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“The future ain’t what it used to be.” — Yogi Berra Today, law firms are at a crossroads where competition, organizational values, and integration of business practices are converging. We see five big areas of change affecting the business processes of law firms and, in turn, the design of their offices: competition, technology, outsourcing, organizational change, and profits. Many law firms are focused on important internal issues like flexibility and operational efficiency, but the way they have typically addressed these issues has been by changing easy-to-fix parts of the real estate picture. Law firms are trying to be more efficient by making smaller libraries, building conference centers, changing secretarial stations to flexible furniture solutions, and other small, manageable projects. While this approach yields short-term results, it is not centered on the challenges and opportunities that are available now to substantially increase efficiency and effectiveness. For the law firm of the future, efficiency is the most critical goal. Though some complain that efficiency leads to stripped-down, Dilbert-like office environments, real-life examples have shown that achieving efficiency and organizational effectiveness does not mean that law firms must sacrifice their image and culture. Firms can retain their individuality by incorporating these important elements into office design. Efficiency is about increasing productivity and profitability, as well as making better use of resources and creating more flexibility in all of the firm’s decision-making. LOOK TO CORPORATIONS Most firms believe that their offices work pretty well now. Why be more efficient? The first reason is competition. One way for law firms to regain ground lost to competitors is to “catch up” with innovations made in corporate real estate. While the corporate world has been addressing workplace efficiency for years due to competitive pressures, law firms have been slow to see the necessity of making better sense of the workplace and its associated costs. This gap is due to the organizational differences between law firms and corporations and historically higher margins in legal fees. Those days may already be over. In terms of space utilization, the way that law firms describe their efficiency — in square feet per attorney vs. square feet per person in the corporate world — highlights the organizational differences and overemphasis on attorneys. According to current studies, 68 percent of law firms allot more than 700 square feet per attorney — and half of those firms allot more than 800 square feet. That translates to more than 400 square feet per person in some firms, whereas in the corporate world the standard is in the range of 200-265 square feet per person! If your real estate costs are, say, $4 million per year, that kind of efficiency could translate to as much as $2 million in annual savings! So how do law firms get to this level of efficiency? • Commit to a strategy.To make real gains in efficiency and reduce real estate cost per attorney, firms need to develop a strategy that is supported from the highest levels on down and consistently stated. Turning a firm of today into a firm that is flexible enough to adapt to the coming changes requires a focused strategy and firmwide commitment. • Leverage technology.The law firm of the future will commit to leveraging technology. We’ve all heard about the advantages of technology, but current technological tools can transform inefficient organizations into efficient ones. Law firms need to catch up with their clients. The corporate world has much more successfully integrated and leveraged technological tools. For example, Jeff Immelt, CEO of the General Electric Co., says his company will eliminate (or, as he says, “digitize”) 75 percent of its administration functions by leveraging new technologies. Law firms could do the same. Telecommuting.Just look at how many “national teams” a large firm has. These lawyers work from anywhere already — do they all need an office? As for administrative employees, transportation problems will only get worse, making telecommuting a more viable alternative. Sun MicroSystems designs its new facilities to put 1.5 employees in every seat. With nearly 40,000 total employees, that means Sun doesn’t have to buy real estate for 13,000 of them, reducing their facilities costs by 33 percent. Electronic filing.Most people don’t have confidence in electronic filing systems, so they keep collecting paper. This practice not only wastes the money spent to build these technology-based filing systems, but also increases the need for real estate. It is not unusual for a large firm to have 15 million pieces of paper — the equivalent of 150 square feet per person dedicated to files! It doesn’t take long to see how much that is costing this firm. On the other end of the scale, one national law firm builds data rooms on its intranet instead of assigning a file room for every new case. This firm is increasing efficiency, as well as saving thousands of dollars in real estate. Voice-recognition software.Your cell phone or computer probably has this feature already — and future improvements will help reduce the need for secretaries to near zero in the next five to 10 years. Currently the ratio is 2.5 attorneys per secretary. Voice over Internet Protocol.A company called Vocera has developed a cell-phone-like device that uses a wireless VoIP system to allow every employee to be reachable instantly. No more having someone go look for a colleague or leaving voice mails or e-mails that go unanswered. Soon desktop video will be commonplace, reducing the need to meet physically, and enabling people to work from anywhere — another potential for reducing real estate costs. Next year, one international law firm will institute firm-wide VoIP in its move to a new 400,000- square-foot headquarters. • Outsource.Every major company is outsourcing everything from human resources to information technology, to business processes. Last month, 3Com reduced its staff by one-third by outsourcing certain critical business process units. Michael Bell of the Gartner Group says that outsourcing has reached “intergalactic proportions” and shows no signs of abating. Why? Because every department that can be outsourced eliminates real estate. Law firms have slowly started this practice. For instance, an international law firm headquartered in Washington outsources accounting and business processes to a Big Four company, and a San Francisco-based law firm moved its administrative offices to West Virginia. (Wouldn’t you rather pay West Virginia rent?) Others are outsourcing document processing, file retention, and even litigation support. • Support demographic changes.The next generation of partners won’t have the same expectations and attitudes toward work that the Baby Boomers have had: Quality of life will be an everyday consideration, not something to be postponed until the end of one’s career. Quality-of-life issues are discussed in every business publication these days. Many professionals have decided to restructure their lives around different values (and the rest of us are thinking of doing it). Now that technology can support working anywhere, anytime, accommodating these changes can help firms reduce their real estate costs. Accommodating these changes can also improve retention and recruiting, making your firm more competitive. • Organizational change.The law firm of the future may institute same-size offices for attorneys. This change is not for the sake of efficiency: A 200,000-square-foot office gains only about 5 percent in efficiency with this plan. The real benefit comes in reducing or eliminating churn. Firms spend a fantastic amount of money relocating or finding offices for new partners. Typically, a firm moves a dozen or more people to accommodate one new partner. These costs rarely even show up on the real estate cost spreadsheet — yet they rob firms of profit. The overriding reason to make a strategic commitment to efficiency and organizational effectiveness is, of course, to increase profitability. How much are we talking about? A typical 300-lawyer firm currently occupying 280,000 square feet could leverage technology, accommodate demographic and organizational trends, and outsource to reduce its space to 160,000 square feet, cutting its occupancy cost by $50 million over a 10-year lease term (assuming $45 per rentable square foot in lease costs). In an efficient organization, profitability increases when technology, organizational strategies, and facilities are well-integrated and aligned with the strategic vision of the firm. THE RIGHT DESIGN So what does this mean for the design of your offices? You’ve reduced administrative functions by leveraging new technologies, you’ve eliminated file rooms with electronic data rooms, you’ve replaced most of your secretaries with new technology, and you’ve outsourced other departments like information technology, human resources, and marketing. But space is not the only thing that will change in the law firm of the future. With many staff and departments reduced or eliminated, work processes will change — law firms will become more streamlined. Traditional law firm design has placed attorneys on the window line and left the big spaces in the middle of the building for all the administrative functions. With administrative functions reduced or eliminated, the “big spaces” in the middle will be left empty. Not good news for all the firms currently designing their future space. Buildings designed for the “law firm of yesterday” could become functionally obsolete — too much interior space and no organization to fill it. Faced with a building that’s obsolete, the firm would face three options: • Pay for and use the excess space. • Change the organizational structure to be able to use that space effectively, i.e., move attorneys into the interior. • Move to a building that supports the new, efficient organization (more perimeter, less support area). How will your current design accommodate the coming changes? Law firms that have recently signed leases for 10 to 15 years will have to adapt existing space. Firms getting ready to sign long-term leases have the opportunity to look for buildings and design spaces that support the efficient and organizationally effective “law firm of the future.” Steve Polo ( [email protected]) is a partner at OPX, a strategy and architecture company located in Washington, D.C. OPX ( www.opxglobal.com) serves professional service firms, technology and communications companies and the hospitality industry worldwide.

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