A new order for law

News orderHere is a brief excerpt from an interview conducted by Alex D’Amico and Christian Johnson for the McKinsey Quarterly, published by McKinsey & Company. We learn how one law firm’s story shows how lean management can transform even the most complicated, tradition-bound, and intellectually demanding of businesses. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

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Since 2005, the 800-lawyer, Chicago-based international law firm Seyfarth Shaw has been rethinking how it practices law, applying lean-management principles to create greater predictability, transparency, and collaboration—even in highly complex specialties. That experience has enabled Seyfarth to expand the scope of its advice beyond the resolution of legal problems, and now includes improving workflows within clients’ law departments and providing training on high-risk compliance issues. Seyfarth has sustained its commitment, winning accolades in the industry and showing unusual resilience through a period in which many storied law-firm names disappeared in mergers or bankruptcies. Over the past four years, the firm’s revenues have grown more than 20 percent, and profits are up more than 25 percent.

McKinsey’s Alex D’Amico and Christian Johnson jointly interviewed four members of Seyfarth’s management team: Andrew Baker, director of legal products and technology; Kim Craig, director of legal process improvement; Lisa Damon, a member of the executive committee; and Steve Poor, the firm’s chairman since 2001.

If we turn the clock back a few years, what were some of the challenges that you saw for the legal industry?

Steve Poor: “Disruption” may be a buzzword in the legal industry today, but not ten years ago. Firms were growing, profits were growing, rates were growing, and demand was outstripping supply.

That cycle camouflaged a structural problem. Corporate legal departments were facing more demands from internal clients to deliver higher value at a lower cost. As a result, the solutions that general counsels needed were becoming more sophisticated, driven by their desire to become value centers rather than cost centers. Law firms were not meeting that challenge.

One of our clients likes to say that he doesn’t buy legal services so much as he buys business solutions delivered by lawyers. His distinction points to a fundamental paradox: How do you raise the value of your services while controlling their cost?

Within Seyfarth, was there a shared view of where you were competing strategically and where the market was going?

Steve Poor: Not at that time, no. It posed an educational challenge for us, to help our colleagues see the problem in the same way we did. But it helped that we had already developed an executive training program with the Kellogg School of Business, which gave our partners a business literacy that law school alone doesn’t provide.

Lisa Damon: As a firm, we have always set an expectation that our partners would invest serious effort into their clients. Getting our partners to stand in their clients’ shoes extended this idea. We hosted a series of client speakers that included Tom Sager, who became DuPont’s general counsel. When Tom described how DuPont was bringing lean ideas into the legal department, it helped our partners see the potential because of lean’s focus on delivering value to clients.

How did you galvanize the leadership team around this idea?

Steve Poor: We started with two projects. The first was the review process for conflicts of interest—a complex, difficult task at any law firm. It is a high-pressure process requiring accuracy and speed, and centers on the continual evaluation of client relationships for conflicts that might require the firm to recuse itself. This was a pain point across our organization, so improvement would be highly visible.

The second project focused on a type of real-estate lending in which we were having trouble matching the market rate for the work. The lawyers who specialized in it were a small, well-defined team, so the scope was limited. And if we could help them become more successful, they would help convert their peers in other practice areas.

Once both projects were showing strong results, we started the next partnership meeting by saying, “We are embarking on this journey. We know you’re sitting there reading your paper and waiting for this latest management fad to pass. It’s not going to—this is going to be part of who we are and what we do as an organization, and here’s why.” One of our partners spoke about the changes in conflicts, where we reduced processing time by 86 percent and the number of errors by 90 percent. Then a partner from the lending group described how the changes led to better allocation of resources and higher fee recoveries.

Did anybody say, “That’s great for securitization, but my practice area is totally different”?

Andrew Baker: They did. In fact, one of our early training documents started with a slide saying almost exactly that. And, given the frequency at which we heard that response during the early years, we wanted to address that misconception whenever possible.

Steve Poor: But as we gathered more success stories, we began to eat into the mind-set of “my work is different—what I do is magic.” There are moments of magic in the practice of law, which you recognize and celebrate. But unless you can get people to think about it as a process, you can’t see all of the steps that make the magic possible or everything that needs to happen afterward to turn the magic into something tangible.

What was it like to define all of those steps?

Lisa Damon: So far, we’ve created “process maps” for more than 500 different workflows associated with legal work. For each type of project, such as a corporate acquisition, we assemble the best practitioners—partners, associate attorneys, project managers, technology specialists—around a table. They come up with a list of all of the tasks involved and estimate how much time each task should typically take. The end result is a form of what lean-management practitioners would call “standard work,” setting guidance for what each project should look like.

Andrew Baker: These aren’t exact scripts, but they give us more discipline. If our process map estimates that writing a particular contract should take two hours, and an associate starts to think the task will take closer to eight hours, that’s a signal to her that she should probably talk to somebody.

Lisa Damon: To avoid that result—and increase quality and efficiency—our process maps include “artifacts” such as model documents, checklists, and the like at each important step in a given process. Of course, we continually curate the process maps based on experience, legal developments, and client-based process improvements.

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Here is a direct link to read the complete interview.

Alex D’Amico is a partner in McKinsey’s New York office, and Christian Johnson is a senior editor in the Hong Kong office.

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