LegalBusinessWorld Posts

 

In the first part of this three-part essay, I gave a brief overview of the history and five basic principles of Lean. In this part, I explain how Lean can help legal services providers.

 

 

 

 

 

As James P. Womack and Daniel T. Jones explained in their book, Lean Thinking, there are five principles at the core of the Lean philosophy:

  1. Specify what creates value from the client’s perspective.

  2. Identify all the steps across the entire value stream.

  3. Create flow among those steps that create value.

  4. Only make what is pulled by the customer just-in-time.

  5. Strive for perfection by continually removing waste.
     

To see how these principles work in law, let’s look at a simple legal service. The client calls a law firm asking the lawyer to draft a contract. This is the “pull” that triggers the value stream. Ideally, the lawyer to whom the matter is routed is the lawyer who will draft the contract (and if the contract can be assembled by a paralegal using document assembly software, then the paralegal would receive the call).

 

In our ideal value stream, the lawyer receiving the call is ready to work on the contract immediately. The client was routed to this lawyer because she had time to work on the contract and the necessary expertise (some consulting firms use software to help them achieve this). She opens a contract template (no searching) and fills in the necessary information. The software checks what she is typing so that errors are corrected on the fly. She finishes the drafting step, reads the document on the screen (this is the quality check step), and sends it to the client. The value stream is tight (there are ways to tighten it, but this isn’t bad) and the client receives what she requested—a contract that is fit for her purpose (not too complicated, but not missing critical elements).

 

Even though many lawyers would protest that this describes how they draft a contract today, some quick observation and value stream mapping reveals that this is rarely if ever the case. Even if this idealized version of contract drafting were accurate, there are still many things we could do to improve the process. Using various Lean improvement techniques, we could bring the process closer to perfection, and then cycle again to get even closer. Each cycle would accomplish many things, including cost reduction. But it is this idea that all Lean has to offer is cost cutting that got Lean got off on the wrong foot in the legal industry.

 

Lean Reduces Costs, But It Is Not Cost Cutting

None of the five principles mentions cost cutting. And yet, within the legal industry, Lean has become known as simply a cost cutting tool. In part, this is because Lean was introduced to the legal industry at a time when corporations were focusing on what became the “more for less” dilemma. Corporate counsel faced increasing compliance and regulatory requirements in the United States and globally. Business models were evolving quickly and adding new areas, such as social media and digital tools. The combination of these factors meant in-house counsel needed to provide more to their clients.

 

At the same time, in-house lawyers were being asked to focus more on their budgets. They were told to spend less, or at least not spend more. They also were told that budgets were real, not just estimates that could be missed. The increased financial discipline combined with increased service quantities created a problem. The solution seemed to be reducing the cost of each unit of legal service and Lean became one way to cut costs.

 

Unfortunately, this got Lean off to a bad start. Rather than asking the broader question of how to improve legal services delivery in a way that would reduce cost, the industry focused on cost itself. In medical terms, this is treating the symptom without looking for the underlying cause of the disease.

 

Lawyers began taking one day seminars intended to teach them how to do short improvement events, which they thought would get costs down. The legal industry’s approach to Lean became: process map, remove some waste, and hope the cost dropped. Not surprisingly, this 1-2-3 approach to Lean has not been satisfying to many. While paying attention to a process will cause some improvement, without a more robust Lean approach built on a deeper understanding, the fast food fix to legal services delivery leaves one craving something more.

 

Re-Directing Lean In Legal Services

Starting fresh with Lean in the legal industry, we can see how it has the potential to help us do much more than cut costs. In their first book, The Machine that Changed the World, Womack and Jones set the goals for Lean much higher: “[T]he adoption of lean production, as it inevitably spreads beyond the auto industry, will change everything in almost every industry—choices for consumers, the nature of work, the fortune of companies, and ultimately, the fate of nations.”

 

One way to appreciate the benefits Lean can bring to legal services delivery is to start at the end of the value stream. Under the labor-intensive, craft system of legal services delivery every lawyer employs today, the time and cost of achieving what the client wants reaches a point where the client will pay no more even though the lawyer can imagine ways to reduce risk or improve the quality and value of the service. The lawyer must stop and deliver the service to the client.

 

Lean provides a way to get past the barriers created by the increasing cost of labor without resorting to the high cost of technology. The goal of Lean is perfection. To achieve that goal, we trim away everything that isn’t value. Again, looking at legal services value streams, Lean allows us to reduce what we spend on what does not add value and re-direct our energies on providing value. Doing so, we can do more to improve quality, enhance value, and generally improve services.

 

If a client will spend $10,000 for a service, Lean gives us two basic options (with many variations). First, we can reduce the cost of providing today’s service, while maintaining (usually improving) quality, timeliness, and fitness for purpose. This allows us to drop the price so the client pays less, while at the same time the cost to produce the service has dropped so the value (profit) to the lawyer remains the same (in a decent Lean program, profit would go up even though the price came down). For certain services, this helps the client and the firm.

 

Second, because the cost of providing the service has dropped, we can add value to the service while keeping the price to the customer the same. We can increase service levels (quality) or expand service levels (e.g., cover those ideas we couldn’t cover at a higher service level cost). In other words, the Lean lawyer can provide more and better quality service than the non-Lean lawyer at the same price.

 

Quality comes up a few times in these examples. Obviously, quality is important to lawyers. But in the labor-intensive processes we use today, we can only do so much before the cost of the service becomes too high given the price the client will pay (some clients are not price sensitive on some matters, but those form the minority). We don’t have the time or the money in the budget to read the brief again, check the citations again, or do other work (or re-work) to improve quality.

 

Lean’s goal, however, is perfection. Perfection means zero defects in the services delivered to the client. To achieve zero defects, we must re-design processes so that defects are removed as soon as they are created. We can’t wait to the end and look for defects (read the brief one more time), because the cost is too high to find and remove them. Lean’s goal, then, is consistent with and a better way of achieving what lawyers want to provide their clients—the highest possible quality in legal services.

 

In the final part of this essay, I will explain how to incorporate Lean ideas into your legal services and turn your organization into a continuous improvement enterprise.

 

About the author:
Ken Grady is Lean Law Evangelist for Seyfarth Shaw LLP, and Adjunct Professor at Michigan State University College of Law. Ken regularly writes and speaks internationally about legal practice issues. He was named to the Fastcase 50, honored by the Financial Times for innovative leadership of in-house counsel/outside counsel relationships, and is editor and author of SeytLines.com, included in the ABA Journal’s Blawg 100. Ken was CEO of SeyfarthLean Consulting, LLC, general counsel for three Fortune 1000 corporations, held executive positions at Fortune 500 and 1000 corporations, and was a partner in the law firm McDermott, Will & Emery. 

 

LinkedIn: https://www.linkedin.com/in/kennethgrady

Twitter: @leanlawstrategy

Publications:

            www.SeytLines.com

            https://medium.com/rethink-the-practice

            https://www.linkedin.com/today/author/kennethgrady

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