Lean process improvement: Who says there's no messing with lawyers?

This interview is a transcript of an earlier podcast. Listen to the original interview here: No messing with lawyers? How Lean is slowly infiltrating legal firms

Please note: this transcript has been edited for readability.

PEX Network: Lean has been around for ages and a lot of different industries have adopted it. But you think that the legal industry is ripe to start using Lean tools. Why?

Karen Skinner: To understand why we’re bringing Lean and Lean Six Sigma concepts to law now, you need to understand what’s happening in the legal market.

For generations, lawyers have charged their clients hourly rates for legal services and we’ve had a monopoly over those services. So, we could get away with charging pretty much whatever the market would bear because nobody else could provide those services. Times were good. Law firms saw ever-increasing profits. Individual rates for top partners climbed to over $1,000 an hour. Even brand-new associates fresh out of law school could be charged out at over $200 an hour. At those rates there is really no incentive to be efficient and the billable hour is a major impediment to change in law.

David Skinner: Everything changed in 2008. We all know the economy tanked and at that point clients started to look at their enormous legal bills and said, "whoa, enough is enough". Clearly the notion that "the longer I take, the more I make" is anathema to efficiency. Growth in most practice areas in law firms is now flat or even declining.

Growth in profits per partner – which is the key measure that law firms use as they compare one another – are down from over 6% per year in 2007 to about 1.5% now and even lower depending on the country you’re in and the sector in which you are working.

Karen Skinner: On top of that, firms are facing new forms of competition that threaten the traditional monopoly. They aren’t making as much money as they used to and they’re looking for ways to stay profitable and hang onto their clients. Globalization has been a major game-changer in law. Firms are merging to create multinationals that can move work to lower-cost jurisdictions within their own firm and there’s been a huge growth in the market for legal process outsourcers – as we call them – in places like India that can provide your legal services cheaper and faster than a lot of the commoditized work.

This brings me to the whole idea of commoditization. Law for years was seen as an art. But clients and their procurement departments are starting to treat legal services the same way as they treat any other service they have to purchase. So, routine work is being seen as a commodity and then anyone can do it, so they look for the lowest-cost provider and the result is a downward pressure on fees.

David Skinner: There’s a real sense in law that we engage in analyzing how many angels dance on the head of a pin. There’s always been tension between clients and lawyers and their respective views of the profession. But post-2008 that has become very clear and the tension is mounting.

Karen Skinner: There’s also a lot of excess capacity in the market. There are too many lawyers available now and too many lawyers graduating every year to fill the available positions. That means that a lot of very well-educated people are graduating from law school and are looking for alternative ways to practice. So, they’re creating online resources. They’re creating small boutiques. They’re creating competition and that leads to a lot of growth in DIY law; do-it-yourself law.

There are a lot more online services available and they offer much better quality because you’ve got a lot of people out there who can provide those services. There are document assembly sites. There are online forms, lots of free information... more clients are able to do it for themselves.

David Skinner: All of this means growing competition, greatly empowered clients, and downward pressure on fees. In short, clients that demand lawyers do a lot more for a lot less – which is the core of Lean. They are the ones who are the driving force behind change in the legal services sector. The result is an increasing interest in Lean and its application to law.

PEX Network: So, where are you seeing the greatest uptake of interest in Lean in the legal profession?

David Skinner: It’s really important to understand, Diana, that this stuff is really cutting-edge. Very few people do what we do and law is really the last bastion for Lean. Now, many people thought that doctors would be the last, but in fact lawyers won that title and lost the plot. So, acknowledging that this is all very new for lawyers, let’s go back to your question.

Karen Skinner: We’re getting interest and enquiries from all over. Firms of all different sizes in Canada, in the US, and in the UK are starting to show interest, asking, what is Lean? What can it do for me? We see particular interest in full-service mid-size firms; so, small-to-mid-tier law firms that offer a whole range of services to their clients. Those types of firms are under the most competitive pressure because there are more of them and because the pool of available work for them is limited. That said, we do have clients that include some of Canada’s leading national and international firms as well as mid-size and smaller boutique firms in Canada and the US.

Demand for this greater efficiency really comes from clients and all firms have clients. After five years of an uncertain economy, all firms are under this increasing pressure to deliver better-quality service in less time at less cost.

David Skinner: It may be that firms in the UK and Australia are slightly ahead of the curve because they’ve already adapted business structures that are more conducive to a business-like approach. Let’s face it: a huge partnership is hard to manage. If you have to get 900 partners in ten different cities in six countries around the world on board, it’s going to take you a while. Smaller firms are more agile and more able to adapt and that’s where we see a huge uptake.

PEX Network: So, what are the first steps that these legal firms are taking? How are they going about implementing Lean in their business? Are they setting up continuous improvement departments? Are they just bringing in outside help like consultants like yourselves really to help train their staff in these tools?

David Skinner: We see a mix. Some firms are setting up internal departments, but they’re lumping process improvement in with other initiatives like knowledge management and project management. Certainly these things are linked, but what seems to be happening is that the department staff become overwhelmed by slow creep in their base mandate. Apart from firms like Seyfarth & Shaw from Chicago - who have pioneered the application of Lean Six Sigma in law - most firms that go this route aren’t hugely successful. We believe that’s because they’re expecting their internal improvement teams to do way too much way too quickly.

Karen Skinner: We do see success with firms that really focus on Lean Six Sigma. So, Hunoval Law Firm, a firm in North Carolina, is a really great example. They hired a black belt from the financial services industry and they partnered with a local university to develop a tailored Lean Six Sigma curriculum for their lawyers and all the professionals and non-professionals on their staff – everyone from the receptionist right up to the managing partner.

Over the next two years they’re training the entire firm and they’re already seeing really impressive results. We do see other firms that bring in outside consultants like us, but remember: this is really new stuff. Most of what we do now is educate lawyers in law firms and in-house legal departments. We do that through speaking at conferences for bar associations and we also offer introductory and intensive workshops designed to familiarise lawyers with DMAIC and the tools of Lean Six Sigma that we’ve adapted for law.

We did this, for example, with one of our clients in the United States. We did an intensive workshop for them with about 20 people and a range of legal staff and lawyers, partners, paralegals; a really good mix. They’ve now hired us to come back and train the rest of the firm – some 120 people – in a shorter familiarisation workshop so that when they start their hands-on process optimisation, everyone will understand what’s going on around them. They’ll understand some of the language they hear, they’ll understand why they’re being asked certain questions, and they won’t be afraid for their jobs.

PEX Network: One of the things that I think many of our delegates and our listeners often say is that it can be quite difficult to extend the use of the Lean toolset into non-traditional areas which would include things like accounting and especially legal departments. What do you find works best to really help get the lawyers on board and maybe even excited about Lean process improvement?

David Skinner: For law firms, the short answer is that we offer them a way to make their practices more profitable and more competitive. We started off thinking about clients and talking to law firms, saying that if they adapted and adopted process improvement and Lean methodology, they would see better client satisfaction and down the road that would bring them more work, but advising lawyers that Lean Six Sigma offers a way to improve client satisfaction didn’t get us very far through the door.

So, we adapted our message to better suit our target audience. We said that increasing value and eliminating waste would help them cut cost and become more profitable and more competitive and that’s what worked. Once we’re in the door, we show them practical things they can do immediately and we show them how they can use Lean in legal and business processes and they start to see the value much more quickly.

Karen Skinner: For in-house legal departments, the message that we use is slightly different. For them we stress how Lean Six Sigma can help them balance headcount, cost, and risk. General counsel - in legal departments and within businesses - are under an incredible amount of budgetary pressure. They’re always being asked to do more work with fewer resources and efficiency gain can go a long way to alleviating that pressure.

For them, we talk about using Lean Six Sigma and efficiency to balance what we call the triangle of legal imperatives. This is something that Trevor Faure, who’s a very well-known general counsel out of the UK, has developed. It’s a concept of balancing compliance and your coverage and your client’s satisfaction against your headcount and the cost to the business. So, it’s using Lean efficiency strategies to really help in-house counsel balance that triangle.

David Skinner: However, for all lawyers we have had to change the way that we talk about Lean Six Sigma. Statistics and metrics and Lean Six Sigma terminologies – three-letter acronyms – make most lawyers’ eyes glaze over. So, we’ve adapted tools to fit the culture and the structure of law firms.

Our clear advantage over other Lean consultants is that we are lawyers. We have more than 40 years of practical experience in Canada, in Europe, and in the UK. We’ve worked in large international firms, solo, and as in-house counsel for private and public companies. We understand the legal services industries from both the external advisor’s perspective as well as that of a client and a purchaser of sophisticated legal services around the world. We understand the market, can speak with authority and importantly as equals about the industry, and we know how lawyers think. So, we’ve stopped using acronyms and jargon. We bring it down to a common sense level. Lean is all about improving what you do so you can do it faster, better, and cheaper.