Identifying waste in professional services processes

Lean methodology grew from the world of manufacturing, where processes are nicely repeatable, with few branching paths and where it’s generally obvious if things have gone according to plan. Machinery often handles the complex or fiddly bits. Professional services industries such as law may seem like they have little in common with that world. In this article, I draw on my experiences of process design and engineering in the legal world, and examine how business analysts can find each of the Lean categories of waste in professional services processes.

What we mean by waste

Like all companies, law firms always want to maximise profitability. For business analysts, that typically means looking for ways to eliminate uneccesary costs.

Lean methodology was born in the manufacturing world as a way of making production more efficient. In Lean, waste (or muda) is anything that doesn’t add value to the product received by the customer. The mnemonic TIM WOOD refers to seven categories of waste – transportation, inventory, motion, waiting, over-production, over-processing, and defects.

I’ll describe each of these categories below and explore how business analysts can apply them to find and eliminate waste in professional services industries such as law.

Tip – do not try and convince lawyers that their work is just like a factory production line. This rarely ends well.

Transportation

While lawyers may not need to move their caseloads around on forklifts, legal work often involves a lot of hand-offs or moving information around.

Documents are drafted, reviewed, printed and posted. Information moves between lawyers, their supervisors, and their administrative staff. Every such hand-off adds delay. Simply drafting and sending emails, or dictating letters to be typed by a secretary adds time and cost to the process. Printing and paginating several hundred pages of a court bundle is expensive, time consuming, and not much fun for the person doing it.

Transportation also creates opportunities for things to go wrong and defects to slip in.

Business analysts can help identify the points in a process where work is being “transported” and examine whether there may be faster or cheaper options. Reducing the need for transportation also removes risk.

Inventory

If you make things, keeping a warehouse of materials or finished products is not an effective use of your money. The stock is simply dead weight. This is why so many products are produced and shipped “just in time”.

Lawyers don’t make widgets, so they don’t have warehouses full of stock. However, there are a couple of things I would class as “inventory” for lawyers.

Firstly, their unbilled time. As lawyers perform their work, they’ll record their time spent. Eventually this will be billed to their client, but until it is the work is effectively on a shelf gradually depreciating in value. Ensuring work is billed in a timely manner means revenue is earned sooner.

Secondly, lawyers typically create a vast number of records. This may usually be digital these days, but rows of filing racks and mounds of paper are not that uncommon. Storage space costs money. Failure to manage archives also creates data protection risks.

Business analysts can help firms examine processes, data and business rules to ensure excessive and expensive “inventory” isn’t being carried by the firm.

Motion

In the manufacturing world, this heading would apply to staff needing to move to reach materials or tools.

In the legal world, motion could include any unnecessary effort – drafting documents from scratch without templates, data entry, attending meetings, or trying to find information.

Business analysts can help lawyers identify those moments when what a lawyer needs isn’t at their fingertips when they need it, or where effort can be removed by automating repeatable steps.

Technology can provide a wide array of solution, and business analysts can help professionals evaluate the available options.

Waiting

Waiting is unproductive time. In manufacturing, you can’t have part of an assembly line sitting idle waiting for materials to arrive.

An inordinate amount of time is spent by lawyers chasing other people for things or to see if things have happened. Almost every process model I’ve created that involves a lawyer sending a letter or email includes one or more chasing loops to try and get a response.

In some areas of law, professionals may have a huge number of cases, and these all need to be checked regularly for new developments or responses.

This is prime territory for automation – or at least some rationalisation of business rules!

Over-production

Over-production is when supply outstrips the demand, either creating more products than your customers are asking for, or delivering a higher level of quality than the customer is paying for.

In the legal world, this can be seen in lawyers drafting lengthy correspondence that needs to be more concise. The application of templates and drafting automation can help reduce this.

Tip – don’t try and directly tell a lawyer their letters are bloated and overly-long. You will not be thanked. Encouraging some comparisons between lawyers will often spark a healthy debate instead.

Over-processing

This is doing more than required, increasing resource costs without delivering more value.

In law firms this can often be seen in having the wrong roles performing tasks. Some legal activities are “reserved”, meaning that they can only be performed by a qualified lawyers. Many other tasks could be delegated to skilled, but less expensive, members of the team. This should definitely be considered if the activity isn’t going to be billed to the client anyway.

Another example of over-processing is the application of overly-burdensome controls. While it’s essential mistakes aren’t made when clients’ interests are at stake, many controls could be automated or rationalised.

Defects

Defects can adversely hit profitability in a number of ways:

• Clients will be less inclined to engage your services in future if they don’t feel they are getting good quality work.
• Defects can affect your wider brand and reputation, making it harder to secure new clients.
• In a highly regulated environment such as law, defects can incur fines and other penalties or sanctions. In the most serious cases, you could lose your ability to practise.
• Re-work and rectification takes time and requires extra resources. It adds costs without creating any further value.
• Checks and controls might be implemented to eliminate defects, and this creates additional costs.

Business analysts can examine processes, performance measures, and customer feedback to identify where defects are appearing. Root cause analysis can identify why the defects occur. Options can then be explored to detect the defects or prevent them from occurring in the first place.

A note on “billable” time

Professional services are typically charged for by the hour. The activities that can be billed by a lawyer will be agreed in advance with the client. When examining waste examples in a process, I’ve often heard the question “I can charge the client for that time anyway, so won’t we lose money by making that process faster?”.

In the short term, possibly.

In the longer term, no. If you don’t eliminate this waste activity, a competitor will. Your client will then go to the competitor that can provide the same service but at a lower cost. The legal market is increasingly moving towards fixed or capped fees. Firms will need to monitor their margins closely to remain competitive – and that can mean no longer doing things a client is willing to pay for today.

Tip – there may be competing interests at stake. Often there will be one person who “owns” the relationship with a client. Delighting the client on price will be a key goal. Others in the firm may be trying to meet their monthly billing targets and so be reluctant to let go of work. Business analysts can apply a range of techniques to examine different stakeholder perspectives.

In conclusion

Eliminating waste is essential for professional services firms to remain competitive.

Lean methodology provides some great techniques for identifying waste, and with a little imagination can be easily translated to complex knowledge processes such as legal casework. Business analysts come equipped with the tools and techniques to identify waste in professional services processes, and to help firms create and deliver more efficient ways of working.

This handy crib sheet list can help inspire you to spot ways of working more efficiently.

If you’d like to find out more about how business analysts can help professional services firms improve their profitability by eliminating waste, why not get in touch for a chat?