the 10%, the relatively quick wins which can make a real difference to profitability.

Time best used?

Where to start? It is a mistake to look for one big idea. If it existed, it would probably have been thought of, and even if it did, the degree of disruption involved is probably a great argument against it. More likely will be a series of incremental steps that cumulatively will take you to where you want to be. 

In law firms, the most fruitful avenue may also be the most sensitive: people. It is perennially tempting to find reasons not to grasp the nettle of underperformers. Jack is doing his best. Jill has had a difficult time of it recently. They are personally likeable. Moving them on will upset the team. So they sit there, sometimes for years, frustrating their colleagues and costing them dear. Allowing it does the firm no favours, but it’s not helping them either. When, eventually, you pluck up the resolve to deal with them, they will be older and probably even less equipped to make a fresh start.

At the same time, look at less-than-busy people. Practically every firm has them. How can they be made more productive, or can their roles be combined and accomplished with a lower headcount? A great deal of time in every team is spent supervising others. How much of this is really necessary? If people have been doing essentially the same job for a year or more, they ought to need less supervision.

It has been said that as a rule of thumb, you should be able to reduce the hours devoted to supervision by about 10% in each year that the department’s work remains largely unchanged, as long as there has been little turnover. But to gain value from the reduction, you must increase the individual contributions required of the supervisors. Similarly, how many staff are involved in monitoring or liaising with other parts of the firm? Often, when you ask “How much of this is necessary?”, it becomes clear that there are straightforward, more efficient ways to ensure good communication.

Do as others do to you

Have the same beady focus on overheads. Law firms are pushed daily to reduce fees, often by people with severe haircuts, ninja-trained in the dark arts of procurement, and strongly incentivised to squeeze the last drop of juice from the orange. Lined up behind them are battalions of businesses and individuals, who may not have dedicated procurement teams, but are no less demanding of discounts and deals. Yet in my experience, law firms rarely apply the same rigour to their own procurement. Go through all the areas of major spend, and it will be surprising if you cannot find opportunities to save at least 10-15%. Test every market where you have significant recurring spend at least once every two years. As an experiment, ask all your suppliers now for that order of saving, and/or more favourable credit terms. They may squeal, but you are likely to be pleasantly surprised by their final response. 

There is much more to Kate Swann than lopping lumps off baguettes and binning teabags. SSP is spending vast sums on state-of-the-art kitchens at its biggest contracts, and other innovations to improve its offering and strengthen the business. But fundamental to her success is the insight that an extra £1 of savings is often easier to achieve than an extra £1 of turnover, that done intelligently it improves the quality of the business, and that unlike turnover, it all goes straight to the bottom line.