PapillonIn 1974, Allied Artists Pictures, Corona-General, and Solar Productions released Papillion, a movie based on Henri Charrière’s book by the same name (his nickname, which is the French word for butterfly). The book covers the time he spent in the brutal French Guyana penal system. Charrière became famous for his many attempts to escape from prison. The movie has a great cast, including Steve McQueen and Dustin Hoffman. The screenplay was by Dalton Trumbo. Trumbo was an excellent screenwriter. But his greater fame came in the 1940s as one of the “Hollywood Ten” who refused to testify before the House Un-American Activities Committee (HUAC). Hollywood blacklisted him. He continued to write, however, using front men. Two of the front men movies—Roman Holiday (1953) and The Brave One (1956)—received Academy Awards for screenwriting. It is hard to keep a good author down.

One scene from Papillon has stuck with me. For bad behavior, such as attempts to escape, the guards put prisoners in solitary confinement cells. The prison’s conditions were poor and, of course, cells lacked mirrors. A prisoner could guess if his physical condition was deteriorating. But he had another way to tell. To get his hair cut or to get deloused, a prisoner stuck his head through a small hole in the door of his cell. He would turn his head and look at the prisoner in the adjacent cell, who had his head stuck through the door of his cell. the first prisoner would ask, “how do I look?”

For some reason, this scene reminds me of lawyers working in their offices. Even in large firms, they work alone, oblivious to the world. For comfort, they meet at the coffee station and ask each other, metaphorically of course, “how do I look?” They don’t ask clients or others outside the industry, typically afraid of the answer or wanting to avoid it. They trust the word of the lawyer in another cell.

The light for these lawyers would come by inviting other disciplines into their thinking. I wrote an essay explaining the need for multidisciplinary thinking. If lawyers considered what others have studied, they would find answers—or at least potential answers—to many of the questions they struggle with each day.

Holmström’s Career-Concerns Model

The recent Nobel Prize in Economics brings this point home. Oliver Hart and Bengt Holmström won the award for their work on the economics of contract theory. Contracts are dear to most lawyers’ hearts and one might think that lawyers would stay current on research into contract theory. One would be wrong. To most lawyers, Hart and Holmström are strangers. Lawyers remain ignorant of their work.

This gap in lawyers’ knowledge is disappointing. Economic theory and contract studies could help lawyers understand their own practices. But that disappointment deepens, because the knowledge could help lawyers help clients.

(I’ll come back and address the complaint you raise. First, you say, he wants me to learn project management, process improvement, metrics, and AFAs. To that he adds economics. Doesn’t this guy get that I practice law. A day gives me 24 hours and I squeeze in eating, sleeping, and relaxing.)

Corporate clients complain that legal services come with unpredictable costs, inefficiency, mediocre quality, and arrive late. They direct their ire at large law firms, though the problems seem agnostic—every legal services supplier is at fault.

For years we have enjoyed guessing “why.” Why are law firms unresponsive? Some lawyers are responsive and deliver, as best they can, what their clients want. It seems, though, that the challenge for clients to get what they want grows each day. Clients have responded by taking steps, such as bringing legal services in-house. Increase lawyer hiring, say the general counsels. The problems stay, but reducing use of legal services providers reduces the volume of problems.

Of course, the “why” question remains. If we look to Holmström’s research, we can find a potential answer.

Holmström and Milton Harris studied what happens between employer and employee as the employee ages. For employee, substitute lawyer. Remember, Baby Boomer retirement is underway. By 2030, all Baby Boomers will have reached age 65. We should ask, “what happens to the lawyer-client relationship as the lawyer ages?” As a related question, we should ask whether the general counsel push to move work from first and second-year associates to senior associates and income partners makes sense.

The Harris-Holmström study, titled A Theory of Wage Dynamics, questions some of our basic ideas. Let’s start with this one. The longer an employee works the greater the employer’s knowledge of the employee’s skills (or client’s knowledge of a lawyer’s skills). “This learning allows more senior workers to be matched better to tasks than less senior workers. The result is that more senior workers exhibit higher productivity on average, and this accounts for their higher average earnings.” The higher you rank in the law firm, the higher your income.

But what if that relationship isn’t correct. “Some … empirical evidence suggests, however, that there may be factors other than acquisition of productivity enhancing human capital which produce upward sloping experience-earning profiles. …Medoff and Abraham … find that more experienced managerial employees earn more on average even though their performance is not as highly rated as less experienced workers in the same job category.” Harris and Holmström go on to show that senior workers may get paid more for reasons other than productivity. For general counsel, this could mean you pay higher rates for senior attorneys even though you don’t get higher productivity from them.

Perhaps the Harris-Holmström view holds true for lawyers in firms. We do not know. But, this is a nice example of lawyers acting based on guesses even though economic studies would give them data-based knowledge. Harris and Holmström published their paper in 1982. I’m sure an economist would point to all of the studies following the paper. Perhaps their idea did not survive. The point is that lawyers tread ground others have covered, for no good reason. By working alone, lawyers deprive clients of what we (the broader “we”—society) already know. Doing so wastes time and money. As I have said, law and the delivery of legal services is too complex to leave to lawyers.

Join a Team

I promised I would come back to your complaint. You say lawyers lack the time to become project managers, process improvement experts, pricing experts, and economists. I’ll go back to my usual response. I argue that lawyers must become part of expert teams. I get it — I was a partner in a law firm and spent 20 years in-house, most of them as a general counsel. As a general counsel, I worked on teams composed of experts. In-house lawyers get used to this approach. Law firm lawyers avoid it.

I argue that practicing law takes a wide range of skills and those skills should come from blended teams. Lawyers should avoid the lone wolf syndrome. Law firms and law departments will be better off with teams that include project managers, process improvement gurus, data analysts, economists, and other professionals.

The mix of those professionals for each project and matter will vary. But, the modern legal team needs skills and knowledge lawyers lack. The leader of the team, which may be a lawyer or could be someone else from the team, should be familiar with these other disciplines. She should know how to leverage these individuals and how to compose teams suited to answering client problems. I do not argue the lone lawyer should become an expert in all areas.

Lawyers are stubborn. They refuse or ignore this advice. What happens? Precisely what we see happening today. Lawyers get displaced. Consultants, accounting firms, entrepreneurs, and others embrace teams. They leverage teams, which may include lawyers, to the benefit of the client. Lawyers become tacticians, others become strategists.

The retirement of Baby Boomers means the legal industry will watch some knowledge walk out the door. We will lose some experience. But if we don’t change our behavior, we will lose an important opportunity. We lose the opportunity to become team builders and team players. We lose the chance to integrate what we do with what others do to enhance our problem solving abilities. We lose our chance to solve problems. We become the technocrats that computers can replace.

References

Harris, Milton, and Bengt Holmström. “A theory of wage dynamics.” The Review of Economic Studies 49.3 (1982): 315-333.

CellThe word “cell” has picked up an unfortunate connotation in recent years as terrorist cells have taken over the news. Lawyers probably want to avoid any suggestion that they work as part of a cell. But the truth is, cells can be a good thing.

Today, when many of us hear the word “cell” we think of a terrorist group operating distributed cells throughout our city or country. That use has given a good word a bad name. In the original lean thinking parlance, a cell was a small area devoted to a certain group of tasks or activities. For example, on a production line you could have a cell that assembles the right-hand mirror for a car.

The cell concept is popular in lean thinking for many reasons. But, outside of manufacturing, the cell idea has not caught on. To avoid the negative connotation now associated with the word, and to move into a way of looking at things more familiar to legal services providers, I’m going to switch to the term “team station.” Cell and team station are not substitutes, but team station will help us get to where we need to go. More importantly, thinking about teams will help us work through how to generate predictable, productive, quality, and low cost legal services.

The Team Station Concept

It is tempting to bring in a sports metaphor here, but while I am replacing cell with team station, I don’t think the metaphor would work. Instead, I’m going to use … the eye doctor’s office.

A few years ago, I suffered the fate of age and nearsightedness—I had a retinal tear. To show you how devoted I am to helping lawyers, the tear happened sometime during the night so I first realized I had a problem when I woke up in the morning. I had a full day ahead of me doing presentations and facilitating as part of the Association of Corporate Counsel’s Legal Services Management training. I did not know why I had trouble seeing out of one eye, but I knew I was flying home later that day. I called my wife who got me an appointment at 8:00 am the next morning with the eye doctor, and spent the rest of the day doing my thing while seeing out of one eye. In retrospect, I should have gotten on the first flight home because I risked going from a tear to a detached retina, but as I said, I am devoted to helping lawyers.

The eye doctor quickly diagnosed the problem and sent me a few blocks away (my wife driving both times) to a retinal specialist. This is where the team metaphor comes into play. To make the story more interesting, my new retinal specialist doctor was working with a lean thinking consultant on how to make his office run more efficiently.

I started by checking in at the front desk. This was the first team station (or cell, using the old terminology). At the check-in team station, the “operators” had a set of simple machines designed to help with the processes performed at that station. The team members had to perform insurance tasks, phone tasks, medical records updating and retrieval tasks, and other administrative tasks. Immediately behind the front desk was the storage area for patient records. The team members had phones, staplers, scanners, computers, and other tools arranged neatly around them.

After check in, I was sent to the first examination room, or the preliminary examination team station. This room was devoted to processing the patient through a variety of tests and information gathering processes necessary to give the doctor general information about my physical condition and information specifically related to my eye problem. The room had a variety of devices devoted to specific aspects of the relevant processes.

I then moved to the examination room. Again, the room had tools devoted to the specific processes handled in that room. By the way, the hallway had a large kanban board that the medical assistants used to keep track of each patient’s progress through examination and treatment. Each room also had an andon outside the door to signal everyone about the status of the room. All very cool.

The final two rooms were the laser treatment room, where the doctor and his assistant repaired the retinal tear, and the recovery room, where I waited for a short period after the laser surgery. As with the prior rooms, each of these rooms had equipment designed for the specific tasks performed in the room.

You can see how the office operated. The workflow involved moving patients from room to room (team station to team station or cell to cell) for processes to be performed in the proper sequence. The kanban board was used to control flow, the andons were used to avoid bringing a patient to a room in use, and the team members moved among the rooms as needed to perform processes.

The workflow was not perfect (of course, no workflow ever is perfect). There were unnecessary wait times, lots of traveling (from team station to team station), challenges sequencing processes, and other inefficiencies. All of these were part of the improvement efforts the doctor and his colleagues were working on with the consultant. But the backbone was there and the doctor explained to me the significant improvements they already had achieved in workflow.

Now let’s move to law.

Legal Services Team Stations

You may have trouble seeing (pun intended) how the doctor’s suite of team stations relate to delivering legal services. Let’s start by freeing ourselves from the physical constraint of the office. Legal services provider teams work virtually, with the “thing” they are working on floating through the electronic universe. That is okay—a team station does not have to be a tangible location like a check in desk or a room, it can be a virtual grouping of individuals.

Think about how we break down legal services matters. Litigation has depositions, documents discovery and review, brief writing, witness book presentation, and many other processes that come together under the umbrella heading “litigation.” Transactions have due diligence, agreement drafting, ancillary document preparation, and many other processes we pull together under the umbrella heading “transaction.” In fact, any legal project is made up of many groups of processes pulled together under some heading.

Each of those groups of processes can have a team assigned to it. That team may have legal services providers from one organization (the client, the law firm, the ediscovery vendor), or it may have providers from several or all of those organizations. The team will perform the processes related to achieving their goal. The team station is their virtual universe for the inputs needed to perform the processes or the outputs from the processes.

When you break legal processes down this way, you can think about who needs to be on a team and what tools that team needs. Typically, the team does not need fancy, complicated, do everything tools. Instead, the team needs simple tools designed to help it efficiently perform the tasks needed to complete the processes.

Teams and Team Stations Facilitate Simplicity

I just pointed you to a very powerful concept—one that is hard for most people to grasp. Simple tools often beat complex tools when it comes to many things: cost, efficiency, quality, maintainability, training, and re-configuration, to name a few. We get hung up on the idea of big tools, because of two things: interoperability and compatibility.

Interoperability means that the tools work together. You can connect tool A to tool B. In the case of legal services providers, we want our software packages to work together so that we don’t have conflicts. Our document management system should work with our word processing software, and our contact management system should work with our email system.

Compatibility means that the output of one system can be used by another system. For those with good memories, this was the problem that Windows users and Mac users fought for a long time (and still do, a little bit). If we prepared a document in Word at work we wanted to take it home and revise it on our MacBook and then take it back to work and finish it on Word.

Obviously, if you license one big package, everything will be compatible and interoperable with everything in the package. But, if you decide to use many simpler, smaller, packages you may run into interoperability or compatibility problems.

Those problems are on the decline. No entrepreneur in his or her right mind would design a contract editing program that worked with Google Docs but not Microsoft Word. Going the other way, yes to Word and no to Docs, would not constrain the market as much, but ultimately vendors want everyone to use their products. So, the interoperability and compatibility problems can be minimized or avoided when selecting software.

Another way to reduce the problem mimics what companies outside the legal industry have done. Take the base program (e.g., Word) and customize it to the smallest amount necessary. Build macros or use other software to build small tools that manipulate the Word document (yes, that isn’t the easiest thing to do). Large law firms have attempted to do this, although in a ham-handed way. Done with some understanding of workflow and processes, it works very well.

Our due diligence team needs certain tools for its processes. Those tools could be dedicated tools, or customizations of basic tools set up specifically for the due diligence teams’ needs.The brief writing teams needs different tools or different customizations. When a person works on both teams, they will need to learn both sets of tools or customizations, but otherwise they only need to know the tools for their team. Look across all the teams and you will find that seldom does anyone need the big tool that does everything.

Multidisciplinary Teams

If one lawyer does everything, as a solo practitioner might, then you could argue for one tool. I think law is moving towards multidisciplinary teams, even at the solo practitioner level. Multidisciplinary teams can reduce costs, increase efficiency, and help bring law to the masses. To get there, we need to break down what we do into processes, assemble the right tools for those processes, and not overload the team with big tools.

I see many students come through law school who do not like to write legal briefs. I do not mean they dislike the style, I mean they dislike writing. But, they may have great negotiation skills or oral argument skills. This isn’t something new. Those who like to write gravitate towards practices where they can write. Those who like to negotiate go a different path. The solo tries to do it all. But, we can use processes and technology to create virtual practices (and many already exist), where a team comes together each member contributing his or her skills. Done correctly (that is, done in the way many other businesses have), the overall cost comes down, quality goes up, work satisfaction increases, and the products or services become available to more at lower cost.

Most lawyers resist the teams and teams stations ideas, in law firms (large and small) and law departments, because it goes against how they were trained. The “one lawyer does it all” concept still prevails in law schools and law practices. But, we have all the tools to change that concept and deliver some great benefits to our clients. It will take the brave few to step out and implement these ideas, not just in large corporate law, but in solo practices, legal aid, and government legal services, if we want to get past our current logjam where only the elite can afford lawyers. The nice thing is, there is a way.

AirplaneStop me if you have heard this one. A law department says that it wants to “increase efficiency.” Not really sure what that means, the department leaders decide that it must include moving some things they do manually—or things they don’t do at all—onto a computer system. All agree that computers make things efficient and by using technology, the law department will be perceived by those outside the department as “with it.”

The department proceeds to spend a lot of time developing “specs,” researching possible solutions, vetting vendors, and bringing home the idea. The planning process stretches over months, the paperwork is drawn up, the GC makes her pitch, and the department gets authorization to move forward.

Now the fun begins! The vendor comes in and helps the department plot how to bring the software online. The software is introduced (no need to get IT involved, this is software as a service (Saas))so all you need to do is reach out over the Internet, configure the system, integrate it with your existing processes, train everyone, and make sure all happens as it is supposed to happen. Naysayers are shot down as Luddites committed to a way of life no longer acceptable in an enlightened law department. Within the time budgeted the project goes from idea among law department leaders to implemented software doing its thing.

And then the other shoe drops. All agree the software helped. But it hasn’t helped as much as everyone thought it would help. There also is the time. The software wants information to do its job, so people in the law department get caught up feeding the software. Also, the business changed while the software was being implemented. North is now South, East is now West, and Southeast is now part of the corporate family. All those changes meant the software had to be re-jiggered.

Some questions have come up. Since the software is a data hog and everyone now feels like a data entry specialist, people want to know what is being done with the data. In many cases, the answer is: not much. It is being collected for the very good reason that it can be collected. And by the way, when they said the software “works” with the twelve software packages already used by the law department, they meant “does not aggressively destroy.” It seems “works” is a squishy concept.

All-in-all, people now use the software, the software has changed how people do things, people don’t waste time on things they did before, but they do seem to spend a lot of time on new things, and no one can definitively say whether the new things are better than the old things, but they sure are different. The key is that the GC can proudly report the law department is tech savvy.

Follow the Data, Not the Pack

The story may sound familiar because it is one repeated often by law departments. Many departments other than law fall into the same trap, but I’ll keep my focus on law departments. This also isn’t a “who is to blame” essay. Software vendors are in the business of creating and licensing software, so we really can’t blame them for doing what they do. It is tempting to blame the law department, but that wouldn’t help, and they really aren’t to blame anyway. They followed a traditional path trod by many for bringing software into a department. So what went wrong?

In lean thinking, we prefer to focus on the process not the people. When things go sideways, we look to the process and how it could be changed. The people were just implementing the process and we should not blame them because they did so. We should change the process so the next time the people implement it things do not go sideways.

We can identify some process problems in the law department story. First, it seems they jumped the gun in going to software. Rather than learning and improving existing processes, reducing waste along the way, they went to software as the silver bullet. Put in process improvement terms, they went to software before they had reached the limit of process improvement. Second, in going to software, they went big. The decided to go for the platinum, all bells and whistles, cooks your breakfast while making coffee and feeding the dog, version of software. Third, they did not test the software hypothesis before jumping to implementation. The hypothesis was that software would improve efficiency. But, instead of running some experiments they acted on the assumption.

Since these are process failures, we can improve the process to reduce waste and improve the likelihood of a better outcome next time. In the next three sections, I’ll briefly look at how the processes could be improved.

Jumping the Gun

Every law department delivers legal services using a bundle of inter-related processes. Those processes vary by department (often by lawyer) and so there is no one-size-fits-all. The processes vary by corporate culture, historical precedent, who is performing the processes, and constraints imposed by the organization (e.g., processes other departments use). The first step should have been to identify and document existing processes. Then, the department could have used process improvement techniques to eliminate waste. If nothing else comes out of the exercise, it means the law department will not “institutionalize waste” by building it into an expensive software program.

Of course, documenting and improving processes can do much more. Often, you eliminate many steps, so neither people nor computers need to do them. Simplifying steps may mean that existing software can handle the job. Documenting processes means that everyone can follow the processes, which eliminates problems caused by conflicting ways of doing things. Finally, process improvement is quick, low cost, and flexible. When the business changes, it is much easier to change processes than to change software.

Going Big

For law department leaders, there seem to be two goals to software: zero or big. They justify big on the grounds that everyone in the department must use the software. Most lawyers may work on contracts, but those contracts vary across the board. Despite the variance, everyone must use the contract management software which has a workflow designed for the lowest common denominator. That may make sense, but seldom do I find a law department that learned their processes well enough to make that decision before plunging into expensive software. Conversely, I often find law departments who learned that the one-size fits all assumption did not work well.

This is where the lean concept of “cells” comes into play. A cell can be a group or team that does a contract type. A lawyer may belong to many cells, but a cell is devoted to one thing. The team that does distribution contracts should work out their processes and, if software fits into those processes, look for simple software that fits the purpose for their cell. Perhaps some Word macros, or simple implementations of workflow logic or document automation would work best. The software tools will be easier to program (and re-program) and will handle the tasks needed, without interfering with other areas of the processes. The cost is much lower, quality is easier to control, and the department leaders will not be forcing everyone to do data entry or learn tools that don’t help them. Training someone new to the cell is easier, because the software is simpler to learn. Even if you do need to go big (e.g., everyone uses the same package to store and retrieve documents) you can focus on a tool that does that one thing well, instead of the multi-purpose tool that does many things not very well.

Test Your Hypotheses

As I said, law department leaders view the world in binary fashion when it comes to software: zero or big. There is an alternative. Instead of jumping to the big software, law department leaders can look at the adventure as a startup. Again, always start by learning and documenting existing processes. Yogi Berra’s admonition, “If you don’t know where you are going, you’ll end up someplace else,” is a good one. Then, instead of going big, start small by testing hypotheses.

One online grocer started this way. Instead of building out the software so people could go online, fill their cart with food choices, pay, and then sit and wait for the groceries to be delivered, the grocer went small. It put up a simple web page describing the service and a phone number. When a customer called, a real person took the order. Another person went shopping, delivered the food to the customer’s home, and took payment. Hardly a scalable model, but a great way to gather data and test hypotheses. The startup founders knew they could build the software. But they didn’t know if the idea would work.

The manual system allowed them to test their ideas at very little cost. Would people call (they could always move to online orders)? What would people order (keep track on a spreadsheet)? How frequently would they order (another spreadsheet)? What features would they want from the service (keep a list of desired features)? These and many other questions were easier to test in “small mode.” As they understood more about what the customer wanted, they could (and did) start building the online business. Eventually, they transitioned out of the manual approach and into the online approach, but by then they had answered many critical questions.

Law department leaders can follow the same approach with software ideas before going to software. Instead of boiling the ocean, pick a small group and have them “manually” do what the software would do. Keep testing, asking what features you need, learning where there are rough spots in processes, and gathering data. At some point, you may be ready to look at software. Now your focus will be on what you need not on what vendor’s sell. You may find that a much simpler package, or perhaps two or more very simple packages, will do what you need for less money, with better quality, and give you more flexibility, than the one big package.

Why Go the Lean Path

It is easy to spend money. It has gotten easier to spend money and successfully install software. It still is difficult to hold off, assess what you really need, clean up processes, re-think how you do things, and then spend only what you need to spend, not what you are authorized to spend. Going the lean path yields greater and more sustainable results, often getting results well before the traditional path of plan then spend big. It also fits much better with the modern, flexible business.

Running a law department efficiently, one of the keys to getting greater responsibility within the modern corporation, is much more than trimming costs. It involves knowing how to do things differently, innovate, and create new models to replace old methods. Having seen the fallout from those who simply pursue the traditional path, I have found that many programs intended to create efficiency end up creating more waste (especially when you add in the costs of having to redo the efficiency effort). For your next adventure, think lean startup and follow a new path to a better outcome.

ValueWhen you read hype, it sounds like something is about to take over the world. Read an article on artificial intelligence in the law and you can be sure that the offices next to you are now occupied by robo-lawyers. In another article, you learn about blockchain technology. By the time you are done reading, you fear that if you haven’t mastered blockchain by the end of the day, your legal career is over. The art of hype has taken to new levels the ability to scare the bejeezus out of those being hyped.

Unfortunately, hype has a dark side that we all experience. If you do think there is something to artificial intelligence, blockchains, or any other development, hype is sure to set expectations so high that reality cannot reasonably reach them.  When those scared into learning more dig into the facts they find that the real world pales in comparison. Over-hype a good thing and you can send something down the path to obscurity before it reaches its potential. Value fees almost became one of those victims.

Value Should Be at the Heart of What We Do

Value fees (alternative fees, appropriate fees, etc.) came close to never reaching its potential. Apart from the head of finance at a major law firm, it is hard to find anyone who really likes the billable hour. Everyone knows its evils, but few sing its virtues (we all know there is a reason for that, but some valiantly try to squeeze out a few notes). Value fees were hyped far ahead of their time.

The idea of value fees was and is great. It is hard to argue with the basic proposition that the client should pay what it thinks the service is worth and the service provider should receive what it thinks the service is worth. But you may also think, it sounds like there will be a gap. The service provider will go high, the client go low, and they won’t be able to agree on a price.

Ponder this false dilemma a bit more, and you can see what will happen. The service provider will bring down its price. If the client doesn’t come up, the service provider will learn its prices are too high. If the client does come up, the service provider and client can find a point where the value exchange equalizes and they engage in the transaction.

Value fees adjust for risk apportionment. They also adjust for cost, context, point in time, and a myriad of other factors. Value fees are a way of adjusting more than just the pricing, they can adjust the entire value chain for the transaction, and that is far more efficient than having a pricing system based on a measure insensitive to the concerns I listed above (I’m looking at you, billable hour).

What is Value?

We have just hit the point where many lawyers—law firm and client—drop out of the value fee discussion. These fees require something that has been bred out of most lawyers, and that is the ability to understand how they provide services. Without the knowledge of how services are provided, lawyers find it almost impossible to make value fees work consistently. They see this as value fees being over-hyped and stop using them.

To understand this cycle, we need to explore the concept of value fees more deeply. First, we need to get past the stumbling block for all lawyers. Say “value fee” and the first question you get is “how do we determine the value.” A simple answer usually is best, especially when it is accurate: the “value” of a service at a point in time is whatever the client and service provider can agree on as a price. Second, we must recognize that the billable hour has nothing to do with value. It is a measure of inefficiency—the greater the invoice the more inefficient the process (though not necessarily the service provider).

Most people get, even if they struggle with, the part about the value being what the client and service provider agree upon. They have experience with these types of transactions. When you buy a car, a house, a pair of shoes, or a dinner at a restaurant, the value of whatever you buy is what you are willing to pay the other party.

The other part of the definition—at a point in time— throws many lawyers. The value of the exact same service can vary from time to time. In fact, lawyers also are familiar with this phenomena even though most don’t know it.

Want to buy a book from a well-known online retailer? You go on its site and check out the book, but you can’t make up your mind. The book costs $19.95 and you aren’t sure you want to pay that much for it. A few hours later, you are surfing the web when an ad from that same retailer pops up on a site you are visiting. The ad features the book you wanted, except the price is $18.95. You think “wow, a deal” click on the ad and buy the book.

The retailer’s service is selling you the book, but the retailer couldn’t close the deal at $19.95. The retailer was at $19.95 as its value point, but you were at something less. Based on experience selling millions of books, the retailer decided that dropping the price by one dollar would do the trick. So, it offered the same service at a lower value, $18.95. You agreed, and the transaction went through.

What you did not know, is that when you were buying the book for $18.95, the retailer was selling another copy for $19.95 and another for $19.25. Each time, the service was the same—selling a book and delivering it to the customer (assume that cost of delivery was the same in each instance). But, three different values were placed on the transaction, based on what the service provider was willing to accept and the customer was willing to pay. There wasn’t a “right” value for the service.

A ride-sharing service has become famous (or infamous) for understanding that value varies based on context. Hail a ride on a warm sunny day, and you will be charged $X for that two mile ride. Hail a ride from the exact same location on a day when it is cold and rainy, and the cost will be $X+Y for the same trip. Demand for rides has increased so what you the customer are willing to pay has increased, because the ride has greater value to you (staying out of the cold rain versus staying out of the warm sun).

There isn’t one “value” for a service. There are many values, each dependent on many factors. But if trying to find a value to charge (or pay) for a service is difficult, then how can the parties choose among the many values? A large part of the answer lies in that area lawyers don’t understand—how they provide their services.

If You Don’t Know Cost, You Don’t Know Value

When you don’t understand how you provide your services, you don’t understand your cost structure, and without understanding your cost structure setting a value for your service is the same as being left in the middle of a golf course with a blindfold on and being told to find the golf ball. There is a chance it will happen, but the probability is low.

From the service provider’s side, knowing what you will accept as payment for a service starts with knowing the cost of providing the service. Once you know that cost, other factors come into play that will help you set the value. Assume you know the cost of your services is $20,000 (put aside for the moment how you know that). If you accept $20,000, then you don’t lose or make any money. Now, you can adjust up or down what you will accept for the service, based on other factors.

If the client is a new one who could spend hundreds of thousands of dollars at your firm, you may decide to accept less than $20,000 for the service. If the client is problematic and the risk of payment is high, you may decide to charge $30,000 for the service (keeping in mind, of course, professional responsibility requirements). The $30,000 isn’t an arbitrary value, it includes a profit margin and an amount to cover the risk of non-payment. In each case, the client may agree to your value amount, or disagree and decide to negotiate, or simply go elsewhere. The better you understand your services and the market, the less likely you are to lose the sale.

Now we need to circle back and examine how you knew the cost of your services. Trained in the billable hour, most lawyers assume you determine cost by multiplying the number of hours it will take to provide the service by the cost of each service provider. If it takes the partner 10 hours, and his cost per hour is $250 (even though his billable hour rate is $500), then his cost is $2,500. Do that same step for each service provider, add them up, and you have the cost of the service. Not really.

Every day, each lawyer does things at work that fall into one of four categories: value added, necessary but not value-added, unnecessary and not value-added, and other. We can dispense with “other” quickly. It includes all the things that fill up the day but have nothing directly to do with providing services to clients. Getting coffee, talking to your friends, surfing the web, and so on. Forget about those things.

The other three categories are the ones to focus on. When you say that it costs the firm $250 per hour for that partner, you really mean that it costs $250 for one hour of time spent on some combination of value added, necessary waste, and unnecessary waste. Necessary waste includes those things you must do, but which do not add value. Unnecessary waste includes those things which do not add value and which we can eliminate. Law firms typically do not break time out into those three categories, so they don’t really know the cost of the services they provide. In hour one, the lawyer might provide 45 minutes of value added services, 10 minutes of necessary waste, and 5 minutes of unnecessary waste. But in hour two, it might be 45 minutes of unnecessary waste, 10 minutes of value, and 5 minutes of necessary waste.

We can go back to that partner who spent 10 hours to perform his service. The real question is how many of the 10 hours were wasted? Let’s assume this partner is more efficient than the average lawyer and wastes only 50% of his time. That means that out of the 10 hours, 5 hours were value added and the other 5 hours were waste. Remember there are two types of waste, so one of the 5 hours was waste, but we would not have been able to prevent the waste. The remaining 4 hours of waste truly was waste—it should have been eliminated.

From the firm’s perspective, it cost 5 hours value added work by the partner (at $250 per hour) to provide the service, another 1 hour (again at $250 per hour) to provide waste that they couldn’t remove, and 4 hours (also at $250 per hour) to provide pure waste. What should have cost the firm $1,500 to perform (6 x $250) cost the firm $2,500 to perform. This is what I mean by knowing your cost.

When a market has minimal competition (the good old days in the legal industry), spending too much time to perform a service didn’t hurt a firm. It simply passed the excess cost on to the client. In a competitive market, paying more than necessary to perform a service decreases the potential revenue and profit for a firm. Other firms will reduce their cost, lower their prices, and win the client.

This is where process connects with value fees. The firm that controls its costs—not just the billable hours spent, its true costs—has more flexibility on pricing. It can even reduce prices and make more money than a competitor who doesn’t have control of its costs. The firm controlling its costs can use value fees as a competitive weapon while at the same time giving clients predictable pricing.

Flexibility in pricing is not the same as strategy, though without flexibility you are limited in strategy. Flexibility means you can drop your price below your cost, price at your cost, price over your cost, or charge a premium price, all depending on your pricing strategy. You also can vary pricing depending on the context. In other words, you now control the profitability of your organization. Clients always set the price, but by aggressively reducing costs you can increase your organization’s profitability even when revenue drops.

Conclusion

Lawyers shy away from value fees, claiming they are too complex, require too much work, or that they simply don’t work. Value fees are more complex than billing by the hour and they do require more work. Value fees are for firms that respect their clients and trust them. They are for sophisticated firms that understand pricing legal services should not be an exercise in demonstrating your firm’s inefficiency. They also are for lawyers who believe they should get paid a fair price for what they deliver to clients. For clients, value fees are a better, more nuanced way of making sure they pay for the value they receive, reward superlative service, and recognize when there has been a service shortcoming. For all lawyers, value fees get us off the belief that working 24 hours a day is a good thing.

HoneymoonersI grew up watching the first runs and in some cases re-runs of great, early sitcoms. The Honeymooners (1955-1956). The Dick Van Dyke Show (1961-1966). The Andy Griffith Show (1960-1968). I Love Lucy (1951-1957). Each of these shows featured pioneers in television comedy. They have been so influential, that if you watch sitcoms today (something I rarely do), you can catch moments when the writers will pay homage to the early shows by throwing in one of the famous tag lines.

Jackie Gleason’s show The Honeymooners ran in its first outing for only 39 episodes. It faced a timing problem—it was up against the extremely popular The Perry Como Show. The Honeymooners broke new ground by featuring a working-class couple living in Brooklyn. Years later, All in the Family  would pick up on this theme by featuring a working class family living in Queens.

Jackie played Ralph Kramden, a Brooklyn bus driver, and his wife Alice was played by two actresses, the more memorable being comedienne Audrey Meadows. Ralph’s friend was Ed Norton played by another great comedian, Art Carney. Ed’s wife, Trixie, was played by Joyce Randolph. Alice was the inspiration for Wilma Flintstone, Ed was the inspiration for Fred Flintstone, and Trixie was the inspiration for Betty Rubble (and if you don’t know The Flintstones cartoon, you missed a popular culture icon).

The plot revolves around Ralph who has a never ending series of get-rich-quick ideas, each of which Alice shoots down throughout the show. Ralph and Alice, with Ed jumping in, bicker about Ralph’s ideas shooting streams of one-liners. And, of course, by the end of the show Alice’s concerns are borne out and Ralph never reaches the pot of gold.

One of Ralph’s taglines became the instant identifier for those who watched the show. As Alice and Ralph bickered, both would get frustrated until Ralph would bark out (with many variations): “One of these days…” followed by “BANG, ZOOM! Straight to the moon!

Lean is More Than Cost

Today, when I hear over and over again misleading to blatantly wrong descriptions of lean, I’m tempted to shout “BANG, ZOOM! Straight to the moon!” Of course, I’m seldom around someone who would get the line, so I just say it to myself.

Why do I get so frustrated? First, I recognize that most of the comments come out of ignorance (and, in that, I see myself ignorantly speaking about other areas). It is a lawyer habit to read what is written in a paragraph or a blog post and think, “now I too am an expert.” We then want to pontificate on the topic and that leads us into swampy waters. Nevertheless, when I hear someone say “lean is all about cost cutting …” Well, BANG, ZOOM!

Second, I know as we all know that repeating incorrect things often can derail good ideas. It is easier for us to take in what we hear as gospel rather than dig deeper and learn the facts. Say lean is all about cost cutting enough times, and lawyers (who already aren’t interested in becoming efficient) will take those comments as defining lean and reject it.

Third, the person who describes lean as merely cost cutting frequently follows their statement by adding that they tried lean and it doesn’t work. Lean is not the only new idea in law that elicits negative comments. The same people often deride value fees. Dig a bit deeper with them and you find that they were opposed to the ideas, they didn’t make an effort to implement them correctly, and that the so-called failures were mostly if not entirely due to the person not the ideas. In other words, the person is against change and their agenda is to prove they are correct, not to explore new ideas.

The Real Lean

Lean thinking (the original name was Toyota Production System, but I’ll use the name given by James Womack and Daniel Jones in their book, Lean Thinking) brought together many ideas from many streams starting at Toyota back in the 1890s. It worked in part because the right people were in the right place at the right time.

Japan was in its post-World War II phase. As an island nation, it did not have the raw materials necessary for automobile production, which is what Toyota was focused on shortly before and coming out of World War II. Lean was born in a situation of many constraints, which made efficiency and creativity priorities. Contrast that with the United States, which had the necessary raw materials,  could be inefficient without blocking progress, and traded space and brute force for creativity in operations.

Japan also had a very strong cultural belief in employing individuals for life. In fact, to this day Japan still places a high value on lifetime employment. Many businesses will re-deploy workers to keep them busy (even tending gardens) rather than lay them off when times get tough. In the United States, employees always have had less job security and today are treated as disposable by most businesses. When workers aren’t afraid to lose their jobs they are more likely to actively support efforts to remove waste from their jobs, even if doing so eliminates the job they do today.

Japan’s management style was quite different than the management style in the United States. Japanese companies placed a high value on discipline and order. In fact, order is something prized in Japanese society, while clutter has been widely accepted in the United States. If you already favor order, then engaging in a system designed to bring more order doesn’t seem as foreign.

I am not praising Japan over the United States. There were many challenges to Japan’s approach, and emotional intelligence in management was one of them. But it is important to understand the context in which lean thinking came together. Lean thinking flourished in an orderly, disciplined, clutter-free, secure world. Porting lean from Japan to the United States, therefore, was always going to be a difficult task. But it was not a task first and foremost about cost, it was about waste and creativity.

One of the early contenders for this new system’s name was Respect for Humanity (as was the Ohno System, in honor of Taiichi Ohno who did much to pull the streams together). So let’s take a brief trip back to Japan post-World War II as the lean thinking story started and think about respect for humanity.

Don’t be Wasteful

The Toyoda family (they switched to Toyota for public use) had decided to enter automobile production prior to World War II. Coming out of the war, they resumed their efforts, but all the things they needed—steel, rubber, iron—were in short supply. Toyota also faced an efficiency challenge when compared to auto manufacturers in the United States and other countries. What took Toyota 100 workers to accomplish, took Nissan only 30 workers, and Graham-Paige (a U.S. manufacturer) 18. Ohno had to figure out how to get the most possible from each unit of raw material and how to use brains instead of brawn to compete with other companies. In other words, he had to get waste out of the system and harness creativity to solve operational problems.

As I noted above, the idea of removing waste, or not even creating it, fits well with many Japanese philosophies. When you live on islands and have constrained resources, efficiency becomes a way of life. Look at Japanese farming techniques and you will instantly recognize terraced hills for rice growing, making use of space only a very sure-footed individual would dare to reach. Go to a Japanese fish market and you can buy whole fish or every part of the fish separately. Nothing goes to waste. Even Japanese martial arts share the no-waste philosophy. The movements of a great martial artist are lean and focused on the goal. Students spend their lives trying to master the physical and mental goals of simplicity.

Many societies have similar practices, but in post-World War II Japan frugality and simplicity were central to daily life. It did not feel unnatural to have the same view in manufacturing (although Ohno met with resistance just as we do in the United States, since change seldom comes easily).

Lean was focused on removing the eight (originally seven) types of waste, or muda. One clear benefit of removing waste is cost reduction. If you don’t waste raw material or humans, you reduce the cost of the product. Ohno reminded everyone that the equation for a business is Price – Cost = Profit (not Profit = {rice – Cost or Price = Cost + Profit). The customer will only pay a certain price. Therefore, a business earns its profit by reducing its costs. Remove waste, costs drop, and the business becomes more profitable. Cost reduction is part of, but not all of, lean.

Lean Concepts Seem Foreign in the U.S.

Contrast the Japanese context with the United States context post-World War II. The United States had gone through the Efficiency Era, which lasted from 1890 until 1932 and the start of the Great Depression. Many blamed the Depression in part on an excessive focus on efficiency. As a result, businesses downplayed efficiency.

World War II brought incredible demand for products, but even the United States had trouble meeting demand for raw materials. After World War II, supply remained tight for many years. Still, the United States was the land of great riches and it could grow supply to meet demand. Japan, the land of islands, had to import its raw materials.

As you look at the period from 1945 to the present, you can see how the paths taken in Japan and the United States diverged. Toyota remained focused on efficiency through to the present. United States manufacturers did not swing their focus back to efficiency (in large scale) until the late 1980s. Law did not start dabbling with efficiency until after 2005.

By the time lawyers in the United States even started looking at lean, it had gone through several evolutions. I learned lean thinking from sensei (teachers) who worked at Toyota with Taiichi Ohno and were part of the original Toyota Autonomous Study Group that created most parts of the Toyota Production System. I studied at Shingijutsu Co. Ltd., a consulting firm Ohno encouraged these sensei to start to spread lean thinking beyond the automobile industry. I look at lean through the lens of those who developed it.

Contrast that with the background of many who talk about lean in the legal industry today. Most have learned lean from individuals who were two or more generations removed from the original lean thinkers. Much of the discussion about lean comes from an incomplete understanding of its philosophy, because the training they got focused on discrete goals rather than the big picture. The lean practitioners in law skip many of the essentials and concentrate on cost. This distortion makes lean look either like something a low-cost manufacturer would use (not a great law firm) or a misguided attempt to turn lawyers into automatons.

For those who want to really understand how lean thinking can help the legal industry (and work harmoniously with innovation and technology), start by asking yourself this basic question: “Do I believe it is good to have people spend their days on tasks that have no value?” If you answer “yes” then lean thinking won’t work for you. If you answer “no” then lean thinking can help.

Let’s put some meat on those bones. Look at what you do through the eyes of a client and a lean thinker. Is there value in any of the following, or are they simply things you do because you haven’t been creative and found ways to reduce or eliminate them:

  • Moving papers from one place to another (electronically or physically),
  • Emailing,
  • Photocopying,
  • Searching for anything (templates, cases, documents),
  • Waiting,
  • Revising,
  • Reviewing,
  • Correcting,
  • Transferring,
  • Re-creating,
  • Etc.

A big part of the value lawyers bring clients comes through the solutions they create to client problems. The execution of those solutions is the embodiment of the lawyers’ ideas. We should encourage creative problem solving, but we should also encourage efficient execution of ideas. Our current system encourages inefficient execution and, when each day is constrained to 24 hours, that limits the time to spend on problem solving.

Lawyers have trouble separating efficient from inefficient execution, because they haven’t been trained to do so and have been encouraged and taught not to do so. Legal training is largely about teaching inefficiency. If someone has taught you to be inefficient, rewarded you for your inefficiency, and you have been successful (at least financially) because of your inefficiency, you will fight alternatives.

Respect for Clients and Lawyers

The topic of how lean relates to delivering legal services deserves more attention, and I am giving it that attention in other places. But right now, I’ll close with this. Lean thinking reduces costs, but it is not about reducing cost. Lawyers who remove waste from what they do will be happier, less stressed, have more time to focus on substance and quality, and be more engaged in their daily activities. All of those changes encourage creativity and show Respect for Humanity.

All of those changes also reduce the cost of legal services (note: cost, not price, which is the topic of a different discussion). There is nothing wrong with reducing cost through waste elimination. In fact, if you look at the businesses who hire lawyers you will find most of them believe in cost reduction through waste elimination. On a broader scale, society benefits from removing waste (healthcare is one example, another is the food supply chain—approximately 50% of the produce in U.S. supermarkets is thrown away as waste, which is one reason we have an imbalance on access to food).

If you still don’t believe that lean has benefits beyond cost reduction, then do this exercise. Ask one of your lawyer colleagues to sit down with you and the client (that is, the person who really pays the bills, not an in-house lawyer). Tell the lawyer that she will spend more than 50% of each day doing things that add no value to the service the client will get. None. Zero. She will do those tasks merely because no one has bothered to spend time figuring out how to eliminate them.

Then, turn to the client and tell her she will pay for those tasks, even though she gets no benefit from them. None. Zero. Tell her she pays for them because it keeps lawyers busy, makes some rich, and overall because no one has bothered to spend time figuring out how to eliminate them. Ask both if they feel the legal system is showing Respect for Humanity with this structure.

Lean thinking is not a panacea, it is not a silver bullet, and it is not the solution to all that ails the legal industry. But it is a great place to start requiring creativity. So, next time you say to me that lean is simply about cost cutting, don’t be surprised if I say BANG, ZOOM! Straight to the moon! 

LeanCostThe first week, we started down the path of evaluating the cost of process improvement for a law department. The second week, we finished that analysis and started to look at process improvement from the law firm’s perspective. The third week, we continued our look at the value of process improvement from the law firm’s perspective. In this final part of the series, we will look at it when we bring technology into the picture and close out the post.

The Technology ROI Analysis

Mention replacing labor with computers in most law firms and law departments, and you get certain responses. First, you can see the dollar signs floating in the air. Law departments have restricted budgets and are cost centers. The idea of adding more cost to a cost center generally does not excite general counsel. Law firms, now in a competitive environment, do not relish taking money from the partners to pay for computer systems that many partners will refuse to use.

Second, you can see the discomfort on the faces of the lawyers. Lawyers are, as a general rule, not tech savvy. The thought of loading up on more technology creates more stress for a group who do not like being involved with anything they do not understand.

The fundamental question most lawyers ask is the same one their business counterparts ask—will the cost, time commitment, and other resource commitment of using the technology be justified by the return they get from using it. We are back to the ROI question.

From Complex to Simple

I will divide technology into two categories. The first is complex technology. Complex is not synonymous with expensive. In our case it means implementing the technology falls at the end of the continuum where the time, commitment, and resources are high for the environment (what is complex for a one-person department may be simple for a 100-person team). An enterprise level contract management system could be complex for a large law department and a matter management system could be complex for a small law firm. The second category is simple technology. This technology falls at the low end of the continuum. It typically includes single purpose software that is user-friendly to implement. Many contract automation tools fit into this category.

Calculating the ROI on technology often is complicated, but not impossible. The approach is straightforward. First, determine the current process for doing the work. A process mapping exercise will help. Then, create the new process if the technology is implemented. Compare the cost of the old process to the new process (plus the implementation cost) using the ROI calculation. If the new process including the implementation cost yields a positive ROI, then you should consider the technology. If not, skip the technology.

The more the technology affects processes within and outside your domain, for example in areas outside the law department or in areas controlled by clients, the more difficulty you will have mapping the process and tracking costs and benefits. Rather than coming up with “an answer,” think about coming up with a range of answers and probabilities (we call this the Bayesian approach). Also, recognize that the costs and benefits are unique to your environment. A vendor can help with a template and some ideas about where to look for those costs and benefits, but a generalized ROI will not reflect your unique situation.

Beyond looking at the ROI, there are some other factors you should consider. Assume you installed some software (e.g., contract management software) before doing anything to improve the five hour process your attorney uses. You integrate what the attorney does with the software package. You have now done what we call institutionalizing waste. The wasteful process is built into your systems in ways that are deeper and more difficult and expensive than before.

To change the process, you need to re-work the workflow outside the computer system, probably re-work the workflow within the system, and re-train everyone on the new workflows. All of that costs money. And, you get to spend money to change the computer system and re-train each time you do a process improvement event. You have increased your costs and institutionalized waste, a toxic combination.

Institutionalizing waste is quite common. In fact, except in companies that have a strong process improvement culture, it is the norm. I have seen instances where companies introduce computer systems, do not get the improvement they want or eventually see improvements stall, bring in process improvement experts, and end up ripping out the computer system.

Does this mean you should forego the benefits of computers? Of course not. First, analyze, standardize, and remove waste from processes as much as you can before moving to software. Second, when you do move to software, be skeptical of the “one package does it all” solutions. These packages typically do many things okay, but seldom do many things well. In some situations, your process study may show that outcome is fine. If the many things the software does okay are all peripheral to your service and your requirements are simple, the software may be a good choice. If many of the things you want the software to do are important to your service offering, you may want to look elsewhere.

As an alternative to one-package software, consider single solution packages. For example, there are packages that only do document automation, logic trees, or customer relationship management. If you want to excel in these service areas, then a single solution package may be better for you.

Single solution packages take the place of certain steps in your processes, they do not replace processes. Today, someone may open a template and fill in each blank by copying and pasting from another document are typing the entry. The document automation software fills in the blanks by doing these steps for you. They save labor and avoid typos. Whether it makes sense to use the software is something you will learn from your process improvement event and ROI calculations. But, it is much easier to change a process with single solution packages than with a package that tries to do everything in the contract process.

Think of a process as a string of beads. Each bead is an operation in the process. As you use process improvement events to improve those operations, you will come to points where replacing a human bead with a computer bead makes sense. We do not handwrite documents, because typing them on a computer makes sense. No matter how much process improvement we do, creating the document on a computer will go faster and be more legible than hand printing it. Over time, we may even replace the entire string with a computer. But, we do not simply jump from human to computer.

Teaching Lawyers to Fish

I hope I have convinced you of a few things. First, using an ROI analysis, you can determine whether a process improvement event has the potential to generate a positive return on your investment by calculating what level of improvement you need from a team. Second, at the early stages of implementing process improvement, it is very easy to generate positive ROI events. Third, moving to process improvement opens up other possibilities that can benefit both the lawyer and her client (whether that means outside lawyer and company, or inside lawyer and businessperson). Time is valuable. Fourth, technology can be a benefit, but the benefits increase when you use process improvement to take out waste first and selectively add technology, versus replacing processes with “do it all” technology. If it sounds too good to be true …

Sometimes, the payback on a process improvement event just is not there. Often, if you look at the event, focus the project a bit more and reorganize the team, a negative ROI event turns into a positive ROI event. Remember that events build on each other and through that stacking you compound returns. Take small steps.

Usually I tell stories to show lawyers that process improvement works. In this series of posts, I have given you the primary tool to prove to yourself that process improvement works. When lawyers ask “what’s in it for me” the answer lies in doing the analyses I have laid out in these posts. In harsh terms, a positive ROI means there is money in it for you.

The challenge to using process improvement in law does not lie in the methodology, the field, the intellectual nature of what we do, or any other imagined barrier. The challenge lies in the extraordinary resistance to change lawyers present to themselves and the world. As one general counsel put it to me, “When you get right down to it, even lawyers can learn what others have been able to pick up with a few hours training. The challenge is not in this process improvement stuff, the challenge is in getting lawyers to realize that when it comes to law they own the knowledge, but when it comes to delivering services, they do worse than retail clerks and factory workers.”

Some Final Thoughts

I have taken a book-length topic and condensed it to 8,000 words. Obviously, I simplified some things and did not cover others. My point was not to oversimplify to win you to my viewpoint. Rather, it is to educate you about the evolving view of efficiency in law. I call the new combination of human and computer the “augmented lawyer.” This lawyer must understand the law, of course. But understanding the law and advising the client have now become table stakes for most lawyers.

The new lawyer must be able to combine human skills plus computer skills. To do that, the lawyer must understand processes, how to improve them, and when to add technology. That does not mean the lawyer must become a process improvement expert, project manager, or a technologist. In our complex world, no person has the ability to do it all—even a lawyer.

It does mean that a lawyer must become conversant in the tools of the trade. He must understand processes and process improvement. He must know how and when to use project management. He must understand value versus time and deliver more of the former while using less of the latter. He must know where data resides and how to leverage it for his client.

This last point is important for it underlies what I have discussed in these posts. To do ROI calculations, you need data. Data has become to the 21st century what hydrocarbons were to the 20th century. That is a great line, but it is not mine. It belongs to Virginia Rometty, CEO of IBM, who said it in her commencement speech at Northwestern University in 2015.

Pedro Domingos, a computer scientist at the University of Washington, put it this way in his book The Master Algorithm:

Think of big data as an extension of your senses and learning algorithms as an extension of your brain. The best chess players these days are so-called centaurs, half-man and half-program. The same is true in many other occupations, from stock analyst to baseball scout. It’s not man versus machine; it’s man with machine versus man without. Data and intuition are like horse and rider, and you don’t try to outrun a horse; you ride it.

Process improvement is a tool that helps you understand when and how to use the horse effectively. ROI is a tool that helps you understand when and how to use process improvement effectively. You can choose not to use the tools. But in every other area of human endeavor, those who ignore tools find themselves at a disadvantage compared to those who do use them. Choose wisely.

LeanCostThe first week, we started down the path of evaluating the cost of process improvement for a law department. The second week, we finished that analysis and started to looked at process improvement from the law firm’s perspective. This week, we continue our look at the value of process improvement from the law firm’s perspective.

When we did the ROI calculation for the law firm’s process improvement event, we got an ROI of -$35,927. As I noted, however, that is how it looks at first blush. We should dig deeper.

It turns out that what seems to be a disastrous event from the law firm’s perspective really is an opportunity. Ask lawyers, and they say the opportunity is to use the “saved” time to do more work for the same client or do work for a different or even new client. In other words, if a lawyer bills 40 hours per week she sees the time saved from the process improvement event as an opportunity to keep billing 40 hours per week, just with a different mix of clients and matters. That is an opportunity, but not the one I see and not one that would drive a rational investor to use the process improvement event.

Rethinking Law Firm Pricing

The opportunity I focus on offers much more to the lawyer and her client. It starts with the value model. Process improvement supports the lawyer moving from the billable hour to an alternative fee structure which can be more profitable for the law firm while costing the client less. We used the assumption that the lawyer bills at $500 per hour, so the lawyer was charging $2,500 for five hours work. After the first process improvement event, it takes the lawyer three hours to do the work, so everyone assumes the price will drop from $2,500 to $1,000. That is a bad assumption.

The value the client received has not changed. The only thing that changed was the input volume to produce that value. The lawyer could switch from charging by the hour to charging a fixed fee based on the value. On a fixed fee model, the lawyer can choose one of several paths including charge the original price, reduce the price a little, reduce the price a lot, or keep the price the same but offer additional services. The demand for the lawyer’s services will play an important role in the decision. The value of the services is determined by what clients will pay, not by the time it takes to provide the service. For example, even though it only took five hours to perform the service, clients may have been willing to pay $5,000. Of, while it still takes two hours to perform the service, clients may be willing to pay only $250.

Lawyers often think about revenue, but not about profit margin. Firms compensate lawyers based on revenue and often pay little attention to profit margin. Lawyers focus on revenue over profit because they are rewarded for doing so. Most large firms still have some partners generating millions of dollars of revenue on which the firms lose money. For example, the firm may have decided to support a practice area as part of the firm’s mix of services even though that practice area does not make moneyIf that is a conscious decision. In that case, the firm has made a rational decision.

Unfortunately, firms often maintain these money-losing practices for the wrong reasons. They may not want to have the firm’s overall revenue drop, the partner who owns the book of business could b politically powerful in the firm, or the firm simply does not know what it makes or loses on the business.

I am going to assume you want every revenue stream to generate a positive profit margin. Firm-wide profit margins vary at large firms, so I will pick 50% for this example to keep the numbers simple (large firm profit margins more typically range from the low 30s to the 40s, though individual practices can go much lower and higher). Our lawyer was billing (and we will assume collecting) $2,500 for five hours work. At a 50% profit margin, the firm made 0.50 x $2,500 = $1,250. What can the firm do when it takes only three hours to do the work under the various options I listed above:

1. Keep price the same. Profit margin increases to 70% ($2,500 – $750 cost = $1,750 profit, $1,750 / $2,500 = 70% profit margin).

2. Reduce the price a little. Our lawyer charges $2,000, and the profit margin still increases to 62.5% ($2,000-$750 cost = $1,250 profit, $1,250 / $2,000 = 62.5% profit margin).

3. Reduce the price a lot. Our lawyer charges $1,500, and the profit margin stays at 50% ($1,500 – $750 = $750 profit, $750 / $1,500 = 50% profit margin).

4. Keep the price the same but offer additional services. The profit margin will be somewhere between 50% and 70%, depending on the services the firm provides and assuming those services are not too costly so they push the profit margin below 50%.

The price our lawyer uses as the fixed fee will depend on many factors. They include the relationship with the client, the competitive market generally, competition for this particular matter, and the firm’s pricing philosophy.

But, one additional factor the lawyer should consider is the ROI on the investment to reduce the time on the matter from five to three hours. Ignoring the investment means the law firm will not recoup the investment, which is just bad business. There is an exception. If market prices are dropping drastically, then investing in process improvement may be a way to reduce costs while keeping pace with the drop in market prices. In that event, the law firm’s profit margin could get squeezed (from 50% to, say, 35%). Practitioners serving individuals and small businesses may be experiencing some of that with technology-driven competitors entering the market.

Improving the Law Firm ROI

Looking back at our law department example, we recall that the in-house lawyer repeated the process once a month. Over five years, the lawyer would iterate the process 60 times. That may sound like a lot of iterations, but when you break down what lawyers do, it is easy to find tasks that lawyers do hundreds of times each year. Time adds up across those tasks, which makes it easy to find ways to generate large ROIs on process improvement events.

We can translate the effect of repetition to the law firm setting. Again, to keep our example simple, we will assume our lawyer in the firm also does the five hour task once a month, though she performs the task for various clients (one month for Client A, the next for Client B, and so on). The initial cost to do the process improvement event stays the same at $15,000. Now we will look at the ROI for the law firm under a few scenarios.

First, we will assume that our lawyer decides to reduce the price for the matter from $2,500 to $2,000. In the first year, the firm will spend $15,000 during the first month. In the second month, the firm will spend $750 (versus $1,250 before improvement) to do the work, but it will collect $2,000 (versus $2,500 before the price drop). In other words, it will spend $500 less but it will collect $500 less, so the net change in cash flow (before the event to after) is $0. It will remain the same throughout the five years for an ROI of -$13,636.

If the firm spent $15,000 and saved $0 why is the ROI only -$13,636? The firm will have spent $15,000 to get no change in net cash flow, but a profit margin increase from 50% to 62.5% (plus whatever benefits they get from reducing the price to clients). The basic ROI formula assumes the $15,000 is spent at the end of the year, not the beginning. It discounts the amount to the present, which is why the ROI is less than $15,000. For those who want to be very precise, you can tweak the formula to address the timing issue.

The ROI went to -$13,636 from -$35,927, which is good, but we still don’t have a compelling argument for process improvement. Before we abandon this process improvement event, we should ask again whether we have considered in our calculations all of the benefits the firm will get from the event.

The answer is no. In our calculation, we assume no value to the two hours per iteration that were picked up from the event. In the first year, the firm picked up 11 x 2 = 22 hours and in years 2 through 5 it picked up 24 hours per year, for a total over five years of 118 hours. If the firm cannot do anything with those hours (they have 0 value to the firm), then our calculation was correct. But, if the firm can use those hours (do work and charge clients for the work), they have value.

Currently, each hour has $250 of value to the firm ($500 billed rate – $250 cost). If we add that value to our ROI calculation, we get a new ROI of $6,154. If the firm can use those hours at the 62.5% profit margin (for example, do the same task for more clients using only three hours and charging $2,000), the ROI increases to $11,101.

We can do a quick summary of process improvement from the firm’s perspective:

1. If a firm does a process improvement event and it sticks with the billable hour for its pricing model, it will be hard to justify doing process improvement. Firms that are comfortable billing by the hour and who have sufficient clients willing to pay by the hour may not benefit by becoming more efficient (at least not using this simple ROI analysis).

2. If a firm does a process improvement event and changes to an alternative fee pricing model, it is easy to justify doing process improvement, provided the firm sees value in the time saved by becoming more efficient. I showed one value—using the time saved to do work for other clients on an alternative fee schedule. There are other measures of value that could be used, such as lower employee turnover, higher client attraction and retention rates, and higher employee satisfaction from doing less wasteful work. Always remember time is the one thing we cannot replace, so saving time has value.

3. Process improvement events have value beyond the obvious. We did not talk about the value to the client of reducing the work time from five to three hours. The client may value getting the work product more quickly. That value may express itself as client satisfaction. Some clients may be willing to pay more for a faster resolution.

We have seen how process improvement events can generate positive ROIs within a law department and a law firm. But process improvement does not live alone today, like it did back when companies first started using it. In the 1970s when Toyota put more structure around its corporate process improvement program, and in the 1980s and 1990s when U.S. companies adopted process improvement, the question was often binary—do process improvement or stick with the current method. Today, another alternative frequently pops up, and that is technology and more specifically computer systems.

It makes sense for us to look at process improvement and ask whether the ROI method of valuing an event has anything to offer when we consider using computers as an alternative to labor. Next week, in the final installment of this four-part post, I will look at technology, the ROI analysis, and add some closing thoughts.

ModularityLawyers think about things in somewhat discrete units called matters. No one has a formal definition of matter we all must use, but we all know them when we see them. A lawsuit is a matter, a contract is a matter, a policy is a matter.

We have, of course, managed to confuse this neat world by using “matter” indiscriminately at times. If you do a lot of over-the-phone counseling for a client, your system may show “Grady Counseling” as a matter. We also collect things, like all the work necessary for company A to buy company B, into a matter we call “A Acquisition of B.” This matter includes many contracts and other documents, counseling activities, and other tasks.

When we talk about matters which include multiple tasks—that is, when we refer to matters as collections of tasks rather than discrete tasks—we create the possibility and usually the reality of a networked system. “A Acquisition of B” includes contracts and other documents, some of which are based on templates taken from “X Acquisition of Y.” These matters are now linked through a common document template, the asset purchase agreement template.

Active law practices have lots of networking, or linking, because templates get used often. I may have a standard form or motion I use in litigation, a basic form of will, or a standard ERISA 401k plan document. The more often I use it, the more networking affects my system even if I modify it for each particular use.

We can think of each template as a module that gets used and re-used in our network. That module addresses one thing. But, we can plug the module into many situations which need the one thing. Using the module stops us from re-inventing the wheel each time we need whatever the module covers. Using the example above, you would not want to draft an asset purchase agreement from scratch each time you had a client making an asset purchase. You use a template (the module) which allows you to customize the basic template.

The Modular Office

Although programmers have used modules for a long time, certain of the key programs most lawyers use are not modularized when viewed from the user’s perspective. The most famous programs comprise the Microsoft Office Suite—Word, Excel, PowerPoint, Outlook, Access, and OneNote. Office (in one of its many forms) has about 1.2 billion users so anything involving Office could have a massive impact.

Microsoft has explained many times that the organization’s focus is moving toward the cloud and mobile computing. Neither is a surprise as these are overwhelming trends in the tech industry. The interesting note here is that Microsoft also plans to modularize Office. What does this mean?

Start with how you work today. If you want to write a document, you open Word. If you want to crunch numbers, you open Excel. And if you want to tell a story, you open PowerPoint. Behind the scenes, these and the other Office applications share data and processing modules, but to the user they are three separate programs. With the evolution of mobile computing, things get a bit more complicated because some of these applications are easier to use in the desktop world and some work just fine on a smartphone.

Microsoft’s vision involves looking at the “problem” from the user’s perspective and re-defining how the applications work based on what the user wants to do. One example given by the executive vice president of Microsoft’s Applications and Services Group is the post-meeting distribution task. After a meeting, you need to circulate the notes and PowerPoint deck from the meeting to the attendees. Doing this task today would involve using parts of different applications. Tomorrow, in Microsoft’s view, you could simply ask (orally) your computer to do the task. It would know the meeting, the PowerPoint, and the notes and send an email (via Outlook) of the relevant documents to the meeting participants.

Modularity and the Augmented Lawyer

Microsoft’s focus on the modular Office product takes us in the direction of what I call the “augmented lawyer.” This lawyer combines human skills and computer capabilities to deliver solutions to client problems. Augmented lawyers look for ways to combine the best of what computers can do and the best of what humans can do to find higher quality, lower cost, and more timely solutions to client problems.

The augmented lawyer could use the new form of Office to accomplish many tasks faster and with better quality. Assembling a motion for summary judgment might happen when the lawyer asks the computer to assemble the various parts into an e-filing document. Quality increases, because each time we take the human side down and bring the computer side up we have an opportunity to reduce mistakes (when we don’t get better quality, we typically had a process design issue not a computer problem).

Modularity is another way of talking about disaggregation. At the macro level, we can disaggregate projects into tasks and operations. At the next level, we can disaggregate tasks and operations into components done by humans and ones done by computers. As we disaggregate and automate (again, putting aside our mistakes in re-designing the process), we make improvements. Each improvement may seem small, but over the course of days, weeks, and months these small improvements can mean the difference between a viable practice and one that is too inefficient to survive.

Modularity is Coming to Legal Services

Lawyers who have not already done so need to think about modularity in their practices. Having lawyers in a firm or law department continuously repeating what others have done does not add value. When several lawyers, each sitting in his or her own office, review and revise contract terms that that have been beaten to death by generations of lawyers, clients get poorer and lawyers get richer but value is not created. Lawyers’ desire for autonomy needs to become subservient to clients’ desire for for improvement.

One of the early hallmarks of becoming an effective augmented lawyer will be adopting the modularity concept. Lawyers, firms, and departments that do so will see significant efficiencies and quality improvements, and most likely many other benefits. For those who move first, it will give them many opportunities and a significant lead over their competitors. The danger of being the first-mover and choosing Betamax over VHS exists, but only for those who act by tying themselves to an inflexible structure. Another hallmark of the successful augmented lawyer will be avoiding the urge to become inflexible.

Microsoft’s vision is one example out of many about where software is headed. Law firms and departments have tended for many years to prefer enterprise systems or network systems that, once installed, are difficult to adapt to rapidly changing worlds (and expensive). While the future always is murky, focusing on modularity in both computer systems and legal practice design will enable lawyers, firms, and departments to move quickly and focus on client needs rather than face the titanic task of changing course every year (or less) in the new, competitive, legal world.

CreativityAndProcessI spend a lot of time writing, preparing presentations, teaching, researching, and doing all the other things you would expect a Lean Law Evangelist and Adjunct Professor to do. In other words, I create a lot of content. At one point, I was turning out the equivalent of a full-on blog post every day in addition to preparing weekly presentations and class materials. I often get asked how I can generate so much material each week.

It is an interesting question. I don’t think I turn out a lot of written material. In fact, when I compare myself to other writers, I find I lag behind. Take, for example, Sean McCabe. Sean got in to writing as something ancillary to his true love, hand lettering. Sean then expanded his empire to podcasts and YouTube videos and today Sean keeps several people employed. His businesses include teaching people to hand-letter and teaching people how to build businesses through content. Sean estimates that he writes over 1,000,000 words each year. For those without a calculator handy, that is about 2,700 words every day of the year, though for Sean the word count actually is higher. He takes every seventh week off to refresh.

Another writer with a decent work ethic is Monica Leonelle. Monica has an impressive background, with a bachelor’s degree in physics and computer science and an MBA from Chicago Booth. But what is really impressive is Monica’s writing speed. She puts 3,500 to 4,000 words on paper each hour. Think of it this way: blog posts usually run 500 to 700 words, so Monica writes four to eight blog posts an hour. Now, she doesn’t do that eight hours a day, day in and day out. But even one hour a day gives Monica about 1,460,000 words per year (compared to Sean’s 1,000,000).

Creativity and Process are Bedfellows

As you can see, compared to writers like Sean and Monica, I’m a piker. At my present pace, I turn out around 4,000 – 6,000 words a week, or about 200,000 to 300,000 words a year (not including writing for articles and books). Obviously, writers fall all along a continuum of writing speed. But, it seems like many who succeed do so not just because of creative talent (whatever that means). They succeed because they have some process which helps them succeed.

This mix of creativity and process is important for lawyers to understand. When many lawyers are confronted with ideas such as project management and process improvement, they roll their eyes and mutter about these mundane techniques impairing their creativity. “I’m a lawyer, not a toaster maker,” some say. “You can’t treat legal services the same way you treat manufacturing – the creative process is different.”

Let’s look at another creative person, Sunni Brown. Sunni is a writer and an artist. Obviously, she falls into the creative camp. She has written two books on creativity and is working on her third, so she also gets things done. (Note the subtle point here. How is it that creative people get things done if they are so anti-process?)

Sunni says she doesn’t follow a consistent routine each day, but she is consistent in her commitment. As Sunni says, “For me, it’s not about a consistent time in my routine. It’s more about a constant commitment to that process, to being creative.” Now she goes further. As a business person (she runs a consulting firm called Sunni Brown Ink), she has confronted the need to have a more consistent schedule. Listen to how Sunni describes her way of combining creativity with process (the emphasis is mine, just to make sure you get my point):

Up until about three months ago, I didn’t know if it was Monday or Saturday. I just recently started putting parameters around that. If you run a business, you’re very consumed by that. So I just learned the great art of structuring your week as a workweek. I have a coach—a creative coach—she and I over time realized that consistency is one of my biggest challenges. What I’ve seen is much less anxiety. For creatives, I think we have more of a tendency to move into anxiety and instability. So I think one of the best-kept secrets for long-term, sustainable creativity is consistent discipline and sustainable, predictable actions. It’s kind of like getting a container for your creativity so that it doesn’t wear you out.

The creativity-and-process story doesn’t end with Sean, Monica, and Sunni. As I’ve written before, great chefs become great not just by being creative, but by consistently delivering a great experience. Great companies that innovate don’t get there just by having really cool ideas, they have cool ideas and execute on them.

Marry Creativity With Process For Success

Creativity and process live hand-in-hand. Try to name a famous creative person who didn’t execute. You couldn’t, because it was a trick question. Without execution – without some process that gets the creative idea to the public – creativity is just an idea in some person’s head.

Lawyers who cry that process improvement will destroy their creativity fundamentally misunderstand both ideas. Process improvement doesn’t stop a lawyer from coming up with a brilliant legal tactic, a new legal theory, or a stunning solution to a complex problem. Creativity doesn’t preclude efficiency in bringing that legal tactic, theory, or solution to life. They work together, with a time for creativity and a time for execution.

As Steve Poor recently wrote, hyperbole is the new fashion in writing and talking about the legal industry. The pendulum has to swing one way or the other. In a way, I suppose, this fashion matches the world at large where hyperbole is the way to get noticed in a sea of voices. If you want to get on the evening news, don’t say the economy is slowly improving and is likely to continue doing so. Either say we are in another bubble and it will burst any day leaving all of us destitute, or say the economy is about to take off and we will see economic growth like we have never seen before. Extremes play; middle of the road is boring.

At the risk of being boring, then, I’ll go back to creativity and process. We see real value when the provider, lawyer or organization, finds the right balance of the two. Creativity without process leads to great ideas that never see the light of day. Process without creativity leads to drudgery where the next incremental improvement becomes more important than the goal. Hit the sweet spot and like the great writer, painter, or chef, you will find success. Nothing makes a client happier than a brilliant idea delivered early and under budget.

OrganizedLawyerSince lean thinking has been on the legal scene for about 10 years in law firms (longer for some of us who were in-house counsel), some legal industry observers are ready to move on to the next thing. I’ve seen a few articles recently where the author suggests that process improvement is yesterday’s news and says it is time to focus on the next thing. My first inclination is to dismiss such comments as simply the ramblings of the uninformed. But, given the incredible resistance lawyers raise to change, I thought it would be worthwhile to  go a bit deeper in explaining why such comments are more than misinformed, they are damaging.

A Lean Thinking Trajectory

Lean thinking is not a skill, methodology, or philosophy anyone learns overnight. In fact, you won’t learn it in a day, week, month, or year. To learn lean thinking, you must keep at it for a long time. In Talent is Overrated, Geoff Colvin talked about the 10,000 hour or 10 year track to becoming an expert. As Colvin related, some academics hold the view that it takes about 10,000 hours or 10 years of deliberate practice to become an expert in a skill. Deliberate practice is more than just going through the motions. It is a focused and intense type of practice that results in deep learning.

If we have few if any lawyers who have reached the expert level, then it is a bit premature to say process improvement in the legal industry has peaked.

Given the fairly recent entrance of lean thinking into the legal industry, I think it is fair to say that few individuals working in law firms, and even fewer lawyers, have reached that 10,000 hour or 10 year level. Even those firms that have been at it for a while recognize they have a long way to go to match their clients, many of whom have been practicing process improvement for 20 or more years.

Efficiency in the Legal Industry

If we put aside process improvement for a moment and just focus on efficiency in the legal industry, it is hard to say we have moved the needle much. In all areas of the industry, waste is still widespread and productivity low. That sounds harsh, but compared to almost any other industry and any other occupation, it is clear that law is still a labor-centric, low efficiency industry. That doesn’t mean lawyers are lazy. Lawyers work long hours and put forth a great amount of effort. But, that effort has been driven largely by a model that rewards effort, not productivity. Put simply, you get what you pay for.

The question also isn’t whether the legal industry will become efficient. It will or it will fade away. No client will accept working with one profession or service provider that is inefficient when all others are making great gains in efficiency. We already see what clients do – if efficiency is important to them they work with service providers other than lawyers. Either lawyers will greatly improve their efficiency or clients requiring efficiency will take their work elsewhere. Yes, there will be a select few that can get by without great efficiency, but the numbers will dwindle to the point where it will be a niche, not the norm.

We Don’t Pursue Efficiency for Efficiency’s Sake

If efficiency is inevitable, and in my opinion it is, then why should anyone rush it? Why not just let the industry gradually become more efficient at its own pace (that is, when clients push their lawyers to become efficient)? In fact, why pay any attention to it at all? Lawyers are bored by operations issues. They didn’t become lawyers to focus on efficient legal services delivery, there isn’t glory in it, and it requires change.

Process improvement is not an end in and of itself. It is a means to get to where we all want to go. Delay the start of the journey and you put off the day when you will reach your destination.

You don’t do process improvement so that you can improve processes; you do it so that you have the time, energy, and resources to accomplish great things as a lawyer.

Process improvement is the vehicle that transports us from many of the ills that beset the legal industry to a better place. Think of it this way. If your doctor tells you that you need to go on a diet, she isn’t telling you that because being on a diet is the goal. Your doctor knows that unless you lose weight, you will suffer from many significant health problems. The goal is to lead a healthy life, not to diet.

The same is true with many other things we do. We exercise for our health. Sure, some people enjoy exercise for exercise (and some enjoy process improvement), but the vast majority exercise because without it, life would not be as pleasant. Exercise is a way to get to the goal of a more enjoyable life.

Process Improvement is a Simplifier

Life is short, so why spend time doing things that add no value to anyone’s life? When you improve processes, you simplify. Simplifying legal processes is valuable, but the value extends farther than reducing the number of steps to perform a process.

Simplification takes you to a place where you can address some of the larger challenges we face. It isn’t a panacea, but in an era of digital overload simplification has an appeal beyond making things easier at work.

Digital Overload Easing

We aren’t fighting for simplification on a level playing field. As knowledge workers, lawyers must address the flow of digital information that grows each day. That data plays a role in the advice we give clients. We don’t work in a vacuum. We do work in a growing sea of data that is bring us digital overload. The Institute for Communication Technology Management says this about digital overload:

By 2015, it is estimated that Americans will consume both traditional and digital media for over 1.7 trillion hours, an average of approximately 15 and a half hours per person per day. The amount of media delivered will exceed 8.75 zettabytes annually, or 74 gigabytes – 9 DVDs worth – of data sent to the average consumer on an average day. A zettabyte is 10 raised to the 21st power bytes, a million million gigabytes. These estimates are from an analysis of more than 30 different sources of media data, ranging from traditional media (TV, Radio, Voice telephony) to new digital sources (tablet computers, mobile gaming devices, smartphones, mobile video). Media consumed while at work is not included.

In other words, not including what streams at us each day while we are working, each lawyer consumes 74 gigabytes of information.

You are lawyers, though, so handling the digital overload is not a big deal. After all, you are used to dealing with large volumes of information. But, science disagrees. According to Daniel Levitin, neuroscientist, psychologist, and author of The Organized Mind:

We used to think that you could pay attention to five to nine things at a time… We now know that’s not true. That’s a crazy overestimate. The conscious mind can attend to about three things at once. Trying to juggle any more than that, and you’re going to lose some brainpower.

That attention limitation increases the digital overload challenge.

Not only do you have a huge river of data coming at you, but your ability to process that river is limited to a few streams at a time.

Process improvement helps us navigate this challenge, by reducing the burdens placed on our brains. The digital overload overworks the brain to the point of fatigue. As the river flows at us, we must decide which pieces of data are relevant and which to ignore. Add those decisions to a long list of decisions we must make because our processes are too complicated, and our brains get tired.

Decision fatigue occurs when we ask our brains to make too many decisions within a short period. The decision-making process breaks down and we start making poor quality decisions. Again, according to Leivitin:

If you’re making a bunch of little decisions, like do I read this email now or later? Do I file it? Do I forward it? Do I have to get more information? Do I put it in the Spam folder? That’s a handful of decisions right there, and you haven’t done anything meaningful.

It puts us into a brain state of decision fatigue. Turns out, the neurons that are doing the business of helping us make decisions, they’re living cells with metabolism, they require glucose to function, and they don’t distinguish between making important decisions and unimportant ones. It takes up almost as much energy and nutrients to process trivial decisions or important ones.

Poorly designed processes force our brains to make more or these trivial decisions, diminishing our capacity to make the important decisions and deprecating the quality of the decisions we make. If it takes 10 emails to do what could have been done with one email in a better designed process, we are simply adding to the burden on out brains. Multiply that by a large number as you see all of the valueless effort that goes in to most legal matters and you can see why practicing law is tiring.

As children, we all grew up knowing that the best time to hit mom or dad up with that tricky question was when they were worn out from a long day of work. Faced with another decision, they just wanted to get past it and we were much more likely to get them to go our way than when they were fresh and hadn’t already made a long string of decisions. Now think about the lawyer making decisions as he or she works on a draft document at midnight. Are those decisions high quality?

The Process Improvement Fix

Before we declare process improvement a thing of the past, let’s consider what it can do for lawyers. First, it gives them systematic ways to stop spending time on the trivial, tying up their days with wasteful activities and meaningless little decisions. To make the obvious point, these don’t add value to anyone.

Second, it enables lawyers to move from billable hour models to value fee models. You may be tired of hearing about value fees, but in a world where effort becomes less important to counterproductive, you better have an alternative to billing by the hour.

Third, process improvement paves the way for integrating technology into legal services delivery. Technology isn’t going away, so lawyers better find ways to work with it. Cleaning processes gives lawyers simpler and easier ways to bring technology into the fold.

Long Live Process Improvement

Rather than declaring process improvement something that is over, we would do better to consider it part of the baseline for a modern legal practice. Being competent should mean competency in both the substance of law and the process of delivery legal services. There are many skills lawyers need to develop beyond process improvement, but without process improvement lawyers will find themselves struggling to build those other skills into their portfolio. As with technology, process improvement is here to stay.