Rightsizing

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The massive grocery superstore in my neighbourhood has something like 17 checkouts. Great, you might think — 17 lines, no waiting. But I do wait, often, behind two or three people usually, and it’s not because the store is bulging with shoppers at any given time. It’s because at least some of those checkouts are always unattended — in fact, in almost four years buying groceries there, even at Christmas and other high-volume times, I’ve never seen all 17 checkouts in use. I’m not sure I’ve seen more than 12, and I’ve often seen fewer than five. And invariably, I have to line up.

Then there’s the check-in counter at the airport. I always get my boarding pass at home or at the self-serve kiosk, but I still need to drop off my bags and get my claim ticket, so invariably there’s another line waiting for me. And no matter how heavy or light the passenger traffic, I see the same thing — only a handful of the check-in stations are ever occupied. It should go without saying that checking out of a supermarket and checking into a flight are the most critical points of contact these companies have with their customers.

I wonder if my grocery store or airline has ever done the math here. You have to figure the cost of paying a reasonably diligent 20-something to run eggs over a scanner for eight hours would be covered by one family’s grocery bill, or that the cost of a few counter shifts at the airport ought to be paid for by one executive-class ticket. Meanwhile, the capital these companies have invested in their idle workstations depreciates away — a cost ultimately borne by those customers shifting irritably on their feet as they wait in a nearby lineup.

But this isn’t a post about understaffing in the food and travel industries; it’s about the growing downside of overcapacity. These companies evidently felt compelled to create a bigger footprint than they actually required or intended to fill. Possibly they anticipated greater growth in prosperous times ahead (though I think we just came through as much prosperity as we’re going to see for awhile).  More likely, though, they just thought (as we all tend to do) that size is self-evidently good. Maybe they liked seeing all those workstations on the blueprints. Maybe they liked being able to attach “bigger than ever” to a project that bears their name.

Here’s the problem: “more than necessary” is out. I don’t just mean as a matter of aesthetics, the fear of being seen as extravagant in a time of restraint. I mean that as a business imperative, carrying more than you need to get the job done is not just inefficient, it’s now dangerous. Seth Godin puts it this way:

Many businesses that are in trouble are in trouble for a simple reason: they’re the wrong size. A newspaper that only had a few dozen employees would be doing great today. But they have hundreds or thousands of employees because that was an appropriate scale twenty years ago. …

It’s tempting to get bigger. But is bigger better? In many cases, it’s worse, particularly when you can leverage reliable systems that are cheaper and faster and more stable in the outside world. If you can make your product better by assembling it yourself, you should. But if that action makes it worse, why do it?

That last paragraph applies to pretty much everyone except lawyers. Many law firms are as big as they want to be, not as big as they need to be. They hire and acquire and expand because of the peculiar financial logic of legal services: the more people you have working for you, the more you can bill and the more money you can make. In other industries, the market sets the price and demand drives profitability; in the law, the seller sets the price and supply drives profitability. But as the basic rules of commerce finally start filtering into the legal services marketplace, that’s all starting to change.

The mega-firms now chopping thousands of jobs are, as I’ve said before, not conducting layoffs: they’re reducing their full-time employee complement indefinitely. These firms were overlawyered (and often overstaffed) relative to the value of the services they were performing — but it didn’t matter, because there were no effective market pressures to reduce costs. Now, these firms are having to seriously consider ways to automate basic tasks, and to delegate and outsource mid-level work, in the name of efficiency. They have to “leverage reliable systems that are cheaper and faster and more stable in the outside world.” Reducing unnecessary capacity is only the first step; getting more efficient is the next and more important one.

This applies to firms of all sizes, even solos, because it’s not just about whether you have too many lawyers on the payroll. It’s about whether you’ve struck the right balance between the services you’re delivering to the marketplace and the resources you’ve accumulated to deliver those services. It’s the rare law firm that has fewer resources than it needs to service its clients. More often, firms overextend themselves in terms of workers, salary, bonuses, equipment, decor, locations, practice areas — overbuilding their capacity because, at least in part, the costs of overcapacity have always been directly transferable to the client.

Overcapacity is bad from a financial perspective, but it might actually be worse from a marketing and client relationship angle. One effect of a multitude of workstations at the supermarket or airport is to create an expectation of convenient and rapid service. That’s why the failure to utilize those workstations  is doubly irritating to the customer: it’s not just poor service, but poorer service than the company evidently is capable of delivering. An unstaffed check-in or checkout sends the message: “You mean so little to us that we can’t be bothered to put someone at a station we’ve already built and paid for.”

Take a moment to look around your law practice for empty check-in counters and extraneous check-out lanes — acquisitions that have outlived whatever usefulness they once had, promises you’ve made to clients that you no longer intend to keep. If you say you practise w, x, y and z law, can clients get equally effective representation in each of them? If you give them your phone, fax, email and web coordinates, can they get fast information and responses on any of them? If you’re offering clients a host of newsletters, is their content actually worth the investment of clients’ time? If you’re making them wait in a million-dollar lobby, are they going to get million-dollar service?

Figure out the capacity disconnects in your practice –  from underemployed professionals to extravagant premises, from inefficient workflows to dusty websites and abandoned blogs.  And as soon as you identify them, fix them. Think of it as a new definition of “rightsizing” — as your chance to make your practice the size and shape it needs to be.

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6 Responses to “Rightsizing”

  1. Laurie/Halo Secretar

    Wow! As usual what an insightful post. It’s interesting to me right now because as my business grows I wonder what my next steps are. And I don’t want to be someone who gets bigger because they can – I want to provide a valuable service. Period. I think more companies should consider the effect of “growth” on their customers before pushing forward.

  2. Susan Cartier Liebel

    Jordan, the ‘bigger is better’ mentality has always been alarming and often the absolutely incorrect direction a company needs to go in order to be profitable and provide excellent service to its clients. Many companies have the attitude ‘I must increase my market share’. Why not increase the value to the market you do have rather than trying to conquer the world. If a business’ footprint is done out of fear the next person will try to conquer the world then ask yourself this, ‘how much of the pie do I really need to feel full?’

  3. Anne

    Even with the single “cattle lanes”, overcapacity — ie, counters that are unstaffed — is a common sight. In the UK, one of the few places I’ve ever seen all counters routinely staffed is at “mini-marts” — M & S Simply Food, or Tesco outlets. These are tiny stores at the best of times, and the counters are more like holding cells for the unfortunate clerks than anything else.

    The reason that all the counters are filled is that, unless they were staffed, there’d be no space for the customers waiting in line. The footprint is so tiny (I’m thinking of the Tesco near my residence in Bloomsbury, across from Russell Square Tube Station, or the M&S Simply Food a few meters from St Paul’s) that moving the customers through and out as quickly as possible is an absolute necessity. [In order to ensure that customers leave through the correct door -- the one next to the registers -- there are burly security guards at all other entrances, and posted throughout the store. They take up room, but clearly it's worth it.]

    This is the other face of rightsizing, and while it’s probably efficient, it does strip the process of buying and selling to its bare essentials. I don’t like shopping in these stores unless I have to, but I would never call them inefficient.

    Brilliant article, as usual.

  4. Peter Huang

    Thanks for a very interesting article. I remember a relevant comment from a senior partner I once met who was worried about poorly planned expansion in the legal industry a few years ago. He said: “There’s a word for this kind of out-of-control growth: cancer.”

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