Legal Project Management (Part 5): Six Sigma and Lean
When I started this series of posts, I thought it would have only five parts. However, a significant amount of new information has been published on this topic since I started the series a few weeks ago, so I will continue with several additional posts.
When experts talk about increasing legal efficiency these days, the conversation often turns to Six Sigma and Lean.
Six Sigma is a set of formal business methodologies designed to improve quality. It was developed at Motorola in 1981 to improve manufacturing quality control, and the name comes from its original statistical goal of assuring that for every million manufactured parts, three or less would be defective. (If you ever took a statistics course, you may remember that in a normal distribution three per million would be six standard deviations – or six sigma – from the mean.)
Six Sigma has since been used by more than two-thirds of Fortune 500 companies to improve quality and reduce costs. It is built around sophisticated tools and methodologies that force people to get to the heart of a problem and figure out how to re-engineer business processes. But like TQM, the Republican Party, and Buddhism, Six Sigma has evolved and expanded in so many different directions over the years, that it is hard to characterize it as a single methodology.
The reason the term comes up so often in discussions of legal efficiency can be traced to the well publicized success of a single firm: Seyfarth Shaw. Several years ago, Seyfarth managing partner Steve Poor went out to dinner with DuPont General Counsel Tom Sager to discuss how to increase efficiency. Sager’s advice on Six Sigma was crystal clear: you can have an enormous impact if you do this right, but you should not start down this path unless top management is 100% committed to making it work.
According to the book Six Sigma for Dummies(p. 10), the approach is “not for the faint of heart. It is intense and rigorous, and it entails a thorough inspection of the way everything is done.” Would you guess that implementing an approach like this would be fast or cheap? If you guessed no and no, you are getting warm.
An article which describes the evolution of Seyfarth’s program,quotes Carla Goldstein, Seyfarth’s director of strategic management, about the way lawyers reacted when the process started in 2006:
We were dying. [The consultants] came in with these binders of jargon and statistics and numbers and the lawyers’ eyes were rolling around in their heads.
But Seyfarth stuck with it. They collected and analyzed an enormous amount of data about past projects and necessary steps in such categories as M&A transactions, real estate acquisitions, real estate leasing, single plaintiff employment litigation, summary judgments, commercial litigation and more. In each category, groups of up to 40 lawyers and staff held meetings over several months to define efficient processes, and establish guidelines for how long each step should take.
This data analysis helped them to discover some interesting and counter-intuitive trends. For example, many general counsel believe that longer negotiations tend to produce better settlements, because it pays to be tough. In fact, when Seyfarth systematically analyzed data from past cases, just the opposite was true: the less time a case was open, the less clients typically paid in the settlement plus legal fees.
Seyfarth ultimately certified 75 lawyers and staff members (including every lawyer on the executive committee) as “Six Sigma Green Belts,” which “requires completion of an intensive four-month training program and the successful completion of two Six Sigma projects.”
They’ve since trimmed the program, and renamed it SeyfarthLean based on the “Lean Six Sigma” approach that Seyfarth ultimately adopted. That term can be traced back to the “lean production” movement to increase manufacturing efficiency, most famously in Toyota’s efforts to eliminate the “seven wastes” (excess inventory, excess processing, overproduction, transportation, motion, waiting, and defects). Some of these translate to legal work better than others, but basically the lean approach implies looking at every process from the client’s point of view, analyzing whether each step adds value for the client, and eliminating the steps that don’t.
According to an article in the April 2010 issue of The American Lawyer (subscription required to read the article online):
Now every practice area at the firm uses the Six Sigma approach to varying degrees. And by the end of this year, all of the firm's more than 1,500 employees will be trained in SeyfarthLean.
What did all that cost? Again according to the American Lawyer article:
Seyfarth has spent over $3 million to date administering and training workers on the philosophy, and budgets $200,000–$500,000 annually for these costs.
Was it worth it? The article takes an agnostic position. It’s titled “Leap of Faith” and subtitled “How much will Six Sigma pay off for Seyfarth Shaw?” The article does note that about 15% of all work at Seyfarth Shaw is currently done wholly or partly based on Six Sigma, and that “the firm hopes to double the amount of revenue Six Sigma work brings in every year.”
In my opinion, there can be no question that Seyfarth has derived an enormous marketing benefit not just by offering greater efficiency and lower cost at the exact moment that clients started clamoring for it, but also from the publicity associated with being the first law firm to embrace this philosophy.
But now that Seyfarth has blazed this path, should your firm follow, and adopt Six Sigma?
We believe that in the current competitive environment, every law firm needs to work on ways to increase efficiency. But there are many paths to greater efficiency, and every law firm must evaluate the relative return on investment of various options, including the required time investment by staff and by lawyers, the speed of deployment, the degree of impact on law firm operations, and the direct cost of each program. When they do, we think that most firms will agree with us that the “just-in-time, just enough” project management training approachwill be much more cost-effective. Any lawyer can try new tactics without changing firm-wide practices, and you can see the results right away. When something works, lawyers can quickly do more. When it doesn’t, they can try something else. I’ll have more to say on this as the series continues over the next few weeks.
To download a .pdf summary of this series, see the white paper in the project management section of our web page. It will be updated from time to time as the series continues. Additional information appears in the Legal Project Management Quick Reference Guide.