When consulting with law firms, I frequently get asked about the future of law practice. What will it look like? How will firms compete? How will services be delivered? How will it be priced?
I think I saw a glimpse of the future in what Seyfarth Shaw is doing today. Several of their leaders made a presentation on how they use six sigma process improvement tools to improve efficiency and client service and lower cost to the client.
They believe that corporate buyers of legal services want high quality legal work and more predictable and lower legal costs. Cutting rates (and profit margins) is not a sustainable strategy, so they dug in and started to re-design work flows and processes as a manufacturer might value-engineer a production process. Using "lean" process improvement tools, they found ways to save clients as much as 50% off their bill while maintaining or improving quality.
Think that will sell?
To clients, yes. But to the partners of the firm who realize that they have to produce twice as much work to get the same revenue, well, that's another kettle of fish. Profit margins increase and client loyalty improves, but the essence of the law firm revenue and compensation model changes significantly. I have so much respect for any firm who can make such significant cultural change to not only serve clients but to essentially set the standard for a new way think about delivering legal services.
Interested in learning more? Read these articles:
Re-Engineering the Practice of Law - New York Times
Six Sigma Makes a Comeback - Business Week
Seyfarth Shaw Says Six Sigma Method Has Cut Client Fees by Up to 50%
New Buzz Phrase in Efficiency Efforts: Process Management
Making It Lean: Lisa Damon, Seyfarth Shaw
and information on Seyfarth Lean Consulting.
If Seyfarth Shaw can make the implementation (and cultural change) stick, they will certainly have a competitive advantage serving cost conscious corporations.
We may not see the end of the billable hour, but law firm leaders are waking up to the notion that this is just one way to generate profits. Every other business segment employs some version of the "learning curve" to generate profits, which is merely a continuous pursuit of lowering the cost of goods sold, which comes through experience. This approach will boost profits even when revenues are flat or declining. So the lawyer who thinks he has to double his productivity to earn the same revenues misses the point - if what we're solving for is profit, then he might be able to accomplish the same profit by embracing efficiency. There are many law firm leaders who confuse revenues with profits and that therefore pursue mergers or lateral growth because the leaders believed adding more billable capacity is the only way to increase profits, and the tales of the resulting disasters fill our in-boxes every day. They are wrong.
Posted by: Timothy B. Corcoran | May 25, 2012 at 06:39 AM