Most companies that I’ve worked for have tried to avoid arbitration clauses. Some felt that with arbitration companies would be too quick to file for arbitration rather than try to resolve the issues internally. Others were concerned that the results wouldn’t be strictly on the facts. If we ever did agree on one, and that was very infrequent, it could only be used after the results of a full escalation failed to reach agreement and it would not exclude the parties ability to litigate it (meaning non-binding arbitration).

This is a compelling idea. Next time you are in a negotiation and don’t have enough bargaining power to excise an arbitration clause, consider adding a dispute resolution clause as a way to inoculate your client against the risks of a bad arbitration decision. Invoking the structured settlement discussion and escalation process in this clause might just be the ticket to avoid an unhappy outcome.

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In our Value Index, a lawyer completing a Complexity Level 1 assignment in 15 hours would be graded as +10; if he or she completed the assignment in 30 hours, he or she would be graded at -5. In addition, as part of the process, supervising lawyers (or perhaps even clients) would value the quality of the work using a similar 1 to 5 system, with 1 being unacceptable, level 3 being acceptable and 5 being superlative. A quality review of five would result in a doubling of the individual Value Score, a quality level of 3 would be neutral, a quality review of 1 would be a reduction equivalent to the total initial Value Index score. Thus, in the latter instance, if the initial Value Index score was 10, it would be reduced to 0.

To keep the playing field level, each firm’s Value Index scoring system would be peer reviewed by a competing firm randomly assigned, similar to the fashion in which accounting firms are peer reviewed.

One commenter suggested that this Value Index is a nonstarter because law firm attorneys prefer the simplicity of calculating a bill based on hours expended and hourly rates. Speaking from the client perspective, having engaged (and let go) a number of firms during the 4 years I spent in-house at a large company, I would offer up the idea that hourly billing is not so black and white. While it is easy to calculate those numbers, as a client, the numbers never meant much to me. I would find firms handling substantially similar matters (with no expensive curve balls) and would charge radically differently for them. Many lawyers would not spend their time grappling with unique issues, but instead would constantly re-invent the wheel due to their lack of a knowledge management program. And no one who ever pitched us did so in a way that convincingly explained how they had driven out waste in their performance and had a strong process understanding of their business. As a result, I think that categorizing matters by level of complexity is an intriguing idea offered up by Jerome. Of course, even for simple matters, the fundamental problem for law firms is that clients are often quite inefficient in providing information and making decisions in a timely manner, and, in doing so, create unnecessary work, thereby driving up the cost of the service.

If clients want to get serious about improving their performance within the overall process, then ideas like this Value Index could be quite effective in building an effective strategic sourcing legal services program.

I asked my developer why this is possible, and he responded that the constant breakthroughs in computer science, new programming languages, the availability of open source software, and constant communication within the field on novel ways to solve challenges, all combine together to improve the ability of programmers to do more work in a timely manner.

This discussion triggered a Passover memory from about eight years ago. I attended a friend’s Seder and sat next to an elderly gentlemen in his eighties who promptly engaged me in a conversation about the legal world. He practiced law for over fifty years, and regaled me with stories of legal life back in the 1950s. Apparently, a talented, experienced secretary was invaluable, as they did most of the contract drafting. Additionally, he told me transactional attorneys faced a limit on the length of contracts and the number of revisions, as massive editing simply took too long via a typewriter too satisfy the business needs of a client. He said that these constrictions actually are quite positive, as they forced attorneys to hone in on the key expectational concerns of their clients in a deal, and there was little incentive to add a great deal of belt and suspenders language or to argue endlessly over limitation of liability/indemnity provisions (which, let’s face it, are usually of little concern to clients and are often unnecessary in their most extreme, aggressive forms which trigger tiring, lengthy negotiations).

Contrast that context with today’s situation, where we routinely go ten or twenty versions deep into contract drafts, prepare voluminous documents that our clients rarely read, and argue strenuously over provisions that provide little risk protection. Despite all the tremendous tools at our hands over the years, such as overnight mail, faxes, email, word processing, and cloud computing, I have the strong feeling that we are less, not more, productive today. The quality of our work is constantly driven downwards by the weak link in any negotiating chain. For instance, in negotiating an original equipment manufacturer supply agreement, there might be an attorney on each side, a customer procurement manager, a customer operations manager, a salesperson, a finance expert on each side, and an information technology expert on each side. Any one of these people, and each individual’s boss, can grind negotiations to a halt with unreasonable negotiating positions, poorly drafted language, massive spelling and formatting errors, document corruption, loss of version control, and unclear email communications. That’s eighteen possible weak links in the chain! And, one might argue, that the two attorneys are sometimes the two weakest links.

This weak link issue doesn’t really exist as much in the programming context, as the programmer is engaged directly with the client on building an outstanding product, not constantly compromising the quality of that product due to an adversary on the other side who has little incentive to achieve high quality (e.g., a crystal clear contract with little ambiguity that sets up the parties in a satisfying, mutually beneficial business relationship) and instead desires to seek one sided concessions (e.g., a contract that insulates one party from any liability while leaving the other party wide open). Having handled many software development contracts myself, when I have seen programming efforts fail, the common cause is too many people involved in the project who demand short term, one sided efforts that result in overly complex code which is unable to function properly or be completed on time. Essentially, programming projects founder on the shoals of an overly legalistic, adverse project management style.

Ultimately, I don’t believe lawyers will ever change and improve their productivity without a sea change in the financial incentives that drive unproductive behavior. I always engage my developer on a per project flat fee basis with a hard deadline. We work together up front to design and lock down a specification before we agree on the fee and the deadline. As a result, his financial incentive is to do great work (so I give him future projects) with tremendous productivity (so he hits the deadline and makes a good return on investment for his time). We’ll need financial incentives in the legal world that drive a similarly positive state of affairs before we will see a massive increase in legal productivity.

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An Interview With Deborah Gordon, Law Firm Efficiency Expert

Today we are interviewing Deborah Gordon, a health law expert and partner at the full service law firm, Seyfarth Shaw. Deborah is one of the most innovative law firm attorneys I have met, and is on the cutting edge in using advanced management techniques taken from the non-legal corporate world to spur efficiency in the legal arena.

Please tell me a bit about your firm and your practice area.

Seyfarth Shaw (“Seyfarth”) has approximately 750 lawyers practicing in Atlanta, Boston, Chicago, Houston, Los Angeles, New York, Sacramento, San Francisco, Washington, D.C., and Brussels, Belgium.  As a full-service law firm, Seyfarth provides a broad range of legal services, including Labor & Employment, Employee Benefits & Executive Compensation, Corporate & Finance, Tax, Real Estate, Intellectual Property, and Litigation.  I am the Vice-Chair of the Corporate Department and I Co-Chair the firm’s Health Care Practice Group.  My practice is focused on general business transactions, such as finance transactions and acquisitions, as well as regulatory and compliance matters.

Your firm is the only one I am aware of in the legal field that boasts substantial experience in Six Sigma, Lean and process improvement. Why is this the case?

About five years ago, Seyfarth invested in learning about and integrating Six Sigma and Lean principles at the encouragement of a few clients.  We invested in training and were impressed with what we learned.  We decided that Lean Six Sigma was the best approach for our firm and realized it could have significant impact for our firm and our clients if we applied it to our service delivery model.

We also understood that the traditional application of these principles was not something that easily applied to the legal services delivery model.  We spent several years tailoring the approach to fit legal services, an approach we now call SeyfarthLean.  Today, we have 75 in-house certified Green Belts and we have applied SeyfarthLean in every practice throughout the firm to deliver quality and efficiency that also delivered client cost savings ranging from 15–50%.  I received my Green Belt in 2006 and have utilized Lean Six Sigma principles in both internal and client projects.

What are some examples of how you’ve assisted clients in their processes that one does not normally find in the typical legal representation?

One is process mapping.  Process mapping is a critical exercise in our SeyfarthLean approach that lays the foundation for increased efficiencies, reduced costs, and other desired outcomes.  A process map lays out, step by step, the process followed in handling certain types of matters.  Each stage is broken down into individual tasks.  Using historical matter data, we take a look at the typical timekeepers and estimated time taken to perform tasks.  We then critique that process, and identify ways we can be more efficient and cost-effective.  Areas that are driving the wrong results—inefficiencies, higher costs—are re-engineered and a new process is created.   We have applied process mapping throughout our practice areas to develop best practices for the benefit of our clients.  Most typical legal engagements are not as data and process driven.

The second is project management.  We worked closely with a client to develop an extensive and detailed plan for organizing, structuring and approaching the project.  Leveraging the skills of one of Seyfarth’s client-facing project managers, our team partnered with the client to review organizational structure, critical path and resource accountabilities while establishing effective reporting protocols.  We then participated with the client in presenting the project plan, goals and the implementation strategy to multiple team leads across many different workstreams.

What initiatives are going on at your firm in the area of knowledge management and associate training and development?

As we apply SeyfarthLean, we continually seek ways to improve our ability to collaborate with and enhance communication internally and with our clients, as well as more efficiently provide services.  One outcome of that is advanced knowledge management tools, including SeyfarthConnect, our internet-based client services information system.  Through SeyfarthConnect, clients gain real time access to information that is pertinent to our work, including documents, budget, correspondence, calendars, schedules, discussions and almost anything related to specific clients or matters.  Furthermore, our team relies on it as a robust knowledge management tool that helps them access information more quickly and effectively to more efficiently work on client matters.  We have employed similar, internal databases of documents and resources to aid in knowledge management.

With respect to training, we are in the process of training all of our attorneys and staff on SeyfarthLean in 2010.  Many of our attorneys have already been trained.  The training includes an overview of Lean Six Sigma and the DMAIC process (Define, Measure, Analyze, Improve and Control) that we use to drive efficient, high-quality solutions for our clients.  We also regularly engage in practice development training and CLE programs for associates.  In the Corporate Department, for example, we are concluding a year-long program of the anatomy of a deal, providing a detailed focused of an M&A deal.  We are planning a continuation of that program into 2011 with the focus on financing transactions.

Do you find that your unique approach better positions your firm in the new alternative fees environment?

SeyfarthLean provides us a unique platform on which to provide alternative fees.  It allows us to base alternative fees on a true understanding of the costs involved in providing services in the most efficient manner, through extensive data analysis and our historical experience providing those services.  Additionally, it provides clients the assurance that when we offer them a flat fee, we are not simply pushing the work down to the most junior staff available.  Our flat fee offerings, for example, are based on right-sized staffing models that drive the greatest result and value for our clients.  Because of this, we have had success with predictable alternative fees.

Thank you, Deborah.