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Applying the concept of “Lean Thinking” to Increase Productivity and

Maximize Profits in a Small-sized Philippine Law Firm

University of Bradford School of Management

Assessed Coursework OPERATIONS MANAGEMENT

MAN4048M Distance Learning MBA (Manila-AIS)

UoB No. 13031524

I hereby certify that this assignment is the result of my own work and does not exceed 2,000 words as specified in the Study Book.

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Applying the concept of “Lean Thinking” to Increase Productivity and Maximize Profits in a Small-sized Philippine Law Firm Introduction:

This paper attempts to analyze the design process and explore areas that need

improvement in a Philippine law firm, with particular reference to this writer’s own law

firm, by applying the Toyota Production System (TPS) which focuses on the elimination

of wastes (Holweg, 2006), translated into the “lean thinking” approach of manufacturing

firms (Shah and Ward, 2003) in the service sector setting. Like any professional service

organization (PSO), a law firm relies heavily on its highly skilled employees as its main

assets and involves high customer contact and customization of services (Lewis and

Brown, 2012).

The TPS has emerged as a global framework for manufacturers to “think lean”

(Liker and Morgan, 2006) with the aim to eliminate waste in business operations and

thus enhance the productive capacity of an organization to maximize its potential for

profits (Shah and Ward, 2003).

Unfortunately, few scholarly articles are devoted to improving the process in a

law firm. Lewis and Brown (2012) affirm this view when they advance that PSO’s are

relatively “under-researched.”

Indeed, it may be difficult to conceive how the TPS, which is mostly applied to

manufacturing firms, can be applied to a PSO where the main assets are highly-skilled

professionals who, unlike workers on the shop floor, are educated, well-paid and expect

autonomy and creative freedom (Liker and Morgan, 2006; Lewis and Brown, 2012). This

is the biggest challenge being faced by a law firm, especially where the tasks are not

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seen to be repetitive that standardization of highly customized work for individual

clients appears to be difficult (Lewis and Brown, 2012). However, some scholars have

made rational and convincing discourses on the applicability of the TPS to the service

sector’s process design (Ahlstrom, 2004; Liker and Morgan, 2006), which shall be the

crux of this paper’s discussion. In the end, no process is absolutely customized to any

individual customer as to be incapable of repetition to some degree, even in the service

sector. With each repetition, improvements are made, eliminating wastes that are

learned through each experience and value streaming is identified with an aim to

perfection (Shah and Ward, 2003).

Discussion

US Legal.com (2015) defines a law firm as, “…a business entity formed by one or

more lawyers to engage in the practice of law… The primary service provided by a law

firm is to advise clients about their legal rights and responsibilities, and to represent

their clients in civil or criminal cases, business transactions and other matters in which

legal assistance is sought…”

A Philippine law firm is no different from this definition. The only difference with

those in the United States and United Kingdom, perhaps, is that most law firms in our

country do not use the “billable hours” payment system for our clients. This is because,

especially nowadays, there is an increasing number of clients “shopping” for cheaper

rates among different law firms, and particularly focusing on “fixed costs” (Lewis and

Brown 2012; Garrido & Associates, 2000) for legal services such as contract drafting, due

diligence, organizing and establishing corporations, and even litigation.

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It cannot be gainsaid that the legal landscape is changing, as pointed out by

Bergman (2012), where clients seek more control in legal services delivery and are more

exacting in their demands. In fact, scholarly and non-scholarly articles are unanimous in

their view that: every customer wants value for their money, i.e., a perfect product or

service delivered with perfect timing and precision (Shah and Ward, 2003; Lewis and

Brown, 2006; Legal Process Solutions, 2012 and 2014), and the marketplace is

increasingly becoming more competitive as observed by the New York State Bar

Association: Report of the Task Force on the Future of the Legal Profession, February

2011, cited by Bergman (2012).

In our Firm, where there are two senior partners, five off-counsels

(subcontractor lawyers who specialize in different fields), two junior associates and only

three members of the support staff, two major concerns arise: 1) How to reduce lead

time and costs (eliminate wastes) and improve quality of work; and 2) How to create a

true learning atmosphere or culture with a constant quest to improve each service

process in an effort to attain perfection (Liker and Morgan, 2006).

In this regard, Liker and Morgan (2006) wisely condensed the application of the

Toyota management principles into three subsystems: process, people and

tools/technology. This paper will thus focus on the subsystem of “process.”

The customer as the central figure

The client plays a crucial role in our business (Sullivan, 1982) where various

services demand different levels of customer interaction. Customer (or client) contact, a

term coined by Robert Chase (1978 and 1981) as cited by Sullivan (1982), influences the

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service package and, more often than not, the client, being the “central figure” in the

service process (Lewis and Brown 2012), is the biggest source of input because they are

always the starting point (Liker and Morgan, 2006). Outputs then vary depending on the

client’s needs. For this reason, some view that standardization of different service lines

to be difficult (Lewis and Brown, 2012), not to mention the waiting time it takes until a

service is completed, which creates waste and non-value adding activities.

This is where the concept of “customer contact model” whereby “a service

system’s potential efficiency is a function of the degree to which the customer is in

direct contact with the service facility relative to total service creation time for the

customer,” as described by Chase (1978 and 1981) according to Sullivan (1982), in the

service production process comes to mind. In fact, “designing service encounter to

deliver high levels of customer satisfaction and quality is one of the major issues facing

service organizations today,” (Soteriou and Chase, 1998). The bottom line, therefore, is

creating client satisfaction (Cook, et al., 2012), sustaining client loyalty and enhancing

our marketability. To achieve this, Spear and Bowen (1999) advances that every

supplier-customer (lawyer-client) connection must be, as much as possible, direct. The

wisdom behind this idea is that services must be customer-specific or tailored to fit the

customer’s needs. Otherwise, a generic service will be of no value to the customer and,

hence, non-value adding to the company, creating wastes that are costly (Liker and

Morgan, 2006) to the firm. Hence, the “service encounter,” which is the interaction

process between the server and the served, is the ultimate basis for “customer

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feedback” (Cook, et al., 2002) in order to attain precision, if not perfection in the service

process.

Correlatively, there is a need to arrive at a precise, well timed, error-free, simple

and direct process that will minimize or eliminate costly mistakes translated into wastes

(Spear and Bowen, 1999).

The diagram below illustrates the typical workflow in drafting a complicated

contract for client, such as a movie production agreement between a producer and a

director. As this is a new field never before undertaken by our firm, time is devoted to

researching on relevant laws and interviewing the client to acquaint ourselves with the

culture and norms in the movie industry in the course of contract drafting. As illustrated,

the process takes a total of 27 days until the client is satisfied and the work is

completed, thus:

Existing flow:

In the example above, the client usually causes the delay. In the meantime that

the draft awaits further comments or final approval, the waiting time becomes non-

value adding, i.e., it does not inject any money into the business (Shah and Ward, 2003),

and therefore unproductive for the firm. Also, it creates waste when the lawyer’s

attention is diverted meanwhile to other tasks such that, by the time that she returns to

Initial interview and instructing client to bring

documents

second meeting (after 7 days): client brings documents

lawyer makes the first draft and emails to

client for comments (time

it takes: 2-3 days

client reviews the first draft

and emails lawyer (time it takes: 7 days)

Lawyer revises draft per client's

inputs and comments and

sends the second draft to client (time it

takes: 2-3 days

Client reviews the second draft

and either approves the

same or makes further

comments (time it takes: 7 days)

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the draft contract with the client’s inputs, she would have refocus her attention on the

contract, and this often gives rise to omission of details or concerns that need to be

addressed due to faulty memory.

The new workflow engineered by the firm’s management now requires the

client’s full time and attention involving a face-to-face interaction between the client

and the lawyer, with both of them sitting down together in a “sprint” session (Legal

Process Solutions, 2014), no matter how long it would take in a single day, just to finish

the contract, thus:

New workflow:

With the reengineered workflow, the lead-time is significantly reduced and the

cash cycle is shortened as the lawyer can immediately collect on the completed service

(Legal Process Solutions, 2014). Productivity is no doubt increased as the lawyer’s

capacity in contract preparation is quadrupled. Quality-wise, the end product is more

precise as customer feedback is done in real time.

Further, the new workflow subcribes to the concept of “pull” in the

manufacturing process more efficiently as the firm only produces what the client wants

Initial interview and instructing client to bring

documents

second meeting (after 7 days): client brings

documents and lawyer and client

sit down in "sprint", discussing

each provision in the contract while

the lawyer types on her laptop

The first draft on the lawyer's

computer is shown to the client for

review.

Client makes further comments

or approves the draft. If approved, contract goes into

final printing

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at exactly the same time that it is needed and is always prepared for changes made by

the client (Shah and Ward, 2003).

More importantly, the end product, i.e., the Movie Production Agreement, will

now become the firm’s template for future similar clients or similar endeavors for the

same client. It then becomes an addition to the firm’s database of contracts that other

lawyers in the firm can refer to without repeating the entire process of researching on

relevant laws and movie industry customs and practices all over again. It now becomes

the standard contract for similar agreements in the future; subject only to a few

“tweaking” that depends on the specific needs of a future client, such as names and

addresses of the parties, compensation provisions, and special agreements, if any.

Unarguably, it now adds to the firm’s competitive advantage (Lindahl and Beyers, 1999).

Finally, as each process is repeated, the same is continuously improved until

perfection is achieved.

Conclusion

The “Lean Thinking” approach, no doubt, is as much applicable to the service

sector as it is to the manufacturing sector. Albeit standardization of the service process

may seem difficult to implement especially in a professional service organization where

its main assets are its highly educated employees that crave for autonomy and creative

freedom, and different clients have different needs, standardization still applies even on

seemingly non-repetitive tasks with particular focus on the customer’s needs. To

achieve this, the Firm’s world should revolve around the client where direct contact is,

more often than not, imperative.

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More importantly, a full-customization of services down to the last detail of

every client’s needs is impossible. Law Firms are still bound by legal standards and

boundaries within the legal profession that restrain legal service professionals from

catering to the client’s every need (or whim) (Lewis and Brown, 2012). A contract, for

example, has three elements: consent, object and consideration under the Civil Code of

the Philippines. Absence of one will render a contract ineffective or null and void.

Lawyers should adhere to this standard in order to deliver an effective service to the

client where: 1) value is specified according to the client’s own definition and needs; 2)

Value stream is identified by elimination of everything that does not generate value to

the end-product; 3) ensure that there is a continuous flow of services, such as an

expansive database culled from previous activities; 4) Use of the “pull” process in

production by producing exactly what the client wants and needs, subject to legal

restrictions in the profession; and 5) Achieve perfection through continuous process

improvements (Shah and Ward, 2003).

The “lean thinking” principle, after all, can be applied equally to a professional

service organization inasmuch as it is imperative in a manufacturing company in order to

lower costs with the elimination of wastes and maximize the productive capacity of a

firm, as well as its profits.

REFERENCES

Ahlstrom, P. (2004). Lean Service Operations: Translating Lean Production Principles to Service Operations. International Journal of Services Technology and Management. Vol 5, No. 5-6/2004. Online: http://inderscience.metapress.com/content/h0lax7ckgl2r5m38/ [Accessed: 11 April 2015]

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Bergman, N.R (2012). How Toyota and Motorola Can Help You Reinvent Your Law Firm. Real Life Practice: A Sound Balance. 30 June 2012. Online: http://reallifepractice.com/2012/06/how-toyota-motorola-can-help-you-reinvent-your-law-firm/ [Accessed: 11 April 2015] Cook, L., Bowen, D.E., Chase, R.B., Dasu, S., Stewart, M.S., Tasik, D.A. (2002). Human Issues in Service Design. Journal of Operations Management, 20 (2002) 159–174. Online: http://www.sciencedirect.com/science/article/pii/S0272696301000948 [Accessed: 1 April 2015] Garrido & Associates (2000) Website. http://www.garridofirm.com/pg_attyfees.html [Accessed: 10 April 2015] Holweg, M. (2006). The Genealogy of Lean Production. Journal of Operations Management, 25 (2007) 420–437. Available online: http://www.sciencedirect.com/science/article/pii/S0272696306000313. [Accessed: 10 April 2015] Legal Process Solutions. Operations Strategy and the Law Firm – Opening our 7-Part Series. 24 January 2012. Online: https://legalfutures.wordpress.com/tag/toyota-production-system/. Accessed: [10 April 2015] Legal Process Solutions. Operations Strategy and the Law Firm. 8 February 2012. https://legalfutures.wordpress.com/tag/toyota-production-system/ Accessed: 10 April 2015. Legal Process Solutions. Specialist Resources – The Core of an Efficient Legal Production, Part 2 of our 7-Part Series on Operational Strategy in Legal Organizations 1 February 2014. http://legalprocesssolutions.com/tag/toyota-production-system/ [Accessed: 10 April 2015] Lewis, M.A. and Brown, A.D. (2011). How Different is Professional Operations Management? Journal of Operations Management, 30 (2012) 1-11. Online: http://www.sciencedirect.com/science/article/pii/S0272696311000829 [Accessed: 1 April 2015] Liker, J.K. and Morgan, J.M. The Toyota Way in Services: The Case of Lean Product Development. Academy of Management Perspectives, 20, 2 (May 2006), pp. 5-20. Online: http://www.jstor.org/stable/4166229 [Accessed: 9 April 2015] Lindahl, D.P. and Beyers, W. B. (1999). The Creation of Competitive Advantage by Producer Service Establishments. Economic Geography, 75, 1 (Jan. 1999), pp. 1-20.

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