The Growing Pains of Legal Transformation – Advice and Tips from Kenneth Grady, CEO of SeyfarthLean

Craig Sharp

Process transformation in law firms is not a new phenomenon, and like all good trends it had to start somewhere, at some earlier point, before it began to spread.

The process of process excellence in law actually began in both Australia and the US, and has now been in full force for around a decade. So while UK and EU firms may currently be feeling the growing pains of change, their colleagues across the water have already been through the transition, and have a few choice insights that they can share.

Ahead of the ‘Legal Transformation: Process & Project Excellence’ Summit in London this January, PEX Network spoke to Kenneth Grady, Chief Executive Officer of SeyfarthLean Consulting, a subsidiary of international law firm, Seyfarth Shaw, about their efforts in process excellence and the benefits Legal Transformation can bring to both your clients and your business.

Craig Sharp: Why are legal firms in the EU now so focused on transforming and improving their processes?

Kenneth Grady: Clients have a wonderful way of bringing things into focus. When they believe something is important, chances are their law firms will start believing it is important. Clients have spent many years improving productivity in almost all areas of their businesses, but law departments have been among the last holdouts. Starting about 10 years ago, that began to change and law departments started looking for productivity improvements. Trends diffuse slowly through the legal industry, so it has taken many years for law department productivity to diffuse through to law firms. Now, however, clients routinely ask large law firms in the US about their process improvement activities and those law firms are becoming more proactive about undertaking process improvement. The trend is diffusing to the UK, partly because large law departments are looking for consistency across jurisdictions and partly because law departments in the UK are ready for the transformation.

Craig Sharp: So would you say that law firms are currently looking to streamline their processes in an effort to bring costs down for clients, or because they face increased competition with in-house law firms?

Kenneth Grady: Both play a part. Large, global companies have law departments that cross jurisdictions and are learning a lot about how they can manage their legal expenses. Many of those companies started process improvement in the United States and are now expanding it globally. As they undertake that global expansion, it’s putting increased pressure on law firms outside the US to adopt practices and processes similar to those in the US to better serve their clients. Part of it is also the increased competition in the legal industry generally and, as the competition has increased and as the focus has shifted during the past decade from legal services to value, that also is driving the transformation.

Craig Sharp: What’s driving the increase in competition? Has competition increased at an unusual pace for the industry?

Kenneth Grady: It’s increased over the past decade, and part of it is a realisation amongst companies that there need to be controls over legal spending, just like there are controls over spending in other areas. The philosophy prior to the last decade wasn’t spendthrift; but legal services and the costs of legal services were not the primary concern for companies in many instances. If you look at Magic Circle firms or if you look at very high-end matters, the companies, the executives, and the in-house legal teams were a bit less focused on the costs and more focused on the outcomes.

Companies, in general, are now focusing on productivity and on better return on investments and use of assets, so there’s a pressure within the corporate environment to manage budgets, to manages costs and to recognise that not all situations require or justify spending without good budgetary control. Law departments within those corporations have come under more pressure and scrutiny to recognise that not everything is deserving of a top ticket price. Sometimes, you just need to get some legal work done; it’s not the most glamorous; it’s not something that is at the highest risk level for the corporation but nevertheless, it needs to happen. Those situations in particular require more attention to cost control, and those are the areas where you’re seeing the greatest impact from these transformative types of practices in the industry.

Craig Sharp: A Lean Six Sigma approach to law – is it feasible? Why is Lean Six Sigma still rarely adopted in this field?

Kenneth Grady: Nothing about Lean Six Sigma prevents us from applying it to the delivery of legal services. Legal services are delivered through processes and processes can be improved. The adoption rate is increasing, but the rate is not driven by some fundamental incompatibility. Rather, change issues drive the rate. Lawyers in law departments must be willing to change, to improve, and to drive down costs while improving quality and freeing up time to work on activities more value added to their organizations.

In other words, those lawyers must be ready to change from entrenched, comfortable habits to new, different habits.

About ten years ago, Seyfarth decided, for a variety of reasons, to look at some form of process excellence and decided to use Lean Six Sigma as its foundation for process excellence. It was certainly the first major law firm to do that and today, it’s still the largest law firm implementer of Lean Six Sigma.

That process started for Seyfarth back in about 2005 and, it spread throughout the firm, then of course came the financial troubles around the world, and as companies have focused more and more on themselves, on Lean and Lean Six Sigma, it’s just grown to become an area that is now seeping from corporate practices generally, into other departments. Given lawyer personalities and risk aversion, that type of change takes time. But ten years of steadily increasing change in an industry that has not changed for over a hundred years is not a bad rate.

Craig Sharp: What can Lean and Lean Six Sigma offer to legal practices that other process improvement methodologies can’t?

Kenneth Grady: According to the ‘3rd Biennial PEX Network Report: State of the Industry’, Lean and Lean Six Sigma held the number 1 and 2 slots for methodologies most frequently used in process excellence programs (measured across all industries and all departments).

Lean (and Lean Six Sigma) is widespread within clients, making it easier for law firms and law departments to speak the same language. There are more resources available to help law firms and law departments with Lean than with other process excellence methodologies. Given the growing adoption of Lean programs in the legal industry, there are now more resources experienced with implementing Lean in the legal environment than there are other process excellence methodologies. In short, Lean has the advantages of a first mover methodology in the legal industry.

Craig Sharp: For the benefit of those in the UK and in the EU who are just beginning this process, if you could cast your mind back ten years to when this began at Seyfarth, how was it received internally, and how did your first attempts at process improvement pan out?

Kenneth Grady: Lean and Lean Six Sigma or any other process excellence methodology or philosophy, is a change process. Whichever tools you choose, it is changing what you do today and how you’ve been trained to do it, to what you’ll be doing tomorrow. And change, whether it’s in this arena or in your personal life or in some other aspect of your practice, is always a difficult thing because you are trying to break down habits that you currently have and build new habits - that process of taking people from the old to the new is difficult.

To succeed, we must change habits that we have developed over decades in the legal industry and as lawyers. It is unrealistic to expect that a lawyer, who practiced one way for 20 years and is very successful, will wake up tomorrow and agree to deliver legal services differently just because the firm has decided to take on process excellence. As we all know, our personal resolutions, whether to go on a diet or exercise more, are difficult to keep because they generally require us to change deeply embedded habits. Multiply that difficulty by dozens or hundreds of attorneys with deeply embedded practice of law habits, and you get an idea of the challenge. I recommend that lawyers take the long-term view. They need to start the transformation and be persistent. If they don’t start transforming today, the process will just be more painful when they do realize they have to transform, but now are well behind their peers.

It is a commitment that you should expect to make over the long-term and there will be points where you have success and everything seems to be working well and there will be points where you have small failures along the way, but that’s okay – you never encounter success without first encountering a few failures.

Craig Sharp: What steps would you say a law firm needs to take if they’re just getting into legal transformation?

Kenneth Grady: First, the firm should decide whether it is serious about the transformation or just dabbling to impress clients. If the latter, the firm should recognize the effort is mostly marketing and public relations and tailor its investment accordingly. Without a serious commitment, the firm and its lawyers will not meaningfully change their practices.

Second, the firm must commit people and resources (time and money) to the change. Many firms are approaching the transformation as an "and" job, as in we have someone in charge of "pricing and project management." For any firm of size, this type of transformation takes a full-time leader and will take significant resources to make visible progress.

Third, the firm needs to recognize transformation is a journey. The firm won’t be adopting a "one size fits all" process excellence program. It must find ways to make process excellence work within its culture and with its clients. Finally, the journey will involve some failures and the firm must be willing to accept that failure is part of the transformation process.