4 J. Paralegal Educ. & Prac. 31 (1987)
Law Firms, Paralegals and Profitability: An Overview

handle is hein.journals/jpep4 and id is 37 raw text is: Law Firms, Paralegals and Profitability:
An Overview
By ALAN R. OLSON*
The market for legal services is maturing rapidly. As a result, law firms
of all sizes are dealing with the specter of reduced profitability. Law office
overhead is increasing at a faster rate than fee revenue, resulting in a profit
squeeze. Shrinking profit margins are causing law firms to develop and
implement new strategies that enable production of quality services more
efficiently while controlling overhead expenses. Employment of paralegals
is a strategy to which law firms are increasingly turning to counteract the
profit squeeze.
Paralegals Can Be Profitable
The rationale for using paralegals to fight the profit squeeze is straight-
forward and convincing. With effective use of paralegals, the law firm can
produce a higher volume of legal services at lower cost. Paralegals are
employed to perform, under supervision, tasks which were previously per-
formed by partners or associates. In turn, the partner or associate is free to
concentrate on more sophisticated tasks which can be billed at higher
rates. In this manner, efficiency in production of legal services is
translated directly into profits for the law firm.
Paralegals can further contribute to law firm cost control. In general,
paralegals absorb less overhead than lawyers because they use less space
and secretarial services. Paralegals usually have lower income expectations
than lawyers. By employing paralegals, law firms can increase their pro-
duction capability without increasing their partnership promotion deci-
sions.
Finally, use of paralegals can improve client relations by giving both
lawyers and paralegals more opportunities for quality contacts with clients
and potential clients.
Economic surveys of the legal profession indicate that law firms which
use paralegals have higher net incomes than law firms which use none.
While the multiplicity of variables makes it difficult to delineate a simple
causal relationship, Figure 1 shows two areas of contrast between law
* Senior Staff Consultant with the management consultant firm, Altman & Weil, Inc.

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