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Archive for the ‘Change Management’ Category

Professional development in an age of uncertainty

Tuesday, March 13th, 2018

Yesterday the University of Exeter Business School presented its report on professional development and the needs of Executive Education in a seminar at the Business School.

‘Executive education in an age of uncertainty’ shared the findings of a study involving nearly 50 business and public sector organisations in the South of England.

Codexx was pleased to be involved in the study as the lead research partner and build on its existing relationship with the Business School by supporting Bill Russell, the Director of Executive Education in this project. 

The report provides insights into the challenges and approaches organisations are taking for professional development in these ‘uncertain’ times – with a combination of Brexit, economic challenges, accelerating technology and new business models. It also identifies key requirements for the providers of Executive Education based on the feedback from organisations in the study interviews and questionnaire.

The report also shares the new degree and executive education services the Business School will be launching from 2018, enabling organisations to make use of the Apprenticeship Levy for Level 6 and Level 7 personnel development.

You can read the report here.

Executive Education in an age of uncertainty

For more information on the Executive Education programmes, contact the University of Exeter Business School here.

 

Lean in law firms – five key lessons

Monday, December 4th, 2017

by Alastair Ross

I’ve been working with many major UK law firms since 2005, helping them to improve both the value and the efficiency of their services. A key philosophy I have used in this work has been Lean thinking. I thought it would be useful to reflect on that experience and capture five key lessons I’ve learned over the last 12 years about applying Lean in law firms.

Lesson 1 – A law firm is not a factory (not quite anyway)

I first applied Lean back in 1990 as a manufacturing manager in IBM. It was not known as Lean then – but as ‘Continuous Flow Manufacturing, ‘Just in time’ or Kaizen. Later I used it in improvement projects in chemicals, automotive and aerospace companies. In the late 1990s the term ‘Lean’ was coined by Womack and Jones to cover this improvement philosophy and tools. In 2005 I began working with major law firms in the UK that were feeling the heat of increasing competition and market deregulation. It quickly became clear that Lean thinking could be readily applied to help these firms improve their service value and delivery efficiency. But it was also clear that the culture in a law firm, the ‘craft’ based working methods and the terminology meant that Lean needed to be communicated and tailored differently. Partners did not readily relate to case studies of car factories – they needed to understand how lean could be applied to knowledge-intensive services such as law. And equally lean approaches that worked on the factory floor did not always work quite so readily in a legal team!

Lesson 2 – Process thinking does not come naturally to lawyers

Lean thinking is naturally focused on how work activities and resources are applied to the flow of value from the business to the customer – the so-called ‘value stream’. This value stream is realised in a business process that delivers products or services to the customer. So lean thinking is used to assess and improve these processes. This approach comes naturally in a manufacturing environment where there is a common understanding of work being codified into production processes. But this is not the case in a law firm – ‘process thinking’ is an alien concept especially for work types where one fee earner may currently perform all of the work. This is where process mapping is very effective in getting a team of fee earners to draw up the activities that are required to deliver a service – thus producing a visual map of the process. This can then be used to highlight wastes and begin the journey to improvement. Doing this in a collaborative way with fee earners in a change team is the best approach in my experience – getting lawyer buy-in to the improvements and also creating a cadre of ‘process improvement advocates’ within the firm. (And by the way this is why I am not a fan of Six Sigma for law firms – it’s overkill and not as easily deployed as Lean).

Lesson 3 – There is a lot of waste in legal services

A core element of the Lean philosophy is a ruthless focus on the identification and elimination of waste. But what can be considered as waste? It is any activity or resource that does not add value to what is provided to the customer. Waste accumulates in businesses just like dust and debris in a house. Regular hoovering and the occasional major ‘spring clean’ is the solution in a house. And something similar is required in a business to keep its business processes effective and efficient. But what if a business doesn’t feel the need to do this? If the competitive and market pressures are not sufficiently tough that they need to do such ‘process housekeeping’? This was pretty much the situation in the legal sector for many years – times were good and margins were high. But since the financial crash in 2008, the dramatic impact of the internet and other information technologies and in the UK the deregulation of the sector – things have changed. Law firms are feeling the pressure from budget-squeezed clients, new entrants and new business models. So now firms are looking at their how they deliver their services – and they are finding much waste: Poorly defined, inefficient working methods, inefficient use of people (so much legal work is performed at too high a skill level), errors, rework and poor use of IT, for example.

There is a positive message: With this high level of waste, there is much improvement possible.

So firms can significantly improve their competitive position by using lean to identify and radically reduce this waste (see Lesson 5).

Lesson 4 – Start with a partner champion and a fixed fee service

Making change in partnerships is tough – much more so than in a corporate where the ‘it’s my way or the highway’ diktat can more readily be applied… The other major challenge is that ‘the billable’ hour discourages law firms from improving efficiency – as it results in reduced revenue. Great for the client, but not so compelling for the partnership. But the fee regime is changing with more clients in the UK looking for budget certainty and so enforcing reduced and fixed fees for many transactions. This has created financial pain for firms – much of my work has been with firms who have been forced to move to a fixed fee for a service and are making little or no profit for each matter.

To effectively harness this ‘burning platform’ for improvement, a Partner ‘champion’ is needed – one who is positive and committed to driving major improvement in the service. They are critical in being the business partner to an external change agent, in leading a change team of fee earners and removing road-blocks to change within the firm. From my experience, the presence of such a partner champion is a key ‘Go/No Go’ for a Lean improvement project.

 Lesson 5 – More for less is an achievable outcome

There is a common believe in professional services firms that cost reduction will inevitably lead to a reduction in service quality. In other words something has to give – you either have a high quality or low cost service, you can’t have both.

 This is simply not true.

My work with multiple law firms covering 20 legal services has enabled direct cost reductions of between 25 and 75% – whilst improving value to the client, with more consistency and responsiveness. Why is this possible? Because firms can reduce service cost by reducing or eliminating the waste inherent in legal service delivery (see Lesson 3). This waste adds no value to clients and indeed consumes lawyer resources and time – so removing it will not have any negative effects on client value. Only positive ones.

 So service quality can be improved and cost reduced at the same time.

So what’s the key message for law firms?

It’s a simple one, if a firm is not yet using Lean thinking as part of its transformation work it’s failing to grasp a major opportunity. For Lean can deliver significant business improvements with little capital investment (IT can help, but it’s not mandatory) and provide a foundation for ongoing improvement. And if a firm is looking to exploit new technologies such as AI, it had better make sure it’s building on solid foundations – automating a poor process may simply deliver the proverbial ‘pig with lipstick’….

 

This article was first published by Alastair Ross on LinkedIn on 1st December 2017.

Law firm merger – making 1 + 1 > 2

Thursday, October 13th, 2016

Merger Dictionary Definition Word Combine Companies Businesses

 

Merger – the theory

Merger is an increasingly popular option for law firms seeking a transformational solution to the increasing challenges in the legal market. A merger will create a firm with increased services scope, geographic coverage and depth of resources. It will be attractive to major international clients seeking a legal partner capable of covering their requirements in the key commercial, real estate, employment and litigation areas. Merger will allow the new firm to benefit from economies of scale in negotiation with suppliers and in its support services. The merger will provide the magic of ‘synergies’ that will enable the sum to be truly greater than its parts (i.e. 1+1 is much greater than 2…)

 

Merger – the reality

Cut the sunshine and the smell of roses and cue fog and the sound of shouting and clashing swords. Back to the reality of merger. Because it’s tough to do well. Especially in a knowledge-intensive people-based business – like a law firm.

Getting the most out of a merger demands a bold vision for the new firm, a structured approach to achieve it and a clear picture of capabilities in each of the merging firms. There are very few cases of effective post-merger integration and optimisation in law firms. Many firms seem content to settle just for the larger scale that merger provides. Why is this?

An obvious reason is that making the most of a merger requires significant change and that is challenging in most law firms. The partnership model is very effective at resisting centrally-driven ‘mandated’ changes. Firms also do not typically operate or like ‘process thinking’ and typically resist standardisation of working. I’m using a thick brush to paint a crude picture here – but it is a recognisable one for most law firms – and it makes effective mergers a challenge. On top of this basic challenge is the fact that firms don’t typically have a vision or a programme for ‘post-merger optimisation’.

 

Post-merger optimisation needs process-thinking

The focus of most firms on merging is to adequately integrate the two organisations, working methods and IT and establish a new management structure. Indeed this is the necessary ‘phase one’ in getting a working business. But to make the most of the merger, a ‘phase two’ is required. This phase will optimise the joint capabilities of the merged firms to realise the potential synergies from the merger – to yield higher value to clients and improved efficiency for the firm. This requires a clear vision, process thinking and a structured approach, for example:

Before the first step: What’s the vision?

A challenging vision for the new firm that provides an improved level of competitiveness based on exploiting the potential synergies in the merged firms should be the starting point.

Step 1: Let’s see what we’ve got

A key first step is to objectively assess the services and processes in the merged firm to identify best practices and performance (i.e. where is the ‘one best way’ in each service/process element).

Step 2: Commonalisation and Rationalisation

The next step is to establish common processes and services, based on existing best practices (i.e. the ‘one best way’) that are standardised across the firm. This work can be part funded by the savings from realising the economies of scale in support and in the purchasing of products and services.

Step 3: Optimisation

For further optimisation the firm should consider the application of formal services management to establish a more systematic approach to delivery and innovation of services. Major automation of key common internal processes – using integrated enterprise software such as SAP – is now worth contemplating now that there are defined and optimised processes in place. Unfortunately too many firms seek to automate existing processes (without first improving them) and face the ‘pig in lipstick’ outcome…

 

Systems thinking is needed

The appetite of major law firms over the last few years to merge and create major – often global – law firms has created major national and international operations, some with yearly turnover well in excess of £1 billion. These mergers provide clients with increased support and a range and depth of legal capabilities – and thus increase the firms’ potential competitive position.

However such mergers also further challenge the existing operational methods within these firms for effective and efficient service delivery and the optimisation of support processes. Law firms typically lack the systematic approaches of services and process management and innovation. This is a weakness that will need to be addressed if these firms are to operate profitably in a services market that is increasingly global and digitally-enabled.

Business as unusual – innovating professional services – 7

Monday, December 21st, 2015

Professional Service innovation blackboard

by Alastair Ross, Director, Codexx Associates Ltd

Part 7. Key challenges and sustaining innovation

Introduction

This is the last in a series of seven articles on professional service innovation. The objective of the series is to provide a basic introduction to innovation management for managers, partners and change agents working in professional service firms. This final article reviews the key challenges that professional service firms will face in establishing, accelerating and sustaining an innovation programme and some of the approaches that can be used to address them. To read the first article in the series go here.

Key innovation challenges

In establishing and operating a programme for innovation within a professional services firm, many challenges will be faced, for example:

“Carving out real time for innovation instead of chargeable work is a major challenge…we don’t do enough of it.” Partner, Management Consultancy

Motivation challenge for employees is that chargeable hours win.” Partner, Accountancy

“Innovation does not come naturally to most risk-averse lawyers.” Partner, Law Firm 

“People don’t want to take risky ideas to the boss.” Partner, Management Consultancy

“We’ve been in our functional silos too long and they’re too deep.” Manager, Business Services

“There is lip service to innovation at senior levels due to the difficulty of making the required cultural change.” Partner, Law Firm

These quotes are from clients and a Codexx study in 2012-13 investigating the key challenges encountered by professional service firms in innovation. The study examined 15 predominantly large professional service firms in law, consulting & business services, accounting and insurance. The participating firms were asked to identify their top 5 innovation challenges. The results are shown in Figure 1. A copy of the study report can be found here.

Innovation challenges figure

Fig 1: Innovation challenges in professional service firms (Source: Codexx)

Two of the top three challenges are culture-related issues, each identified by 9 or more of the respondents. The highest challenge was ‘the motivation for employees to innovate’. Firms see that in most cases there is not enough encouragement for employees to innovate. The second highest challenge identified was ‘no/poor innovation process’ – the lack of an effective structured approach for gathering, exploring, selecting and implementing ideas. The third highest challenges was ‘a hostile culture to innovation’ which has some similarity to the highest challenge, the difference being that the first challenge covers a lack of incentive for employees to innovate which covers things like management encouragement and support and reward. This third-ranked challenge identifies an active discouragement for employees and managers to spend time on innovation.

The ‘Other’ category covers a number of other challenges that were identified by respondents. Some of these do overlap with the existing categories, but others capture additional challenges such as the difficulty of managing multiple stakeholders and the issue of functional and departmental silos which can limit the sharing and development of new ideas across the firm.

Innovation system diagram

Figure 2: The innovation system (Source: Codexx)

Addressing key challenges

Establishing and operating an innovation system, covering the 7 practice areas, as outlined in Part 3 of this series and shown in Figure 2, is the most robust approach for dealing with the common challenges faced:

  • Employees will be motivated to participate in innovation activities if there is supportive leadership within the firm and a performance management system that measures and rewards innovation participation. Champions need to be found, to lead projects and help execute required changes.
  • An ideas management process will address the frustrations and inefficiencies that occur when ideas cannot easily be explored, evaluated and selected for implementation in an effective way.
  • A hostile culture for innovation occurs when partners and employees are exclusively focused on today’s business and are effectively penalised when working on innovation (i.e. tomorrow’s business). This can only be addressed by moving the culture to innovation-positive through communication, espoused values in the firm and recognition and reward systems that support it.
  • Innovation needs to be resourced – in a professional service firm this particularly means partner and employee time made available for innovation, some common tools and methods (process mapping, analysis and Lean-enabled improvement for example).
  • Firms need to engage clients in their innovation activities, to gain insight and identify opportunities for enhancing value and to look externally for new ideas and resources.
  • Learning needs to be enhanced in firms, especially to support process-based innovation, with the use of process management and measurement and continuous improvement. Additionally a culture of capturing, sharing and reusing improvements is needed to get innovation beyond the silos of teams and departments and applied across the firm.

Sustaining innovation

Leading a programme to establish sustainable innovation within a professional services firm requires a long term outlook and effective change management. In making change within a partnership it is key to get the support of the majority of partners (unlike a corporate where a board-driven ‘It’s my way or the highway’ approach can be effective). Partners need to recognise that the benefits of the change will outweigh the pain and cost of the journey required. This individual assessment of the pros and cons of change are captured in the ‘change equation’ developed by Beckhard and Harris. This is a simple equation but is powerful in recognising that the viewpoint of change must be both at the personal as well as the organisational level. That is, answering the question from the viewpoint of those key individuals who hold power within the organisation, rather than simply from the viewpoint of the organisation as a whole. This is because it is the perspective of the key decision-makers in an organisation that is critical. The ‘change equation’ states that for successful change:

 

DVP > C

where

D= Dissatisfaction with the status quo

V = Vision of desired future state

P=  Practical Plan to realise the future vision

C = total perceived Cost of change (covering energy, emotional, financial)

(Source: Richard Beckhard and Rubin Harris).

So for someone to be supportive of a proposed change the combination of their dissatisfaction with today’s situation, the attractiveness of the future vision and the proposed plan to realise it must be more compelling than their perception of the cost of making the change. Change leaders need to be able to effectively ‘sell’ the proposed innovation programme at the outset and then continue to sell it during the years it takes to fully establish it within the organisation. This is why measurement and communication of benefits, visible recognition and reward of those effectively leading and participating in innovation activities and establishing innovation behaviours as key to progression in the firm are all key to successfully sustaining the innovation programme.

Summary of the series

The objective of this series was to introduce the key elements of an effective approach for driving and managing innovation in a professional services firm. This is based on my experience of working in Codexx on innovation and re-engineering with major professional service firms over the last decade.

In this series I defined a framework for considering and identifying innovation opportunities, using the ‘innovation dimensions’ model and then gave examples of the four key innovation categories. I then outlined a system to support innovation within a firm, based on 7 key practice areas. In the final two articles I discussed approaches for starting and accelerating innovation within a firm and identified the typical challenges that will be encountered in this journey and key approaches for addressing them.

I won’t pretend that this series will make its readers experts in innovation – that was never the intention! Instead, I hope that readers will have a better appreciation of the opportunities and challenges for applying innovation in professional service firms and to recognise that there are proven approaches to effectively manage innovation so that it can ultimately deliver improved competitiveness for their firms. And from my experience, there is major opportunity for professional service firms to utilise innovation to drive significant improvements in the value provided to clients and the efficiency in which it is delivered.

References and further reading

This article and the others in the series are based on the approaches, references and case studies detailed in my book ‘Innovating professional services – transforming value and efficiency’ published by Gower in May 2015. This is based on the author’s ten years of experience working with professional service firms on innovation projects. It provides in-depth coverage and case studies of the topics featured in this series. For more information go to: http://www.codexx.com/2015/innovating-professional-services-new-book/

Cover-Image

Business transformation – think like a farmer, not a scientist

Monday, December 7th, 2015

by Alastair Ross, Director

Business Transformation sign with lots of comments

Business Transformation.  What is it?

Does it even exist in the real world outside the rarefied environment of the CEO’s vision, the consultant’s presentation or the academic treatise?

If it does exist, how can it be achieved?

These are important questions at a time when the need for major change in businesses is ever more pressing, faced with an environment that is full of new challenges and opportunities.

In my career I have worked both inside large businesses and outside them as an external consultant. During this time I have experienced the wide continuum that is ‘business transformation’:  from the all-too-common hype to the reality of major change projects that drive step-change performance improvements through the application of new business practices.

What I have learned is that ‘business transformation’ is not achieved by one mythical ‘big bang’ programme, despite the (over) promises of advisors, consultants and CEOs. Business Transformation is not like a chemical reaction where you bring together key business elements and catalyse them with a strategy to create – in a flash of light and a cloud of smoke – a new business model. Instead it is something apparently more mundane. It’s like farming.

For transformation is achieved by the hacking-away of the stifling undergrowth of conventional thinking, the planting of seeds of new paradigms and practices, and the hard graft of execution in the office, on the factory floor and out in the field. Transformation is realized across many harvests of change – not simply one ‘bumper harvest’. Sometimes the yield from a harvest is poor, the crops of change wither and die and new approaches are needed. Transformation requires the hardy farmers of change as well as its clear-eyed visionaries and sober-headed analysts.

Business transformation requires a bold and unique vision of how the organisation can generate value in a significantly new way – effectively a new business model – and this vision needs to be bought into by leaders and champions in the business. Communicating this new vision across the organisation – repeatedly – serves to catalyze improvement activities and provide a focus for innovation programmes. Then comes the hard grind of execution.

The reality is that most business transformation programmes fail to realize the initial vision. Most commonly the business fails to sustain the transformation programme long enough to yield the planned results. Management is typically impatient for results and performance metrics in most businesses do not encourage the long-term outlook required for successful transformation.

Finally it is worth remembering that businesses that are successful in the long term continually transform themselves – developing new business models – just as a farmer will continually develop their land, introduce new methods and plant new crops. Business Transformation requires long term thinking, it is an ongoing journey of innovation,  not a single destination.

Continuous Improvement – the quiet giant of innovation

Wednesday, December 2nd, 2015

Continuous Improvement image

A BBC article (here) recently gave media prominence to a well-established business approach, namely incremental or Continuous Improvement. It cited the example of how Sir Dave Brailsford applied Continuous Improvement approaches in his role as performance director of British Cycling to benefit from ‘marginal gains’:

Brailsford believed that if it was possible to make a 1% improvement in a whole host of areas, the cumulative gains would end up being hugely significant. He was on the look-out for all the weaknesses in the team’s assumptions, all the latent problems, so he could improve on each of them. (Source: ‘Should we all be looking for marginal gains?’, BBC)

Brailsford made small improvements in cycling aerodynamics, in maintenance methods, in rider health and other areas identified by analysis as being small areas of weakness. These small improvements aggregated together transformed the competitiveness of the British Cycling team and subsequently Brailsford used a similar approach in the Team Sky cycling team. The result?

Team GB used to be also-rans in world cycling. Indeed, one pundit described the operation as “a laughing stock”. But in the last two Olympics, Team GB has captured 16 gold medals and British riders have won the Tour de France three times in the last four years. (Source: ‘Should we all be looking for marginal gains?’, BBC)

A short history of Continuous Improvement

Continuous Improvement (CI) is a type of innovation (defined as creating value from ideas) that sits at the unsexy end of the spectrum of business innovation. It receives few column inches in innovation blogs, individual projects do not result in earth-shattering changes and few of the project instigators will receive individual rewards. It is noteworthy only for its aggregated impact – of using new ideas to increase customer value or internal efficiency (by a little at a time). Toyota is often considered, incorrectly, as the parent of CI as part of its Toyota Production System (TPS), which later became known as Lean. But its conception was much earlier, primarily in the work study movement of the early twentieth century, fathered by Frederick Taylor and resulting in Taylorism. Toyota wrapped the resulting hard mechanics of time & motion study with its own philosophy of waste elimination and high workforce engagement.

Toyota sets the performance bar

Toyota’s ability to generate an average of 10 implemented improvement ideas per employee per year places it in the premier league for continuous improvement; most western firms struggle to get into the lowest league with typically 0.1 implemented ideas per employee per year. Toyota’s approach to CI lies in its combination of a specific methodology and a work philosophy that defines a unique organisational culture: ‘Toyota views employees not just as pairs of hands but as knowledge workers who accumulate the wisdom of experience on the company’s front lines.’ (Source: ‘The contradictions that drive Toyota’s success’, Harvard Business Review, June 2008) This is a powerful view and one that is all too often missing from business organisations.

Whilst industrial firms will have established CI programmes, focusing on shop floor teams, they vary significantly in their effectiveness. In my work with Codexx I have assessed a number of industrial CI programmes and typical weaknesses that occur include: Limited training in the use of CI methods, lack of defined goals and focus areas for CI, weak processes for reviewing and selecting ideas and limited workforce engagement (i.e. most ideas come from a few people). However for businesses that get it right, CI programmes can deliver significant financial benefits year on year and create a working culture that energizes and engages the workforce.

What about services?

Service businesses often lack robust capabilities for CI, although this is changing as Lean thinking continuous to permeate this sector. Allianz Insurance plc launched a major and ongoing innovation programme in 2006. At its core is a Continuous Improvement system.This uses departmental teams meeting regularly to identify and implement improvement opportunities. Each department team defines three key goals for their team and then, using a short weekly or bi-weekly meeting, they seek to solve problems that have been identified during the previous week and put on a departmental whiteboard by team members. Idea exploration and selection is performed by the team through a discussion. Implemented solutions are then recorded in the firm’s ideas management system. In total there are about 400 teams working in this way with the support of 100 trained innovation champions. Since its start the programme has yielded 38,000 implemented ideas with benefits measured at £19m (1).

Making difficulties visible

A challenge for service firms in Continuous Improvement is the difficulty of ‘seeing’ problems. In industry, a production process is physical, parts and products move through process steps involving people and machines. In a service business, the ‘product’ is information or an experience and is not always physical. This is especially so in Knowledge Intensive Services such as design, accountancy, law and management consulting where the ‘product’ is information-based. Why does this matter? It matters because ‘making difficulties visible‘ is key to Continuous Improvement. This is why a key mantra in Toyota is Genchi genbutsu or ‘Go See’. In other words: Don’t rely on reports or information from others, go and see the situation for yourself. In a services environment, walking into the location where work is performed provides limited value, particularly in information-based work, for there is little to see: what does a law firm’s office filled with people, desks, computer screens and paper (oh yes) tell you about the services performed there? Very little. This is why process mapping and visual management methods are key to making processes and their performance visible in a services environment. In my re-engineering work with professional service firms, the power of collaborative process mapping cannot be underestimated.

Continuous Improvement needs ‘Know Why’ not ‘Know How’

‘Know How’ is a common term used to describe expertise and is thus considered a ‘good thing’. However it is a bad thing when it becomes a barrier to innovation, which is not uncommon. Let me explain further. Much of work is repetitive to a degree with work comprising common activities and sequences of tasks. ‘Know How’ is sufficient to perform such work, as the procedures to be performed and the steps to be followed can be learned and represent the required ‘Know How’. The underlying reasons for why the work is designed in this way are not necessarily understood or indeed do not need to be to perform the work. But ‘Know Why’ is key to making significant improvements in how this work is performed as there needs to be understanding as to why the work is designed in its current form. Indeed much waste exists in working methods because steps and procedures in place were relevant to a situation that does not apply any more. For example, in a major insurance client, some activities in an internal process related to an IT-workaround which had not been required for many years….the people performing the work simply had not been told. The disciplines of questioning, investigation and analysis to enable ‘Know Why’ – a deep understanding – of the work area under focus provide a strong foundation for Continuous Improvement.

Marginal gains x high participation = something big

One of the biggest challenges in driving innovation in an organisation is how to fit it in around the daily business. Innovation is about creating ‘tomorrow’s business’ – a organisation’s focus is on delivering ‘today’s business’ and employees are measured and rewarded on this. So finding time for innovation is always challenging. A related challenge is that the term ‘innovation’ can be intimidating to employees. Many people (incorrectly) associate innovation with the need for creativity and radical ideas and thus feel that they can’t contribute. AXA Insurance Ireland ran an innovation programme in the early 2000s (2). AXA’s analysis of those improvement ideas implemented in the first few years of the programme showed that 80% of them related to small process or service improvements or waste elimination. This helped employees realise that indeed they could participate effectively in the programme by seeking improvements in how they performed their daily work. This helps engage employees in innovation as a regular part of their work – as demonstrated at Allianz Insurance. CI thus provides a good foundation for commencing a programme of innovation in an organisation. So whilst Continuous Improvement might not make as much noise as other forms of innovation, don’t underestimate the power of marginal gains multiplied by high participation in your organisation.

Notes:

1. Source:‘High engagement innovation at Allianz Insurance plc’.  2. Source:‘Experiments in innovation at AXA Insurance Ireland’

both case studies in ‘Innovating professional services – transforming value and efficiency, Alastair Ross, 2015, published by Gower.

Business as unusual – innovating professional services – 6

Monday, November 30th, 2015

Professional Service innovation blackboard

by Alastair Ross, Director, Codexx Associates Ltd

Part 6. Starting your innovation journey

Introduction

This is the sixth of a series of seven articles on professional service innovation. The objective of the series is to provide a basic introduction to innovation management for managers, partners and change agents working in professional service firms. This article focuses on the approaches for starting or enhancing an innovation programme. To read the first article in the series go here.

Beginning a journey of change

There are a number of ways for a professional service firm to become a measurably more innovative business. There is no one ‘best practice’ way for how a firm should make the journey to realising their own effective innovation system. For that is as much to do with the goals, culture and the leadership of the firm as anything else. However, there are three significantly different approaches that are worth reviewing, as one of them may very well fit with your own firm’s situation and culture. It is important to note that just as an innovation process is drawn as a straight line, but in reality is closer to a lump of spaghetti, so the execution of an innovation programme is rarely clean. Here are three different practical approaches for developing an improved innovation capability in an organisation:

1. Top down strategy

2. Emergent

3. Champion led 

 1. Top down strategy

This is in many ways the classic consultant-advocated approach to innovation, which is logical and structured, putting in place the required ‘infrastructure’ (i.e. process, training, metrics, resourcing etc.) and the conditions (i.e. leadership, cultural changes and new behaviours) – as described in the previous articles – to enable and sustain innovation.

Strengths: This approach will deliver the conditions required for effective and sustainable innovation.

Weaknesses: This approach requires resourcing and will take time to deliver results – the other approaches can be faster to yield initial benefits.

 2. Emergent

The emergent approach offers a pragmatic way to build or enhance a set of innovation capabilities. The trigger will be an existing event (typically external) such as tough business conditions driving the need for efficiency improvements to save cost; or a new requirement from a major client(s) for a dramatic change in a solution(s) value or price; or a business event such as a merger or acquisition.

Strengths: The innovation programme can piggyback on an existing change driver and enable more innovative behaviours and outcomes as a result. The existing change driver helps legitimise the need for innovation, so helps management push through the typical inhibitors to establishing innovation activities in a professional services firm. It can yield faster results than a ‘top down’ approach.

Weaknesses: It is unlikely to be sustainable beyond the short to medium term as the conditions for ongoing innovation have not been put in place and a ‘crisis-driven’ change programme can only run for so long.

3. Champion led

This is an opportunistic approach, which finds potential champions for innovation and then supports and resources them.

Strengths: This can be a fast and effective way for bringing new offerings to market. Individual champions are motivated to make their ideas a success. This can be a low resource approach, with little supporting infrastructure required, and only the matter of budget.

Weaknesses: Success depends on a few key individuals and if they fail to perform or they leave the organisation, then the innovation capability dies with them. This is not a system that leverages the capabilities of all the employees and is not sustainable in the long term. This approach is not uncommon in partner-based organisations when individual partners can be ‘given their head’ to take their ideas forward. Success is mixed however, typically with successes at least equalled by failures. And unless the budget is effectively allocated and controlled, a money-pit can be created….

What does experience tell us?

I’ve worked with a number of professional service (and industrial) firms over the last ten years on innovation programmes and inidividual projects and researched many case studies in the writing of my recent book and other articles. What are the three most important lessons that I have learned?

  • It is difficult to start (or ramp-up) an innovation programme
  • It is even more difficult to sustain innovation programmes
  • You cannot underestimate the importance of committed leadership

As discussed in previous articles in this serious, innovation requires a different paradigm to the dominant one that is prevalent in professional service (and most) businesses – i.e. the focus on delivering today’s business. Establishing an innovation programme requires focus and resources pointed at developing tomorrow’s business. This is why leadership is critical to its success. AXA Insurance (Ireland), IBM, PWC, Allianz Insurance plc and the law firm RPC all provide examples of successful innovation programmes where the senior management personally championed and were active in the programmes.

But the starting of innovation programmes benefits from the ‘excitement of the new’ which can help gain initial support, resourcing and involvement. Existing innovation programmes do not benefit from such enthusiasm, which is typically eroded over time, and it is often a struggle to maintain and progress them. These programmes must be kept fresh – through new focus themes, new champions, innovation competitions and rewards, for example.

But most importantly innovation must be embedded in the fabric of the firm – as part of ‘the way we work here’. This means strategy, budget, good people, time, management, measurement and rewards need to be allocated to innovation on an ongoing basis. In effect, professional service firms need to establish something similar in purpose (though not necessarily in structure) to the Research & Development (R&D) function that exists in industrial firms to enable an ongoing focus on innovation.

So what approach is best for taking innovation forward in your firm? My experience leads me to recommend a pragmatic approach that is the hybrid of the above:

  • Work to establish the required infrastructure – a system of innovation – whilst building involvement and gaining demonstrable results (thus maintaining management support and increasing employee buy-in).
  • Employ opportunistic approaches that make use of the energy and capabilities of key personnel acting as innovation champions.
  • Build on any ‘burning platforms’ that are available and help legitimise the need for the innovation programme.

In the final article of this series I will identify the typical challenges that firms face in seeking to improve their innovation capabilities and the approaches that are helpful in sustaining innovation into the longer term.

References and further reading

This article and the others in the series are based on the approaches, references and case studies detailed in my new book ‘Innovating professional services – transforming value and efficiency’ published by Gower in May 2015. This provides in-depth coverage and case studies of the topics featured in this series. For more information go to: http://www.codexx.com/2015/innovating-professional-services-new-book/

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A story of law firm re-engineering: people, processes & profit

Thursday, November 5th, 2015

Law firm re-engineering - enhanced with clients

by Alastair Ross, Director, Codexx

Introduction
Whilst the term ‘re-engineering’ is typically prefaced by the word ‘process’ as this is the key focus area, re-engineering in professional services firms is very much about people. Successful re-engineering requires partners, fee earners and support personnel to make changes in their beliefs, behaviours and working methods. No small challenge then! To help illustrate the people-side of re-engineering in professional service firms, I’m going to review two recent projects I performed for a medium-sized UK law firm operating across three offices over a 12 month period.

Getting started
Codexx was contracted to help the firm drive major improvements in the efficiency of service delivery. The sponsor for the programme was the Managing Partner. The programme commenced in summer 2013 with an ‘Opportunity Assessment’ where I worked with the firm to select the initial services for re-engineering. The selection criteria we used included the potential financial benefits achievable through re-engineering as well as the level of support and commitment from relevant partners. As this was the start of the programme, it was particularly important to pick two services with a good likelihood of success – as otherwise it would reduce internal support for subsequent projects. For the first wave, two services were selected: an insurance claims management service and a clinical negligence service. Both services were delivered in relatively high volume, at a fixed fee, to important clients. And neither service was profitable. A ‘partner champion’ for each service was selected and I worked with each of them to help prepare them for the re-engineering programme that we were to undertake. The methodology we used in this programme was the Codexx ‘Smarter Working’ re-engineering solution which we developed and have used with professional service firms over the last decade. This uses a phased approach (see diagram) with a high level of collaboration from the client and the work in the initial AS-IS and TO-BE phases performed in interactive workshops and client visits.

The importance of the partner champions in professional service re-engineering projects cannot be underestimated. They help set the importance of the project for the fee-earning team members who are continually challenged for time on the project with their chargeable work commitments. If the partner champion is less than committed, the team members will follow suit. In this programme both the partner champions proved to be both committed and effective – attending all the required workshops and leading the team in challenging existing ways of working and identifying opportunities for service improvements. Together we selected a core team for each of the services, comprising 3-4 lawyers and an administrator. I established the ‘Steering Committee’ comprising the Managing Partner, Finance & HR Directors and Department Heads, for progress reviews and key decision making (e.g. in project investments) during the programme. Then the workshops was scheduled and we kicked off the programme with the first ‘AS-IS’ workshop for each of the two services.

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The AS-IS phase – capturing today’s situation and changing beliefs

There are three key objectives for the AS-IS phase:

1. To capture the operation of the service as it is today to provide a performance baseline;

2. To educate the core team in new ways of thinking and assessing service efficiency and value;

3. To get the core team to recognise and commit to the need for change.

To do this our workshops cover both analysis and training in Lean-based service analysis and improvement principles. Thus the team members are able to map the existing service and identify key wastes. I guided the team in profiling the value provided to clients and the service experience they receive. I then prepared them to visit a number of selected clients to get their views on the service provided by the firm and to identify service improvement opportunities. In parallel I worked with the partner champion and Finance department to gather financial performance information on the service to identify typical matter cost and the resulting profit margin. So at the conclusion of the AS-IS phase we had a rich, detailed picture of the existing performance and issues of the two services and a growing list of potential improvements, which the partner champions and I reported to the Steering Committee.

Equally important in this phase is the development of the team – both in the beliefs and capabilities of the individual members and the team’s effectiveness as a whole. Initially in these two projects there was more than a little doubt in the team members about the value of this programme. The most experienced and senior associate in the claims management team was frankly dubious that their working methods could be improved in any significant way. This is not an unusual reaction in our legal projects, as process-thinking is not common in law firms. Indeed a lot of the concepts and thinking that we introduce to the team – such as Lean thinking, waste identification, process mapping, service disaggregation and right-skilling – is new and indeed alien to most lawyers! As our approach is deliberately collaborative with the team members actively performing mapping and analysis, they each make a journey of self-discovery by using these techniques and seeing the results for themselves. This results in an important transformation of individual thinking and leads to a level of buy-in to the resulting changes that is far deeper and permanent than a consultant-enforced change.

Re-engineering personal journeyThat very much proved to be the case here, with the formerly resistant associate lawyer, obviously enlightened and energised following the AS-IS, then working in her spare time to outline a new ‘TO-BE’ process for performing the claims management service that would reduce the time required to perform the service by nearly 75%. This is an outstanding example of individual change. But it is not uncommon and I find that fee earners are generally surprised at the level of inefficiency that their process mapping and waste analysis reveals. So by the end of the AS-IS phase they certainly recognise the need and also the obvious scope for improvement. To capture the insights and energy that builds in this phase we start capturing a list of improvement opportunities in the first workshop and build it during the AS-IS phase. New ideas are allocated to team members who are responsible for providing an initial exploration and recommendation as to whether this idea should go forward and even be a ‘Quick Hit’ project (we implemented a number of these in the claims management project during the AS-IS phase). This further engages team members and also provides a useful first ‘filter’ on new ideas. To broaden engagement beyond the core teams we used a ‘Living Walls’ approach to share our findings with the rest of the fee earners working on the service – and get their feedback – using large paper charts pinned up in working areas

Some of the major challenges in the AS-IS phase in this programme were: Difficulty in getting accurate service cost data and issues of fee earners fitting in project work alongside their existing client workload. These are challenges typically experienced in most of our legal re-engineering projects.

The TO-BE phase – designing a new service and new working methods
The objective of the TO-BE phase is to build on the learning from the AS-IS phase and design a new process, with a supporting organisation and IT, for delivering the service which is significantly more efficient (to yield cost savings) and provides higher value and a better experience for clients. In addition an implementation plan with supporting resourcing and business case are needed to validate the case for change.

To help in ‘framing’ the team’s TO-BE work, we typically use a ‘Vision workshop’ at the start of this phase with a number of partners and managers. We share the team’s AS-IS findings and work to develop a 3-5 year Vision for the service, with measurable targets. In this programme I ran a vision workshop for only one of the two services, where the multi-office and multi-partner operation of the service meant that it was valuable to share progress and likely changes to get partner input and eventual buy-in to support the partner champion.

In the TO-BE phase I worked with each team using a number of innovation tools and the existing ideas list to generate a number of ‘transformational concepts’ for the new service which we then mapped. This provided a blueprint for the new service which required much less time and cost to deliver whilst improving on the existing client service. The concepts were developed into transformation projects, making use of Codexx project definition templates, and an overall implementation plan and business case for change.

Interestingly, whilst at the start of the programme both teams were adamant that a new case management system was needed to enable major efficiency improvements, they did not eventually recommend this in the TO-BE phase. For by then it was clear that whilst the existing Case Management software was indeed old and ‘clunky’ the implementation of new case plans and templates to support the new TO-BE process would enable major improvements. So for now the old case management system would be ‘good enough’ – which improved the business case for these changes.

The major changes in the new TO-BE process for each service was an underlying process that was optimised to reduce required fee earner time, that was ‘right-skilled’ to push work down to the lowest skill level that it could be performed at with acceptable quality, that was ‘codified’ using templates and documented procedures that captured and deployed the ‘one best way’ approach for repetitive work elements, making use of Case Management to control workflow and deliver documents. Both services also changed the way in which experienced associates and partners were used in the service. Their time was reduced and focused on ‘up front’ matter strategy to guide fee earners rather than ‘back end’ review and checking of work already performed – to maximise their value and minimise fee earner inefficiencies. This freed up the most experienced (and expensive) fee earners to work on more complex work.

Overall the TO-BE for both services moved them from a rather informal working approach, where issues in resources and controls had led to variable (and expensive) outputs, to a more systematic working approach with improved resources and controls leading to more consistent outputs, at lower cost (see diagram below).

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Implementation – changing behaviours and realising business benefits
The objective of the Implementation phase is to realise the TO-BE service by executing the defined transformation projects. Both programmes required the development and documentation of new templates, a ‘new process bible’ and updating the case management processes and screens (though keeping the existing case management system).

Implementation is always a challenge. The Managing Partner of one of our clients referred to it as ‘the grind of implementation’, which is an apt description. For the AS-IS and To-BE workshop phases of a re-engineering programme are ‘new and exciting’ with much collaboration. But in contrast, Implementation is more akin to ‘heads down’ and ‘get it done’ by project teams working on their own for much of the time – whilst team members also juggle a case load of work. It’s tough. We recognise this and particularly the challenge for time from client work. To help in this we provide a monthly progress review with the project leaders and partner champion, to keep at least a ‘monthly pulse’ of project work and to identify issues early. Despite this, we find that law firm projects typically slip and on this programme it was no different with most projects completing 8 weeks late. One key reason for this is that it is the core team members that typically lead the transformation projects and it is difficult to get their case load reduced during the implementation period (despite our recommendations) so they are typically very busy.

Our two programmes differed somewhat in their implementation experience. The claims management service was delivered from one office and thus is was easier and thus faster to get the required buy-in and implement the required changes. The clinical negligence service was delivered from teams and partners located across three offices. The partner champion thus had the added challenge of streamlining a service using fee earners who did not directly report to him, necessitating working to get the buy-in of other partners. In addition this service was more complex and thus required more work on process detailing and case management changes.

Continuous Improvement – locking in and extending improvements
I have been placing more emphasis on this phase in our re-engineering projects with law firms. This is because there is always the danger that the new methods and resulting improvements can fade away, as these islands of ‘new ways of working’ are surrounded by a large ocean of ‘business as usual’ in the rest of the firm…. So locking in new ways of working is key to retaining their benefits. But this is really not enough. For the reality is that there will continue to be downward pressure from clients on fees. So unless the firm wishes to suffer eroding margins, it needs to find further improvements over time.

So the objective of the Continuous Improvement phase is to lock in the existing improvements and establish a simple and ‘light touch’ system for identifying and implementing ongoing improvements that will further improve service and cost-effectiveness. Key elements that we put in place for these two services were a performance dashboard with monthly updates and at least a quarterly session involving team members to define improvement needs. One ongoing challenge is how best to reward fee earners delivering a fixed fee service and motivate them to further improve service efficiency – whilst their conventional targets and compensation are based on chargeable time… As part of these two programmes the firm recognised the need to develop new mechanisms for fee earner recognition based more on revenue and profit generated than on time recorded.

So what were the outcomes?
Both services have now been operating with the new methods for around 9 months at the time of writing. Compared to their operation prior to re-engineering, the claims management service has reduced costs by around 70% whilst maintaining service quality and improving reporting and billing quality. In addition, the firm has strengthened its relationship with the financial services client  receiving the service, as the firm’s lean-based improvements were seen very positively by the client. The clinical negligence service has reduced costs by around 50% whilst improving service consistency and providing a faster service to its public sector client.

This significant cost reduction meant that both services are now providing a good level of profit to the firm. In addition, the fee earners in the teams working to the new methods have given a very positive feedback – a key reason being that they are finding the work less stressful than before – whilst delivering  a better service at higher productivity. One team has used their process analysis experience to map and analyse a related support process which had performance issues. The firm subsequently commenced two more service re-engineering projects with Codexx.

Energizing Change

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