May 2018

Get lean for greater efficiency and profits

Law firms are still operating the way they were when the Titanic was being built, say Larry Port and Dave Maxfield, authors of “The Lean Law Firm: Run Your Firm Like the World’s Most Efficient and Profitable Businesses.”

But law firms can become far more efficient – and profitable – by adapting the same science of lean management that companies like Toyota pioneered over decades, they say.

“As unique as law firms believe themselves to be, they are not unlike most of the business world,” Port and Maxwell write.

The book — part graphic novel and part business manual — guides lawyers into the process of using metrics, reducing waste and producing as much value as they can for their clients.

The graphic novel interspersed throughout tells the story of Carson Wright, who is working to save his small law firm using “lean” manufacturing techniques to illustrate process, marketing and financial advice.

The book’s principles are supported by the website leanlawfirmbook.com, which features business tools and the authors’ new podcast, titled The Lean Law Firm Blog and Podcast

Port is founder and CEO of the cloud-based legal practice management software company, Rocket Matter. He is a speaker and award-winning writer at the crossroads of attorney wellness, the legal profession, cutting-edge technology and law firm marketing.

Maxfield has represented thousands of individual consumers in cases against banks, credit reporting agencies and insurance companies for nearly 25 years. He has taught nearly 100 continuing legal education programs, and is a frequent speaker at the ABA TECHSHOW. 

YourABA caught up with Port and Maxfield to find out more:

Why are the “lean” concepts developed for manufacturing also useful for law firms?

We lawyers see ourselves as apart or different from other kinds of business. And that’s true: our clients are more than just “customers,” and our product is not some widget, but a tangible and potentially life-changing solution to our client’s problem. To the extent we can put our own stamp on that we are artisans if not artists. 

But, we’re also just like every other business because we want to make money. And all businesses do that the same way: by taking a raw material (whether it’s a lump of steel or a prospective client with a problem), putting it through a process (manufacturing, litigation, etc.) to create a product (bicycle, or completed legal solution), from which we get money. A simple, linear system.

While most law firms are only starting to see their business as the system it really is, for over 100 years manufacturing businesses have been improving it scientifically. The most successful of these systems are “Lean” – a metrics-driven systematic method for waste minimization and productivity increase. 

Since Lean concepts have universal application to any business system, by “borrowing” these concepts from the industries who pioneered them, law firms can make significant and immediate gains in productivity and profitability. 

The point of “The Lean Law Firm” is to translate these concepts into simple actions that a law firm can take to become more profitable by thinking systemically. We created it in the form of a story – a graphic novel, actually – so readers can watch our hero, Carson Wright, transform his own firm, month-by-month using Lean, with lessons from his mentor, bicycle-manufacturing magnate Guy Chaplin. 

How does marketing fit into the Lean approach?

Just like everything else in Lean, resources must be directed to where they will have the greatest impact. In any market where many lawyers compete, this almost always means that the firm must find an unmet need – a niche – where it has a competitive advantage and put its limited resources in becoming the masters of that niche. Firms must also measure the results of their efforts to see if the marketing is succeeding, and constantly readjust. Lean marketing is targeted and scientific — the opposite of throwing money at advertising or SEO and hoping for the best. 

Discuss your philosophy of daily, weekly, monthly and yearly meetings.

Lawyers love to talk, and love meetings. Too much so. The problem with meetings is that, with some exceptions, they involve talking about doing work, rather than doing work. What moves a case forward is not talk, but action.

Our philosophy is to minimize meetings in favor of visual communication. What that means, first, is that a lot of the day-to-day communication within a firm about a case or matter takes place “visually” on an electronic, shared Kanban board, where the progress of each case in the system is tracked (along with employee responsibilities). This cuts down tremendously on the need for formal sit-down meetings because everyone in the firm can “see” exactly where a case is in the system – and what needs to be done. 

But a few kinds of meetings are important – a short, weekly (sit-down) meeting of about an hour, in which the Kanban board is viewed in a group setting to identify upcoming deadlines, locate bottlenecks blocking progress and assign responsibilities. Daily stand-up meetings are of a few minutes (no more) dedicated to resolving something blocking progress (we call them standup because if people sit, they take too much time).   As a means of incremental improvement, we also counsel a monthly retrospective where the firm asks, “what should it start doing, what should it stop doing and what should it continue doing?” Finally, we have an annual goal-setting meeting with a very specific method for charting the firm’s upcoming year.

You write, “To continually improve, Lean law firms need to be in constant alignment.” What do you mean by that?

Let’s return to the idea that a law firm is a business that, just like any business, is just a system that takes raw material and processes it to create a finished product and money.  All businesses try to do this, but the ones that succeed are, in the words of “The Lean Law Firm’s” mentor character Guy Chaplin, the ones that “Build something that people really want, as perfectly as possible, when and how they need it.” 

At the most basic level, alignment is getting everyone in the firm to realize that the above is what they’re there to do. The firm must align its practice areas with an actual unmet need in the market (e.g., a niche) in which it can compete. The marketing efforts, the message of the firm and identity of the firm must align specifically with that niche marketing. The training and skills of the employees must be focused on mastering the niche so the cases (whether they are transactions or litigation matters) are built “as perfectly as possible.” 

It also means that the firm’s efforts are aligned with what the client wants — “when and how they need it.” Clients almost universally want their problem resolved quickly. Since Lean is focused on constantly identifying the constraints blocking progress, Lean law firms are much faster in getting clients a quality resolution in less time. Which makes for happy clients.

Finally, alignment also means not only that marketing, quality of production and speed of production are aligned, but that everyone in the firm is aligned in this effort with everyone else. A Kanban board allows them to actually “see” where matters are in the system, and what (or who) is blocking progress. KPIs, discussed below, tell the firm whether it’s succeeding.

How will a law firm know if they’re succeeding in being Lean?

By measuring the things that matter. In “The Lean Law Firm” we discuss Key Performance Indicators (KPIs). Just like meetings, too much measuring means less “doing.” Lean is not about measuring things that do not matter and are just for vanity’s sake. It’s about monitoring the gauges and meters that reveal system health and profitability. 

The KPIs that tell a firm whether they are succeeding range from the appallingly simple to a few that are more complex. Of the former are Cash Quantity (how much money do you have right now) and Cash Pipeline (what do you know for sure is coming in). Of the latter are Throughput Rate (how many matters are being finished within a unit of time) and Average Case Unit Value (the average monetary value to your firm of each completed matter). Other critical measurements include average Cycle Time (how long on average a case takes to complete from start to finish) and current WIP (how many cases or matters are you handling right now). 

In “The Lean Law Firm,” we show why these measurements determine profitability, how they relate together and, most importantly, how to improve them.

How should lawyers go about getting buy-in for adopting the Lean approach?

Before trying to convince others, the lawyer or “change agent” in the firm must understand Lean for his or herself. The best places to start are by reading accessible “lean story” books like “The Goal,” by Eliyahu Goldratt; “The Phoenix Project,” by Kim, Behr and Spafford; and, of course, our book.  Beyond understanding what you’re trying to sell to others, buy-in will be driven by general agreement that something in your firm must change. As Winston Churchill said, “Never waste a good crisis.” Once you have that agreement and you (and other influencers in your firm) are in board, real change becomes possible. 

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