Building continuous improvement processes into SME law firms

Continuous-Improvement

The process of continuous improvement is at the heart of all modern lean (or agile) business thinking.

This ongoing process of ‘change; measurement; change’ is important for all business processes and across all industries – but particularly so for SME law firms, who are competing in an increasingly tough market.

In this post, I’ll explore why continuous improvement is vital for law firm management – and how SME law can realistically implement it.

What is continuous improvement?

To wind down from my half marathon training, I’ve been setting aside time to read up on modern approaches to business improvement – and doing some thinking about how this applies in the legal sector.

One of the books that has been top of the bedside pile is Scrum: the art of doing twice the work in half the time by Jeff Sutherland. In it, Sutherland describes his widely used project management system ‘Scrum’: “a simple framework for solving the most intricate work problems effectively” that aims to “ simplify your work life, increase productivity, and get more done in less time than before.” Sounds great!

The book is aimed at “entrepreneurs who are struggling with managing small teams, increasing performance, and making forward progress with large projects.” But it struck me that these are all issues that SME law firms are contending with – with varying success.

Sutherland discusses the established continuous improvement process of Kaizen as part of the cycle of regular process reviews and results.

A typical Kaizen cycle:

  1. Set goals and provide any necessary background.
  2. Review the current state and develop a plan for improvements.
  3. Implement improvements.
  4. Review and fix what doesn’t work.
  5. Report results and determine any follow-up items.

This type of cycle is frequently referred to as PDCA (Plan, Do, Check, and Act). PDCA brings a scientific approach to making improvements:

  • Plan (develop a hypothesis)
  • Do (run experiment)
  • Check (evaluate results)
  • Act (refine your experiment; then start a new cycle)

This process can be scaled up or down depending on the task being evaluated. However you implement it, the most important aspect of the process is measurement: ie review first, then report on your results, then check and evaluate those results.

Why is continuous improvement important for SME law firms?

In previous posts, I have talked about the dangers of law firms failing to scrutinise and act upon key financial, operational and market data in a market of increasing demand for non-traditional legal services in which entrepreneurial start-ups are swooping in and grabbing market share.

There is no longer any room for slack. Decreasing law firm profit margins, client demand for more cost efficient billing models, and market disruption from technology-based entrepreneurial start-ups all mean that continuous improvement and fine-tuning is essential for law firm survival.

Discussions around the topic of continuous improvement are not new in the legal sector. But I think it’s worth re-emphasising the ongoing importance of ongoing legal practice process reviews to remain efficient and ensure that client needs remain central to service delivery.

The continuous improvement process for SME law firms

The continuous improvement process in a legal context is summarised nicely in this Clifford Chance white paper: Applying continuous improvement to the high-end legal sector: “Continuous improvement is a combination of the well-established process improvement methodologies of ‘lean’ (which is about doing the right things) and ‘six sigma’ (which is about doing those things right).”

Most small to medium law firms won’t have the resources to bring in continuous improvement consultants. But law firms of all sizes should be familiar with the principles described, and understand how they can be applied in their own business.

Here are some key considerations you should have when implementing continuous improvement in your firm, and establishing the process.

(1)  Set a benchmark

You can’t expect improvement unless you first measure the start point as a benchmark, then continuously measure against that. Set your benchmarks at the start, and track performance against them at regular timely intervals. They key to this is measuring – opinions and “gut feel” cannot be measured and therefore cannot be used to ensure progress is being made.

(2)  Monitor both associated and unrelated performance indicators

Measuring indicators not directly related to your change criteria is critical to ensure changes don’t have negative impacts on other areas. For example, while you’re focused on making changes to improve your average fee rate, make sure that those changes are not bringing down your customer satisfaction scores.

Measuring improvement in law firms

If you can’t (a) measure your baseline (where you are at), and (b) measure the results of your actions, it is not possible to carry out any process of continuous improvement.

To find efficiencies, you need to know exactly what you are working with. If your MIS does not deliver high-quality information (not just meaningless data; but instantly accessible, actionable management information), then accurate continuous improvement analysis is impossible.

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Read our two-step guide to developing a the best law firm MIS below:

More information on this topic:

  • Read more about: LEAN and Six Sigma.
  • Alan Hodgart’s Performance Measurement for Law Firms is also a good read.

Have you introduced continuous improvement in your law firm? What KPIs do you measure? And what impacts has it had on your business?

Do share your comments and best practice case studies! You can tweet me at @KatchrData or get in touch (details below).

 

GM-1If you’d like to discuss how your law firm management information system can be developed to fully support continuous improvement in your practice, please contact us by email or call 0845 6806 843.

Blog post by Graham Moore, Managing Director, Katchr

 

 

Law Firm Practice Management System and Business Intelligence expert. Managing Director of Katchr.

If you’d like to discuss how large or small law firm software and legal financial reporting systems could help you run your practice more profitably, please give me a call on 0845 6806 843.