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Archive for October, 2012

Seven ways in which re-engineering enables law firm improvement

Tuesday, October 30th, 2012

In our work with major UK law firms since 2005, we have seen a number of major benefits through applying ‘re-engineering’ techniques proven in other business sectors. Re-engineering drives down costs and increases value through a process and client-focused approach. We have successfully applied re-engineering to legal services including Commercial Due Diligence, Insurance, Employment, Inquests, Commercial Property, Probate and Matter Management. From this work we have seen that there are 7 distinct ways in which re-engineering can be used to improve law firm performance:

1. Reducing the chargeable time required to perform a matter by improving the efficiency with which processes are defined and operated – through the application of techniques such as Lean. This results in a reduction in the cost of performing the process. The process can be a service (i.e. a client facing process such as Corporate Acquisition or Probate) or a support process (i.e. an administrative process such as Client Inception or Billing). Law firms need to move to fixed or value pricing arrangements to fully benefit from the increased profitability that this enables.

2. Lowering the cost of performing a matter by reducing the cost of the personnel required to perform the process – what we call ‘right-skilling’. This means using a higher proportion of junior and paralegal personnel. To enable this whilst maintaining required service quality the process needs to be redesigned, standardised and supported with operating procedures, templates and documents – so that it can be effectively operated by lower skilled personnel. This also creates opportunities for reducing the indirect costs of support staff and infrastructure. It should be emphasised that the resulting process will be of higher quality and consistency – even though lower skilled personnel are being used – because it is designed and operated based on the ‘one best way’ process derived from the codified knowledge of the senior experienced personnel. In our work with law firms, reducing chargeable time and right-skilling have yielded direct cost reductions of between 20-40% – with minimal capital investment.

3. Improving the service received by clients through improvement/redesign of the client experience throughout the service cycle. For example by improving responsiveness, reducing errors and improving consistency – focusing on the key ‘moments of truth’ in the client service experience.

4. Raising the value received by clients by improving/innovating the overall service value proposition and the individual elements of the service offer in ways that are valued by the client and so improve client retention and the firm’s competitiveness. The required client-centred approach in our re-engineering work flushes out these opportunities. For example we worked with one firm to develop a new internet-enabled service for inquests, with another we developed a new collaborative improvement approach for insurance claims management and have worked with a number of firms to develop fixed price services.

5. Exploiting the potential of IT and internet-enabled IT as part of re-engineering to improve internal efficiency and client service, including the development of internet-enabled services or service elements. We do this by ensuring that IT is well represented in the re-engineering programme team and so identify opportunities for leveraging IT.

6. Developing opportunities for strategic innovation in the firm covering a change in the value proposition, new business models and organisational change. Re-engineering promotes questioning and analysis of the services provided and how they are delivered, together with improving insights into client requirements. This naturally leads to opportunities for significant changes in the firm’s business model.

7. Catalysing the firm’s approach to innovation – addressing culture, resourcing and management of innovation and ongoing improvement. A re-engineering project establishes an environment for focused and collaborative innovation, together with experience in a systematic improvement approach. The Partners and employees involved can share this knowledge with others and the re-engineering approach can be deployed in other parts of the firm. We assist this in our projects with deliberate and structured skills transfer. In addition, this work creates a new paradigm where questioning and new ideas become welcome.

As law firms face challenging business times, re-engineering is an approach for step-change competitive improvement that we believe should not be overlooked, based on the significant improvements that can be achieved.

Law Firms can request a complimentary copy of our whitepaper: ‘Smarter working in law firms – re-engineering value and cost’ published in March 2012, which covers this subject in detail, by contacting us via the website.

I’d welcome your views and comments on this topic.

Alastair Ross
Director
Codexx Associates Ltd

Law firm re-engineering – 10 lessons from 2005-12

Tuesday, October 16th, 2012

We have worked with a number of major UK law firms since 2005, in innovation and in particular re-engineering of existing services and business processes – including Commercial Property, Insurance, Inquests, Employment, Probate, Matter Management and Innovation.
During that time I have experienced both the satisfaction of clear and measurable benefits achieved by our clients from this work, but also encountered many common challenges along the way. I thought it would be useful to share a ‘Top Ten’ of the key lessons I have learnt, to provide guidance to change leaders in law firms.

1. Benefits from re-engineering are major
Let’s start by answering the ‘Is it worth it?’ question right away.

    Yes, indeed it is.

A re-engineering programme will be a significant exercise that will require a good amount of time from partners and associates – taking them away from fee earning work. So it is not to be taken lightly. But our work with law firms since 2005 has shown major benefits can be realised. Typically our projects have achieved:20-40% reduction in the direct costs of performing a service (with limited capital investment) and improved competitive differentiation by enhancing and innovating services. In addition, the re-engineering programme provides a platform for ongoing change in a number of ways: A culture of improvement has been started among partners and employees; a template for future re-engineering has been proven (we support this with skills transfer) and measurable benefits help encourage other potential change leaders to take action.

2. Board and partner support is crucial
Making major change in a Partnership is much more difficult than in a Corporate, where the CEO can decree ‘It’s my way or the highway’ and force changes quickly through. Change in a Partnership requires the consensus of the senior personnel and therefore it is critical to have board support in place if major firm-wide change is envisaged. Once support is in place, successful execution depends on the active support of the Partners who manage the teams and the clients affected ‘on the ground’. It is not unusual to have vocal support from a Partner until their fee earners are needed to be involved in the programme—then they will resist their fee earner involvement, citing immediate business needs… Partner Champions must be actively engaged in the programme and be able to commit the time and energy required.

3. Lawyers must be challenged to overcome their innate conservatism
Or as one ex-Managing Partner put it: “Lawyers don’t do radical.” They also don’t naturally think as business people who provide a service, that just happens to have as a core, legal content. Changing the paradigm of lawyer from legal-centric to business-centric and breaking free of existing (often self-imposed) ‘rules’ is key to achieving the potential of re-engineering. This is why leading partners and associates need to be engaged in the re-engineering programme, so that they can change their thinking and share this with their colleagues. This is also why the initial ‘AS-IS’ phase of the programme is key, so that partners and fee earners can remove their rose-tinted glasses and view the business as it truly operates today, riddled with waste and inefficiency – and ripe for major improvement.

4. Clients must be engaged
Client input is key to effective re-engineering, to ensure that services are redesigned with client requirements in mind. However law firms typically do not know their clients’ business at all well. Lawyers can be reluctant to ask clients the open and ‘naïve’ questions needed to better understand their businesses and so enable innovation. This is why our ‘Smarter Working’ approach deliberately engages clients in the re-engineering programme, through meetings and workshops to talk about the business – their business – using structured approaches. This also has the benefit of improving the client relationship and making the firm stand out from others. The Managing Partner of one firm we work with is a strong advocate of the Lean approaches which we are helping him implement in his firm. He communicates Lean enthusiastically in his meetings with clients and incorporated Lean into a recent (and successful) bid. He helps differentiate his firm and also improves empathy with the firm’s industrial clients for whom Lean is a key part of their business improvement activities.

5. Re-engineering needs to be approached in a structured way
Few law firms think about their business processes as an area for examination or improvement. They often consider IT-led improvement activities, as if implementing an extranet, new Blackberry applications or Case Management alone is the answer to their performance challenges. IT implemented in this way has a well defined (and major) cost but undefined (and often little) actual benefit. IT investment should follow process/service improvements, as part of a structured re-engineering approach which is business and client led. In addition, major change requires active ‘Change Management’, which is a skill that few law firms possess. That is why our ‘Smarter Working’ approach uses a structured and phased approach based on 20 years of re-engineering experience.

6. Fee earners must be involved
I was once asked by a Department head in a major UK law firm, “Why do we need to get associates involved [in the re-engineering programme], can’t we just use partners?” It is key that Senior and Junior Lawyers, Paralegals and support staff are involved as they know how work is really done—not just how it is supposed to be done. Getting the best of them released from fee earning work to attend the required re-engineering workshops and work on subsequent change projects is always a challenge – but it must be done to enable practical solutions and help establish a culture of involvement in improvement.

7. Measures and rewards must recognise change agents and new ways of working
In professional service firms, chargeable time is the most valued performance measure for a fee earner – this is as true in a law firm as in an accountancy. Yet if fee earners are to be involved in re-engineering, they must not be penalised for missing utilisation targets, they must be encouraged and rewarded for innovation. And since law firms will be increasing the amount of work performed to fixed or value pricing, rewards based on number of hours performed will be counter to the new behaviours of efficiency and delegation required. New measures and rewards based on profitability, growth, collaboration and innovation will needed instead. Establishing new metrics and rewards needs to be considered as part of the change management element of the re-engineering programme.

8. In-house IT capabilities will be a bottleneck
Information Technology is a critical competency for providing professional services effectively. Indeed its importance will increase with the need for improving collaboration through e-working and the provision of internet-enabled legal services. Yet all too many law firm IT departments operate far behind best practices in other sectors in IT strategy, application development and effective user interfaces. Re-engineering will require IT solutions to support improved services delivery through Case and Document Management and to support new internet-enabled services through internet solutions. In my experience, all too often the IT group will not have sufficient resources or skills to meet the solution design/timescale required by the re-engineering programme. Change leaders need to be prepared to utilise external IT resources for projects where internal IT capacity is inadequate or specialist skills are needed.

9. An integrated strategy for innovation & re-engineering is needed
A key success factor in successful business change is a focused improvement programme. However, too many firms will dilute their efforts with multiple (often conflicting) programmes for IT, innovation & re-engineering. To increase the chance for re-engineering programmes to deliver on time, robust ‘pruning’ of other projects should be performed to postpone some and cancel others to enable resources and management time to be focused on those most critical to the business. Model your change programme on a fast moving stream, where a few projects are run in parallel and complete quickly through focused resources and management – rather than on a wide slow moving river where sediment and detritus cause blockages and delays….

10. Success requires managing a multi-year programme
Re-engineering is more akin to a marathon than a sprint and firms need to have the stamina and resources to stay the course. Whilst analysis and redesign work can be completed in a few months, development, piloting and deployment of new services and new ways of working take many months and indeed years to secure the full benefits. Active programme management is required to monitor progress, manage the required cultural change, and take action where delays occur. In my experience few law firms do this seriously or effectively, resulting in long delays before they can realise the identified benefits in cost reduction and value improvement from their re-engineering projects.

That’s my ten for now (although I can feel another couple coming…). Of course a ‘Top 10’ list is a gross simplification of reality, but hopefully the above points will help guide firms looking to improve their competitiveness through re-engineering activities. For more information in this area a number of articles and ‘New Directions’ newsletters can be found at http://www.codexx.com/knowledge.php

Law Firms can get a complimentary copy of our whitepaper: ‘Smarter working in law firms – re-engineering value and cost’ published in March 2012, which provides further information on this subject – see here: Smarter Working in Law Firms – Re-engineering value and cost – 2012

I’d welcome your views and comments on this topic.

Alastair Ross
Director
Codexx Associates Ltd

Standardisation – the path to commoditization or innovation?

Friday, October 5th, 2012

Standardisation has a bad name in the professional service community. It is seen as another name for ‘commoditisation’: the de-skilling, devaluing and ultimately the de-profitisation of services. So it is typically a four letter word in a law firm, accountancy or consultancy seeking to provide high-value services. But is standardisation really such a bad thing?

Standardisation certainly shatters the work paradigm in place at most professional service firms, where the individual ‘craft’ approach to work is applied. Experienced (and highly paid) professionals deliver services such as due-diligence, audit and business improvement using methods which are typically highly individualised. From a client perspective, professional excellence is of course valued. But inconsistency in service delivery between offices and between partners is not helpful. And in today’s tough economic times, high prices have to be justified.

I would contend that standardisation is actually a key stepping stone to raising service value. On the surface this seems counter-intuitive. But bear with me. Many professional services are repetitive in nature – e.g. commercial due diligence, audit, probate and are simply tailored for the client. Others have significant repetitive work elements in them – e.g. ‘discovery’ in litigation, ‘data gathering’ in management consulting projects. Repetitive work is is the rich soil in which standardisation can flourish. By codifying and standardising repetitive elements of work, it can then be effectively performed by a less skilled person (e.g. a paralegal or administrator). Of course this has benefits in reducing service cost – aiding service firms as they seek to respond to severe price-down pressures from clients. And of course it then frees up the most valuable (and expensive) employees to work on more complex (and profitable) activities for the firm – raising protitability. But it also has major benefits in two areas of service innovation:

1. It frees up the time for high value employees to spend on innovation – to enhance existing services and develop new services to add more value to clients and differentiate their firm from rivals. Service firms are waking up to the need to become more innovative, but are challenged in finding the available time from their fee earners.

2. Standardisation of a service (or service element) is the first step to enabling effective continuous improvement
of that service using Lean techniques (which are increasingly on the agenda of professional service firms).

So standardisation is not a word that should be feared by service firms. It is simply one of the key methods which firms need to embrace as they streamline themselves for the emerging new era of highly competitive, deregulated, globalised and internet-enabled professional services.

Alastair Ross
Director
Codexx Associates Ltd

Energizing Change

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