The following piece is adapted from "An introduction to Lean and Six Sigma" authored by Catherine Alman MacDonagh, JD for her best selling book Lean Six Sigma for Law Firms
It provides an introduction to lean and six sigma methodologies, their application, and benefits for law firms, and the clients they serve.
Catherine along with Tim Corcoran will also be hosting a Legal Lean Sigma® and Project Management Yellow Belt Certification Course in conjunction with Ark Group - December 6th & 7th in Chicago.
What is process improvement?
Let’s start with the basics. What, exactly, is “process improvement”? A primary goal of Lean Six Sigma for Law Firms is to provide an introduction to the two most important process improvement toolkits (Lean and Six Sigma) for law firms, the main concepts behind each, and the jargon used by Legal Lean Sigma®.
Most people can identify when there are “issues” with a process. Far fewer can thoughtfully respond to the questions:
How would you decide which problems are the most important to solve?
How will you know when you have succeeded in improving a process?
Process improvement (sometimes called legal process improvement or LPI) provides a framework and tools to answer these two critical questions.
Lean Six Sigma for Law Firms is an overview of process improvement, process measurement, the five key phases (define, measure, analyze, improve, control) in executing a process improvement project, and the major steps and most common tools used in each phase of a process improvement project. In discussing what is required to move beyond carrying out process improvements opportunistically, I hope not only to make the case for starting a program and eventually carrying out process improvement systematically, but to help the reader to make the case as well.
To begin, then, it is helpful to define what we mean by “process improvement”. It is the systematic practice of first analyzing a process to understand how it is currently carried out, then searching for issues, problems, and opportunities in the process and prioritizing them. Once prioritized, tools and techniques are employed to solve priority problems or to capture significant opportunities. Finally, the new process must be controlled so that it delivers the anticipated benefits.
A “process” is a describable, repeatable sequence of activities that generates an outcome; as such, to a process improvement practitioner, nearly everything qualifies as a process, from the mundane routines of everyday life (like making coffee or tea) to incredibly complex processes involving multiple operations, people, organizations, and so forth (such as class action law suits). In the words of W. Edwards Deming, who was known as the Father of the Quality Revolution, and was responsible for the first application of statistical quality control principles to a non-manufacturing environment, “If you can’t describe what you are doing as a process, you don’t know what you are doing.”
Already, based on my experience, I anticipate that there are readers who are unconvinced (and may be bristling with the notion) that the legal work they do can be considered or distilled to “a process”. One of the things I often hear from clients is that “we don’t have a process for that”. However, the reality is that if you are doing a particular kind of work right now, you have a process – albeit one that may radically differ from matter to matter, client to client, lawyer to lawyer, or office to office. Moreover, we consider processes to be the way that law firms create and deliver value to their clients. Thus, we recognize that processes embody the knowledge of the law firm, department, practice group, or team. In short, our processes are the way we do and deliver our work. Ideally, they are the best way we have learned or know how to do something – they are our best practices. As such, a great process can create a competitive advantage for a law firm.
What is legal project management?
There is a direct connection between process improvement and project management (also called legal project management or LPM). Consider this: what is the benefit of having the ability to manage projects very well if our underlying process is not the best it can be? Conversely, what is the value of having an excellent process that is not being managed well?
Process improvement helps us determine the best way to carry out a certain kind of work to achieve efficiency, excellent quality of work and service, high probability of successful outcomes, and predictability. When we do develop the capacity to do process improvement work, we can employ project management skills to select the best processes, tools, and skills to be able to carry out our ideal process every time.
Essentially, project management is a role and set of skills that ensure that, for a particular engagement, we review and select the right processes and then apply them appropriately to each particular matter. Then, project management involves actively managing schedules, staff, and deliverables to deliver high quality work on time and under budget to achieve specific goals.
Timothy B. Corcoran, principal of the Corcoran Consulting Group and adjunct faculty and affiliated consultant of the Legal Lean Sigma Institute, defines project management as “the process and activity of planning, organizing, motivating, and controlling resources, proce- dures and protocols”. So, even project management may be considered a process.
Corcoran explains the six steps of project management as follows:
Define objective (what constitutes a win for the client?).
Define scope and constraints, e.g. budget, timeline.
Establish the project plan. (Identify standard, variable, and volatile tasks; establish task timelines and budgets. What is on the “critical path”? What resources are necessary, including a project manager?)
Execute the plan (track efforts, time, budget, results).
Continuously monitor performance, change management (including regular communication and establishing a continuous “feedback loop”).
Review and improve. (Learning organizations focus on improvement over time.)
Where to start?
Many firms ask: “in which discipline should we invest and engage first, process improvement or project management?” The simple answer is that there is no one “right way” to begin. That stated, my bias is for firms to learn both at once; this is why the Legal Lean Sigma Institute developed the only certification courses that combine Lean, Six Sigma, and project management. My next best suggestion is to engage in process improvement first, so that a firm begins to improve processes and simultaneously to develop project management skills. After that, the firm can train project managers and others using optimized processes.
Whether your firm begins with process improvement or project management, eventually, both must be employed for the firm to fully realize the benefits of either one. We are able to attain a multiplier effect when we combine process improvement and project management: we have better, more standardized processes that are well controlled in order to achieve a high level of performance.
Processes always exist to serve a client. Accordingly, we measure both the process performance and efficiency. Processes have a characteristic performance level, usually called process capability, that describes how well the process meets client expectations (which means, obviously, that we need to understand the client’s expectations as well). Additionally, we learn about process resource requirements, sometimes called process efficiency, which refers to the resources (time, people, equipment, money) required to carry out the process. There are many dimensions along which a process may be measured. Moreover, a process may perform quite well in some dimensions and poorly in others.
Ronald L. Burdge points out the value of measuring client satisfaction: “The legal profession frequently proclaims it is dedicated to providing legal services in a way that satisfies… But if we do not measure the quality of that service, then can we really say that we are able to provide excellent legal representation? If you don’t know that you are doing good work, can you really be sure you are? If what you value is a satisfied client, then you must determine how to satisfy a client – and you will not really be able to know that until you understand how to gauge client satisfaction in the first place.”
What are Lean and Six Sigma?
Now that we have process basics covered, we can delve into Lean and Six Sigma. Lean is about simplifying processes. With Lean, we simplify processes, reduce the number of steps, maximize process speed, and greatly improve productivity – we focus on doing the right things and eliminating waste in processes. In this way, we ensure that we maximize resource efficiency. Six Sigma is focused on reducing and controlling variation. Put together, Lean Sigma is about deciding the best way to do something and then always doing those things correctly.
In short, the two disciplines are about establishing the right things to do (Lean) and then doing those things right (Six Sigma). While it used to be the case that practitioners of each might have argued that their way was better, now they are considered complementary and used together. Some use the term Lean Six Sigma, others use Lean Sigma, which is actually an example of Lean in action, since it eliminates “six” as a superfluous word. That said, both terms are correct and are used interchangeably.
Lean concepts have been applied for centuries, but a major development in this line of thinking occurred in the Japanese automobile industry in the middle of the 20th century:
“As Kiichiro Toyoda, Taiichi Ohno, and others at Toyota looked at this situation [of the automobile manufacturing process] in the 1930s, and more intensely just after World War II, it occurred to them that a series of simple innovations might make it more possible to provide both continuity in process flow and a wide variety in product offerings… and [they] invented the Toyota Production System.
This system in essence shifted the focus of the manufacturing engineer from individual machines and their utilization, to the flow of the product through the total process. Toyota concluded that by right-sizing machines for the actual volume needed, introducing self-monitoring machines to ensure quality, lining the machines up in process sequence, pioneering quick setups so each machine could make small volumes of many part numbers, and having each process step notify the previous step of its current needs for materials, it would be possible to obtain low cost, high variety, high quality, and very rapid throughput times to respond to changing customer desires. Also, information management could be made much simpler and more accurate.”
How do we translate process improvement to a legal context?
One of our challenges is to translate the concepts of process improvement so that they make sense in a legal context. After all, law firms are not manufacturing automobiles or silicon wafers. There is a great deal of variation: each firm, practice group, lawyer, client, jurisdiction, matter, case, set of facts, judge, opposing counsel, and so on, is different. So how can we ensure that the desire to eliminate something in a process does not replace the exercise of good judgment or constrain our ability to do something that is in the best interests of the firm and its client?
This translation of these concepts from the manufacturing world to the legal space is why Legal Lean Sigma® was created. The use of Lean and Six Sigma in law is simple on a conceptual level but not always easy in the application. We have found that it has always been easiest for candidates in our certification courses to understand how to use process improvement in relation to business processes such as timekeeping, client intake, or conflicts. Initially, it can be more of a stretch to think about how these concepts might be applied to legal work since there can often be quite a bit of variation in terms of how lawyers like to do and deliver particular kinds of work.
However, if we consider that every service offered, whether it is litigation or transactional work, contains a series of repeatable, describable steps – even if there is variation in each one – then each one is a process. Accordingly, in each service offering, there are abundant opportunities to apply Lean concepts and tools to make the process simpler and faster.
The application of Lean concepts to a service company:
In an October 2003 Harvard Business Review article entitled “The Lean Service Machine”, Cynthia Karen Swank related how a service company was able to apply lessons learned from manufacturing. The article is particularly relevant, considering that many large law firms have grown through mergers, acquisitions, and combinations. Moreover, most firms have identified service as a key strategy for differentiation, just like Jefferson Pilot Financial, as Swank describes:
“Jefferson Pilot Financial was typical of many U.S. service companies at the end of the 1990s. After making four acquisitions that more than tripled its size, the full-service life insurance and annuities company was searching for new ways to grow in a fiercely competitive business environment. Rising customer expectations had led to a proliferation of new insurance products as well as an increase in product complexity and costs. At the same time, specialized niche players touting lower premiums and faster handling of policies were forcing full-service insurance providers to both improve service and reduce costs.
The top managers of Jefferson Pilot Financial ( JPF) recognized that the company needed to differentiate itself in the eyes of its customers, the independent life-insurance advisers who sell and service policies… It identified superior service to them as a key ingredient of that strategy.
To determine where improved service would have the greatest impact, JPF undertook an in-depth analysis of the operations… The study unearthed considerable variation in the quality of existing services… It was clear that management could significantly increase revenue by improving operations. Indeed, the company estimated that it could increase the paid annualized premium for its Premier Partners by 10% to 15% if it could issue all policies within three weeks of receiving the applications, offer periodic application status reports, simplify the submission process, and reduce errors to 1%.
If we replace key terms in this case with legal examples, the applicability of Lean to law firms becomes more obvious: Law Firm A was typical of many similarly situated firms. After making four acquisitions that more than tripled its size, the full-service law firm was searching for new ways to grow in a fiercely competitive business environment. Rising client expectations had led to a proliferation of service offerings as well as an increase in service delivery complexity and costs. At the same time, specialized niche players touting lower premiums and faster handling of legal services, such as document review, were forcing full-service law firms to both improve service and reduce costs.
The executive committee of Law Firm A recognized that the firm needed to differentiate itself in the eyes of its clients, prospects, and referral sources. Law Firm A identified superior service to them as a key ingredient of that strategy.
It was clear that the firm could significantly increase revenue by improving operations. Indeed, the firm estimated that it could increase the profits per partner by 10–15 percent if it could speed up the delivery of legal work to the most utilized services of its key clients within three weeks of receiving the request for work, offer periodic status and budget reports, simplify the intake process, and reduce errors to 1 percent.
Using Lean thinking to eliminate waste
Lean thinking relentlessly searches for and then reduces and even eliminates eight kinds of waste:
Defects and all related waste, including inspection, testing, and correction: Examples of defects include missing a filing deadline, incomplete forms, bad drafting, data entry errors, and omissions;
Overproduction: Examples include starting work before clearing conflicts, printing too many hard copies, and drafting a 10-page memo when only a one-page summary was requested;
Waiting: Examples include awaiting responses from clients, employees, or opposing counsel, starting a call or meeting late due to late arrivals, waiting for technology such as boot up/restart times;
Excess capacity: For example, not using the lowest cost resources such as clients, paralegals, and assistants that are capable of doing tasks, when partners are doing associate-level work, or over-staffing a matter;
Transportation (this type of waste refers to things moving as opposed to people moving, which is considered “motion”): Examples include moving files from one place to another and sending hardcopies rather than emails;
Inventory: Examples include work in process (WIP), unread email, marketing materials (such as collateral, brochures, and promotional items, or event materials);
Motion (which refers to people moving as opposed to things): Examples include people spending extra time getting from one place to the next due to travel or poor office layout, delivering files rather than mailing/emailing them, extra keystrokes/clicks to find documents; and
Extra processing steps: Examples include conducting too much research or double and triple checking (e.g. approvals of expenses without any real review).
Waste is present in virtually every process. In their Lean management guide, “Lean for Legal Staff – The 7 Hidden Wastes”, legal services consultants and trainers Levantar give examples of how work in progress (WIP) is created through waste: “One department found that 40% of in the inputs (paperwork and forms) it received from clients contained errors or omissions. To correct these, the legal staff had to call the clients; we know from our work in call centres that only 1 in 3 outbound calls is successful… Imagine therefore that for every 100 matters being processed there were 180 activities generated.”
Using Six Sigma to reduce variation
Lean is better when we add Six Sigma, which is focused on reducing process variation to reduce errors and defects. Our concentration is on understanding relationships between many variables. Those include the relationships between inputs and outputs, the key factors that affect outcomes, and the “best way” to do something (i.e. how can we increase our probability of a positive outcome). We question how carefully a process needs to be controlled in order to give the results desired by the client, and ask what are the benefits of consistency and standardization?
While Lean is focused on resource efficiency, with Six Sigma, our focus is on process capability and alignment with requirements. Process capability is what your process can deliver. Therefore, with Six Sigma, we want a capable process that is aligned with requirements. When we reduce and control variation so that we are doing things right, we create a very capable process.
A Six Sigma process is one where there are only 3.4 defects per million opportunities (DPMO). We define “opportunity” as any chance not to meet the required specifications. This standard makes perfect sense in the context of a manufacturing environment where Six Sigma was originally developed (first at Motorola, in the early 1980s, and later at other companies such as AlliedSignal, Boeing, or General Electric, where it was famously championed by the former CEO, Jack Welch).
The art and science of legal process improvement
At its core, Six Sigma revolves around a few key concepts. The first is “critical to quality”, which are the attributes that are most important to the client(s). A “defect” is any failure to deliver what the client wants. We must always keep in mind that variation is what our clients experience, what they see and feel; clients want to be pleased, not surprised, so it is impor- tant to have “stable operations” which ensure that we have consistent, predictable processes to improve what the client sees and feels.
NovusLaw offers document review, management, and analysis for lawyers. They offer a stunning case study on the applicability of Six Sigma to the document review process and also serve as an example of an industry driver and innovator: “Six Sigma is what we use to elimi- nate defects as we measure and analyze our work processes. Typically, undocumented processes will yield 20,000–60,000 defects per million opportunities. Six Sigma is designed to get that down to fewer than 4/ million. On our most recent document review we performed at Five Sigma, or approximately 200 defects per million. By the way, that’s about 200 times better than the average in the legal industry today.”3
This type of work used to be routinely performed by law firms. Now, law firms may do very well to partner with an outsourced provider who can deliver greater predictability and much higher quality work at a predictable price.
Not every step or part of every process should be standardized or controlled as tightly as another step in the same process – this is why legal process improvement is both art and science. There may be plenty of steps that require us to allow for a lot of latitude as we need to build in room for variation based on the lawyer’s experience and knowledge. Other steps require little to no judgment and are therefore good candidates for controlling variation. Every case or matter does not need to be approached as though we had never done this kind of work before; this is not efficient and it also actively contradicts what we say to our clients, prospects, and referral sources about the benefits of working with lawyers who have great experience.
The foundation of process improvement is to describe (map) the process. Then, we measure the process. Each process has a characteristic performance level and characteristic resource requirements. The process performance (also called process capability) describes how well the process meets client expectations, while the process resource requirements (also called process efficiency) refers to the resources (time, people, equipment, and costs) required to carry out the process. There are many dimensions along which a process can be measured; a process can perform well in some dimensions and poorly in others.
Lean is used to understand process efficiency and Six Sigma helps us to understand process capability and align the process with requirements. Thus, we now use Lean Sigma (or Lean Six Sigma) for they are complementary and, used together, offer the most relevant and effective approach to employing process improvement in the legal industry. There is no question that opportunities for improvements in law firms are everywhere. When we employ the thinking of Lean Sigma we cannot help but see many chances to make things better in our processes for both the client and our firm – with no tradeoffs.
There are some who find it difficult to see the process behind the art of doing and delivering legal work. However, whatever kind of work a lawyer or firm is currently doing, it most certainly involves a process – it may not be a good one, but there are steps that are being followed each time. Since lawyers and law firms the world over seem to be far more easily persuaded by precedent than by the idea of being the first to innovate, this book contains compelling case studies as to how Lean and Six Sigma have been applied in the legal profession.
Five principles of process improvement
Lean Sigma is both a methodology and a toolkit. The methodology consists of investigating a process and improving it by using a set of five principles in a particular sequence:
Specify value in the eyes of the client: We use the client’s perspec- tive to evaluate whether an activity is value-adding (activities that work to create a feature or attribute the client is willing to pay for) or non-value-adding (activities that take time and resources, but do not create additional value for the client). All non-value-adding activities are priority candidates for elimination or minimization.
Reduce waste and variation: In addition to minimizing or elimi- nating the eight kinds of waste, we are also cognizant of the fact that processes are harder to operate and require more resources if they vary. Also, when processes vary, sometimes the results will be outside the client’s acceptable range.
Make value flow at the pull of the client: When a process has “flow”, the steps are linked together so that we move from one value-adding activity directly to another, without stopping or waiting. Non-value- adding steps have been eliminated and activities are now very close together. This means that there is no waiting or batching and the process takes the shortest possible time from the beginning to the end. This short cycle time allows a law firm to be very responsive to the client. The idea of “pull” is that a law firm is able to create value directly in response to actual client demand. Providing exactly what the client wants and acting exactly when the client wants (and at the last possible moment) requires all process steps to be closely coordinated in order to work together seamlessly.
Align and empower employees: To successfully and continuously improve processes, the firm must harness the power of great teams. There are teams of grouped individuals, where each member of the team is carrying out separate aspects of a project. There are also teams that act as an extension of the leader. The integrated, true team is able to leverage individual strengths to achieve extraordinary capacity for coordinated action – this is the kind of team we are aiming for not only when we deliver process improvement projects but in the teams delivering client work and service.
Continuously improve in pursuit of perfection: Because changes in the business environment are constant and rapid, they create requirements for higher process capabilities and efficiencies. If we do not continuously improve, we lose our ability to compete and function.
Maintaining the client’s perspective
Notice that we begin our inquiry into Lean Sigma by using the client’s perspective to evaluate whether any activity is value-adding (activities that work to create a feature or attribute the client is willing to pay for) or non-value-adding (activities that take time and resources, but do not create additional value for the client). Non-value-added activities are priority candidates for elimination or minimization. Of course, we do not just indiscriminately cut anything or anyone from a process. In fact, there are many occasions where we actually need more people/resources to make a process efficient. Moreover, just because value is not clear to the client, that does not necessary mean that the step should be eliminated; it is an opportunity to have a discussion about why something is necessary, advisable, or important to do from the lawyer’s perspective. Even after discussion, the client might not find the activity valuable – this is an even greater reason to be highly efficient.
For any of your processes, consider:
What is the value of the process in the eyes of the client?
How do you establish this (or how would you find out)?
What do you do that your clients might not consider valuable?
What waste is there in the process?
What are the effects of variation in your processes on your firm and on your clients?
Lean Sigma is the methodology and toolkit that provides a way to explore and answer these key questions.
Catherine along with Tim Corcoran will also be hosting a Legal Lean Sigma® and Project Management Yellow Belt Certification Course in conjunction with Ark Group - December 6th & 7th in Chicago.