Budget Reset: Managing Overhead Costs Post-Pandemic

If 2020 and COVID-19 have taught us anything about managing small- to medium-sized law firms, it’s the need to be flexible, adaptive, and thoughtful in our response to future crises.

Just over a year ago, my firm’s management team was making daily decisions based on the latest recommendations from agencies like the Centers for Disease Control and Prevention, state government, and local health departments. We had to keep business running, our clients’ needs met and our employees safe, and we certainly weren’t alone in these efforts. I’m sure your firm was doing exactly the same thing, trying to make decisions based on rapidly changing information and guidance.

Managing overhead as new business was declining across many of our practice areas—while trying to avoid layoffs and keep employees productive during a health crisis of this magnitude—was one of the most stressful events or periods during my 16 years at English, Lucas, Priest & Owsley, LLP. Now that we seem to be approaching the post-pandemic phase, it is important to look back and assess what lessons we have learned and where more learning opportunities exist. Are we now better positioned and ready to respond to the next crisis, be it a localized issue, a community-wide natural disaster, or a future pandemic? I believe we are, and here are some things we learned that may help your firm, too.

As we adapted our 2020 budget to the new environment, a number of changes we needed to make were quickly apparent. For example, one area of immediate savings was business-related travel. We no longer needed an allocation for many of the travel expenses we routinely incur, since all travel related to continuing education, conferences and even client visits ceased. This freed up funds for other areas that became paramount, such as new technology to better equip our teams for a work-from-home environment. While this involved some trade-off, we still realized a net savings that helped to offset the impact of a decline in new matters.

Another area of savings was office supplies. With most employees working from home, their continued adoption of electronic communication led to a decrease in printing. We saw a significant increase in electronic sharing, collaboration, and review as most were shared electronically. To be clear, our firm was not functioning in the dark ages—we have always embraced technology. But the pandemic accelerated the pace of acceptance from some employees who may have otherwise been holding back in certain circumstances. This translated to a reduction in office supplies, and by extension, printer and copier usage, ink/toner, and ultimately a reduction in document destruction/shredding costs. As with the savings realized in travel, some of these funds were redirected to new or increased use of other technology, such as an increased capacity for electronic signatures. That said, it still resulted in net savings to the firm.

We also noticed significant savings in marketing and business development. As most public events were either canceled or closed to in-person attendance, we saw a significant decrease in our spending on entertainment and sporting events. While we still made donations to many of these organizations, we were no longer incurring the actual costs associated with attendance, such as food, beverages, parking, and additional tickets. We could still support theater and the arts as concerned corporate citizens, but also realized a reduction in total overheads in this particular budget area. We purposefully shifted some of these savings into more targeted digital marketing and advertising efforts—almost always substantially less costly than other marketing platforms.

Research and library costs also dropped. We have been reducing our remaining printed library materials for several years; the pandemic just expedited the transition. Some publications we decided to continue to update in print—discontinuing the print edition wasn’t a battle we were willing to fight with some senior attorneys. The material was already included in our online library, but it was duplicated in print for the benefit of a few. But now, these same attorneys were forced to ask themselves just how valuable the printed copy sitting in an office they couldn’t access really was. They quickly adapted to the online resources (or more likely, assigned the research to someone with more e-fluency).

I have talked with colleagues across the country, mainly in larger urban areas, who reduced overhead by canceling or nonrenewing parking contracts, reducing utilities in their now-vacant offices, or renegotiating lease options on space for future expansion. While these were not matters where we realized overhead savings at our firm, they are opportunities that allowed other firms to reduced or restructure over the past 12 months.

Moving Forward

Reflecting on the past year has been particularly helpful in projecting how we move forward and sustain the positive momentum gained from the pandemic. You didn’t misread that: I strongly believe we are better positioned for future success as a result of this trying year. As we set out our 2021 budget, many of the lessons learned were incorporated into our current-year plans.

Many had more far-reaching implications, too. For example, in early 2020, we assembled a team to look at our projected space needs over the next five to 10 years. Already a little cramped in our main office, we have been leasing additional space for about six years. That space is also near capacity with little opportunity for expansion. As a result, our committee was tasked with identifying available options to satisfy future needs. A newly constructed building, sale of our existing space, a third location via lease or purchase—all options were on the table. After only two initial meetings, our work was put on hold as we pivoted to address the more immediate needs of the pandemic.

Now with our new perspective, we have agreed no additional space is needed—we have seen how working from home and more flexibility works. As a result, we’ve expanded these options and use one office space for a team of four to five employees who each work in the office on different days. This type of arrangement can translate to significantly lower overhead costs down the road. For those firms operating in larger urban areas, even more potential savings exist on parking contracts, public transit reimbursements, and other related costs.

As firms emerge post-pandemic, I recommend taking the time to review and reflect on the past year and continually challenge the status quo within your firm. You may be surprised at what you find and the value it may bring to your firm as you move forward in the months and years ahead. You will almost certainly be better equipped for the next crisis we face.

About the Author

Travis ArmstrongTravis C. Armstrong is the chief operating officer at English, Lucas, Priest & Owsley, LLP in Bowling Green, Kentucky. He has responsibility over the financial, operations, facilities, and human resource management areas of the 28-attorney firm. Contact him at tarmstrong@elpolaw.com

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