Most law firms are not quite ready for an MSO.
There is a great deal of interest in management services organizations, or MSOs, as a way for law firms to obtain stronger financial, technological, human resources, marketing, and administrative support. The interest is understandable. But most law firms are not yet ready to get the full benefit of an MSO.
There still is some important work for the law firm to do.
That is not an argument against outsourcing. It is an argument for doing the work that makes outsourcing successful. A firm that cannot explain how its current operations work, where they fall short, and which decisions must remain under lawyers’ control is not ready to evaluate a provider’s promises. It risks transferring poorly understood processes to someone else—and paying for a more elaborate version of the same problems.
From factory to shipyard
Outsourcing to an MSO or similar provider is consistent with a fundamental change in the law firm business model. In the traditional “factory” model, the firm tries to assemble most of the people, systems, and capabilities it needs inside its own organization. In the “shipyard” model described in the Walker Clark Worldview Archives, external providers contribute components that the firm coordinates, customizes, and delivers as part of its service to clients.
That distinction has particular importance for small and midsize firms, defined not by an arbitrary headcount but in relation to their home markets. Such firms may need sophisticated capabilities without having enough work to justify building every capability internally. A shipyard approach lets them consider where outside expertise could improve quality, responsiveness, and profitability while they concentrate their own resources on the work and relationships that distinguish them.
An MSO may supply internal business and administrative functions rather than components of legal work itself. The strategic principle is the same: the firm need not own every resource it uses. It does, however, need to know how the resources fit together. A shipyard is not simply a collection of suppliers. Someone must design the work, coordinate its parts, inspect the results, and remain accountable for the finished product. For a law firm, those responsibilities do not disappear when an outside organization takes over an administrative function.
This is why readiness matters more than enthusiasm.
Know what you are outsourcing.
The first step is to identify the business problem the firm wants to solve. “We need better administration” is too vague to support an MSO decision. Does the firm need faster billing? More reliable financial reports? A better intake process? Stronger cybersecurity? Relief from the time partners spend supervising vendors and staff?
Each answer calls for different services, performance measures, and management arrangements. Before contacting providers, the firm should map its principal administrative processes: what happens, who does it, which systems they use, where decisions are made, and where delays, errors, duplication, or rework occur. It should determine what those processes cost—not only in invoices and salaries, but also in partner time, missed opportunities, and client frustration.
Consider billing. An MSO might offer an experienced billing team and better software. But if the firm has never resolved who approves time entries, when bills go out, or why invoices are repeatedly revised, a new provider cannot solve the underlying management problem without the firm’s participation. The firm first needs to understand and improve the process it proposes to transfer.
This is the thoughtful, firm-specific approach advocated in Outsourcing of Core Legal Service Functions: How to Capitalise on Opportunities for Law Firms, edited by Walker Clark founding principal Norman K. Clark. Although that book addresses outsourcing core legal-service functions, its central discipline applies equally to administrative outsourcing: identify the opportunity, develop a business case, prepare the firm, and manage the arrangement for results.
Decide what must stay with lawyers.
Readiness also requires a clear allocation of authority. An MSO may administer systems, prepare reports, coordinate recruiting, or carry out approved marketing plans. It should not be allowed to turn operational influence into control over lawyers’ professional judgment.
The partners should decide, in writing, who has final authority over client and matter acceptance, conflicts, legal staffing, fee decisions, client communications, and other matters affecting representation. They should examine not only the proposed contract but also how decisions will be made in practice. If an MSO controls the intake staff, performance targets, and information presented to lawyers, what influence might it have over which matters the firm accepts?
Applicable professional-conduct rules require close attention here. The ABA Model Rules, for example, as well as similar guideline and regulations in other jurisdictions, address lawyers’ independence, fee sharing with nonlawyers, confidentiality, and responsibilities for nonlawyer assistance. Jurisdictions differ, so the firm should obtain legal advice on its proposed structure and agreements rather than assuming that an MSO arrangement is permissible simply because others use one.
Test the economics and the exit.
Once the firm has defined its needs and boundaries, it can conduct meaningful diligence on prospective providers. That review should cover ownership, financing, leadership, experience with comparable firms, financial stability, insurance, subcontractors, technology, information security, and references.
It should also test the complete cost of the arrangement. For example:
What services are included?
What will the firm still pay for directly?
Who bears the costs of implementation, staff changes, software, and future upgrades?
How will the MSO’s compensation work, and could its incentives conflict with the firm’s professional obligations?
The economic analysis should compare realistic alternatives, including improving an internal process, using several specialist providers, or outsourcing only one function.
Finally, the firm should plan for an exit before it enters. It needs to know whether it can retrieve usable data, regain control of essential systems, continue paying staff and billing clients, and transition to another provider if the relationship ends. An affiliation that looks efficient only while everything goes according to plan is not a sound business arrangement.
Build the capacity to govern.
Signing an agreement does not complete the firm’s work; it changes that work. Partners who no longer supervise every administrative employee directly must still set expectations, monitor performance, resolve problems, and protect the client experience. They need useful reports, agreed service standards, escalation procedures, and regular reviews of whether the arrangement is delivering its intended benefits.
This is where preparation can produce value even before a firm chooses an MSO. Walker Clark’s Comprehensive Management Systems Review is one way to examine how a firm is managed and identify what should be strengthened. Our quality assurance and continuous process improvement consultations can help firms identify and reduce the causes of errors, rework, and inconsistent performance, before turning a process over to an external service provider. Those capabilities matter whether a process remains inside the firm or moves to an outside provider.
In other words, fix the process before outsourcing it.
Walker Clark can help law firms of any size, anywhere in the world, evaluate opportunities for MSO affiliations and other outsourcing structures—and, more importantly, prepare to use them well. Preparation may reveal that an MSO is the right next step. It may reveal that a narrower outsourcing arrangement would work better, or that the firm should first repair its own management systems.
The shipyard model does not reward firms merely for buying components. It rewards firms that know what they are building and can bring the components together reliably.
The question is therefore not just, “What can an MSO do for us?” It is, “What must we do before an MSO can help us succeed?”
Use the secure e-mail link at the bottom of this page to schedule a 30-minute complimentary consultation with a Walker Clark expert in the risks and opportunities of outsourcing law firm business functions.