Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
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66 LEXPERT MAGAZINE | MARCH 2016 BY RICHARD STOCK | COLUMNS | Richard Stock, M.A., FCIS, CMC, is a partner with Catalyst Consulting. Richard can be contacted at (416) 367-4447 or at rstock@catalystlegal.com. Leaning In THOUSANDS OF BOOKS have been written about process improvement, Six Sigma and LEAN methodologies over the past 15 years. One recent addition, LEAN Six Sigma for Law Firms, by Catherine Al- man McDonough, argues that this meth- odology is easy to understand, inexpensive to implement, and that it lowers costs, im- proves quality, enhances communications, facilitates lawyer training, makes fixed fees profitable and makes clients happy. While the genesis of process improve- ment was found in the manufacturing sector, the same basic methods have also been applied in the legal services industry. Some firms, like Seyfarth Shaw LLP, have estab- lished consulting entities to lever- age their hard-won track record into a revenue stream. A number of Canadian firms have retained them to advise on how better to manage internal processes and service delivery. Others have law- yers and professionals certified as Six Sigma green belts or higher. ere are six basic principles in support of process improvement for the law depart- ment. e first three focus on the customer for value creation, figuring out how the work gets done and removing waste and inefficiencies. ere is a lot of opportunity for savings with the third principle when taking into account eight types of waste: defects, over-production, waiting, non-uti- lized talent, inventory, transport, motion and extra processing. e fourth process-improvement prin- ciple requires a certain doggedness because it entails tracking progress and making decisions based on evidence rather than on assumptions and goodwill. e fih prin- ciple empowers people to work within the process. And, finally, the sixth principle, sustainable process improvement, depends on doing everything in a systematic way so that elements can be adjusted over time. is sounds tedious, detail-oriented and not what "lawyers learned in law school." Yet success with such an initiative is signifi- cant. Law departments and the law firms they work with understand that they can improve their value proposition by deliver- ing "less for less" faster without compro- mising their effectiveness. I have recently heard one global and three national law firms claim that, under the right condi- tions, they can reduce a company's demand for legal services by 10 to 17 per cent with process improvements. In a recent round of meetings with a dozen law firms following a request for proposals, the client was able to ask each firm about their experience with legal pro- cess improvement. Every firm talked about collaboration technologies, the training in project management, and the specialty teams they had recruited to support pro- cess improvement. But none were able to demonstrate that those changes translated into lower rates for clients. Instead, the sav- ings for the law firm hardly paid for the costs of technology and training. e client does not notice the difference. Still, three firms had enough confidence to say they could apply process improve- ment to the client's business practices. eir focus was on how the work was done and on eliminating some of the eight wastes. Coupled with this was a determination by the firm to modify undisciplined behav- iours that inflate the need for legal services. Making this type of undertaking viable depends on three factors. First, a robust, multi-year forecast of legal work, by type and volume, must be available. Second, the usual 15- to 20-per-cent discount on fees should be in place in exchange for a com- mitment to a large volume of work to the firm. And the third is the migration away from time-based fees in favour of a negotiated price, possibly with a performance component. ese are prerequisites to the next stage where the firm can reduce the dis- counted price by 10 to 18 per cent on a permanent basis. In other words, the law firm will under- take to reduce demand for legal services through process improve- ment — hence "less for less." When pressed, two firms agreed to a price reduction before commencing pro- cess improvements for a three-year period. e third firm preferred to rebate or dis- count based on a semi-annual review of progress. It appears counterintuitive for a law firm to ask for lower fees. Yet, a fixed fee with a performance feature can be more profitable for firms than discounted hourly rates because there is an incentive to be effi- cient. It is also a way for firms to grow their market share with existing clients and to maintain volumes over time. General counsel should reconfigure their work, their partnering arrangements and their pricing to take advantage of such emerging opportunities. Efficiency systems found in manufacturing are just as applicable to legal services LAW DEPARTMENTS PROACTIVE LAW firms will actually help their clients reduce demand for external legal services through process improvements that modify inefficient systems — thus providing 'less for less'