Lean in the Legal Department? Yes!
By Jennifer J. Salopek
When Rockwell Collins was spun off from Rockwell International as a public company in 2001, Gary Chadick came aboard as the new company's first General Counsel. Rockwell Collins (and its predecessor companies) had a long history of applying Lean principles to all of its business units and shared service functions, but those efforts had ebbed and flowed. In 2010, the company's CEO announced an initiative to renew those efforts across the company.
"I knew there were opportunities to apply Lean principles to the practice of law but had not seen anyone apply Lean to providing the in-house coordination of outside legal services," Chadick says.
Fortunately, he had an expert source in Seyfarth Shaw LLP partner Lisa Damon, a pioneer in using Lean Six Sigma for the delivery of legal services. Chadick invited Damon to address his department; when he heard how she had used value stream mapping of her firm's processes to generate work product, he saw the clear opportunity to apply the technique in his own department.
"The effort needed to be transformational, not incremental, and visible to everyone in the Law Group in order to meet the Lean renewal goals established by our CEO," Chadick says. "As part of our discussions, Lisa made me aware of what other pioneer companies had done in terms of applying Lean thinking to the services provided by law departments, including the use of alternative fee arrangements. We interviewed other general counsel, outside counsel, and some of Seyfarth Shaw's other clients" to learn more.
What Chadick saw were tangible benefits—predictable fees, consistency of processes, and a more efficient team—that his office and Rockwell Collins could realize. Chadick manages a 20-employee law group that provides legal advice and services worldwide, manages all litigation, and handles corporate secretary responsibilities. The Office of the General Counsel also includes the Ethics and Business Compliance Group and the Export/Import Compliance Group—about 65 employees in total.
At a kickoff meeting with members of the Law Group and the Seyfarth team, Chadick articulated the case for change, described his vision for the future, and empowered everyone to bring new ideas to implement a more value-based approach to the department's relationships with outside counsel.
Damon led the Law Group through a value stream mapping exercise to plot RC's current state. Later, the Law Group developed a future state map, incorporating the use of knowledge management, process efficiencies, and best practices. Within a year, the Rockwell Collins–Seyfarth Lean consulting team had completely reengineered how the Law Group selects, engages, manages, and evaluates outside counsel.
"The Lean workflow is the framework for the entire value-based approach. It maps out all of the steps in the process of selecting, engaging, managing and evaluating outside counsel," Chadick says.
In the first three months since the Law Group started using its new processes, it saved over $58,000 primarily through AFAs. Chadick projects savings for fiscal year 2012 to be $666,000 on $3.9 million in outside counsel fees, or 17.5 percent. Although impressive, cost savings weren't his primary goal:
"We have always been very responsible in the way we manage expenses; there was no feeling that fees were out of control," Chadick says. "Rather, our effort was to change directionally the way we engage with outside counsel in order to better align their interests with ours and to promote efficiency. We shouldn't pay for wasteful or inefficient work."
Sub-teams within the Law Group developed a couple of key tools, including engagement letters based on alternative fee arrangements, a Short-Form Request for Proposals, a checklist for initial conversations with outside counsel, guidelines for discussions with outside counsel, and decision trees that outline the use of the tools. Although some Rockwell Collins attorneys initially feared that firms would resist alternative fee-based engagements, and thus would have to be dropped, outside counsel proved able and willing to engage in alternative fee arrangements. Rockwell Collins now uses AFAs on all new matters over $50,000.
"We didn't use RFPs before, but now use them very successfully to create competition. The firms really had to sharpen their pencils, and we have better goal alignment and focus on "value" of the legal services being provided by outside counsel versus billable hours," Chadick says.
Most of Rockwell Collins' alternative fee arrangements now are based upon success fee arrangements; some include a firm fixed price for a scope of work as well. Chadick defines success in multiple ways: Did the firm achieve the desired results? Were they strategic thinkers and responsive to our input and needs? Was the work done efficiently and did they demonstrate good execution acumen? How well did they perform the work in terms of cost and schedule?
The Lean team also built in vehicles for continuous improvement, including effective feedback loops to ensure candid conversations about lessons learned; these lessons are documented and actioned. The reports are available for reference in selection of counsel for new matters.
"At the end, this opportunity for discussion and learning emphasizes that our system is performance-based and that we will reward firms where they should be rewarded," says Chadick. "It focuses them on what success looks like through our eyes."
"In the end, the Law Group was successful in re-engineering its processes due to the hard work and dedication of all of the members of the Law Group and Seyfarth Shaw's guidance on how to apply Lean principles to the delivery of legal services."
Rockwell Collins' Short-Form Request for Proposal
Rockwell Collins' Checklist for Discussion with Outside Counsel
Rockwell Collins' Short-Form Request for Proposal Decision Tree
Rockwell Collins' AFA Decision Tree