Articles Posted in Tools

Consider this counter-intuitive point made in Jeffrey Pfeffer and Robert I. Sutton, Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting from Evidence-Based Management (Harvard Bus. School Press 2006) at 47: “Process improvement programs like Six Sigma and TQM [have] been shown to drive out errors and improve efficiency, but also to stifle innovation.” The quote cites a 2003 article, but does not explain the comment on stifled innovation. Perhaps this has to do with process improvement techniques ossifying a process; or that when you start quantifying and dissecting a process you draw back from thinking about change?

Perhaps when a methodology is applied by a law department the rules squeeze out and deter original thinking (See my posts of Jan. 10, 2006 and Sept. 4, 2006 on methods to prime the creativity pump.). The scrutiny looks backward rather than peers forward. Follow the “LeanTQMSigma” recipe, don’t freelance and vary the meal.

Jeffrey Pfeffer and Robert I. Sutton, Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting from Evidence-Based Management (Harvard Bus. School Press 2006) at 178 offers advice on the four most important actions that a manager needs to take to change others’ behavior. Being a fan of mnemonics, I relabeled the last two so senior managers can remember the Four Ds.

Dissatisfaction: People in the law department need to be disgruntled or worried about what’s happening. “Our filing system stinks.” Or perhaps, “We’d better cut outside counsel costs or someone will cut our headcount.”

Direction: People in the law department need to know where the change process is heading. “Relentlessly communicate what the change is, why it is necessary, and what people ought to be doing right now with as much clarity as possible.”

A fascinating book, Jared Diamond, Collapse: How Societies Choose To Fail Or Succeed (Penguin Books 2005) at 13, distinguishes between the proximate cause of an event and the ultimate cause. The proximate cause is the one you notice; the ultimate cause may be broader, more subtle, or take longer to bring about its effect. To illustrate the difference in a law department, mull the causes of a higher-than-average turnover rate.

The proximate cause for the departure of several lawyers, the one identified by them in exit interviews (See my post of Aug. 24, 2005 on exit interviews.) might be compensation, but the deeper, ultimate causes might be the poor profitability of the company or the leadership ineptness of its senior executives. In other words, what appears on the face to be the immediate problem may be the result of deeper, less apparent forces (See my post of Aug. 30, 2006 on systemic problems compared to individual shortcomings.). Don’t stop if you think you’ve trapped a proximate cause; keep hunting for the ultimate causes

Permit me a moment of snarkiness. Does everyone cringe when affronted with a platitude for management (See my post of Aug. 3, 2005 that savages “alignment with clients.”)? Here are a handful of other fortune-cookie pronouncements that sound sage but aren’t worth the thyme.

Structure your law department to optimize efficiency.

Keep layers to a minimum.

Having heard of the winner’s curse (See my post of Jan. 14, 2007.), let’s keep cursing. Imagine a general counsel and her leadership team who craft a mission statement (See my post of Dec. 7, 2006 on mission statements and references cited.). The mission statement is replete with abstract concepts along the lines of “client satisfaction” or “low cost – high quality” or “make the most of our assets” or “leverage resources.”

Enter the “curse of knowledge,” because the leadership lawyers understand what they mean by high-level statements, but those who are suppose to be inspired by them hear nothing but lofty, lighter-than-air terms devoid of past reality or future practicality.

If you as a manager know many instances that you have inductively generalized into a broad – but abstract – proposition, you need to ward off the knowledge curse and give specifics to their meaning and import. This idea came from the Harvard Bus. Rev., Jan. 2006 at 20.

“Escalation of commitment is a widespread phenomenon and one that is hard to avoid or overcome,” states Jeffrey Pfeffer and Robert I. Sutton, Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting from Evidence-Based Management (Harvard Bus. School Press 2006) at 175. This escalation might afflict law departments if, for example, there were expanded use of a firm selected after an arduous competitive process, but whose performance has deteriorated. Or once a decision has been made to use task based billing, to push more firms to conform despite indications that the data makes no difference. Commitment pressures can block change (See my post of Dec.19, 2005 about “active inertia.”).

The urge to double down is even worse than the tendency to carry on because of past investments (See my posts of Aug. 5, 2005 that instances the sunk-cost fallacy in terms of facilities charges; and March 23, 2006 on the sunk cost fallacy generally.).

Logarithms refer to exponents, the little superscript numbers that show that the base number is multiplied by itself the exponent times. Remember? 33 = 27. Logarithms are powers of 10, as as log3 is 103 = 1000. Logarithms are useful when you chart numbers that increase from tiny to very small relative to each other (See my post of .

For example, if a law department were to create a scatter gram of amounts paid to vendors during the year, the axis would contain invoices from $1 to $1 million (See my post of June 6, 2006 that explains that kind of chart.). Against that extremely wide scale (log 1 to log 6 plus), many of the smaller invoices would be barely visible, all clumped together. However, if the law department represents the amounts of bills as base-10 logarithms, the range can be readily handled.

If the second axis of the scatter gram also uses a scale of base-10 logarithms, such as to show the number of lawyers in the firms paid the invoices, the law department has felled a mighty tree, a log-log scale. Relatively straight trend lines on log scales indicate smooth increases (See my post of Aug. 9, 2006 on the Richter scale – a logarithmic scale where each additional unit is 10 times more powerful than the preceding unit – of law department cost-saving techniques.).

In Jeffrey Pfeffer and Robert I. Sutton, Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting from Evidence-Based Management (Harvard Bus. School Press 2006) at 7, the authors criticize many benchmarking projects, which they deride as “casual benchmarking,” because the projects suffer from a pair of fundamental problems. “The first is that people copy the most visible, obvious, and frequently least important practices.” A law department example might be convergence, the unthinking reduction in the absolute number of law firms retained.

The second problem is that law departments “often have different strategies, different competitive environments, and different business models – all of which make what they need to do to be successful different from what others are doing.” The cultural attitude of a company toward lawyers, the regulatory environment, and the entwinement of key law firms are each examples of why law departments should not casually adopt benchmarking’s so-called best practices (See my post of May 14, 2005 on benchmarks for metrics and benchmarks for practices.).

Pfeffer and Sutton attribute the core reason for sloppy benchmark to managers’ failures to “ask the basic question of why something might enhance performance” (emphasis in original). They properly point out that “if you can’t explain the underlying logic or theory of why something should enhance performance” (at 8), you’re benchmarked borrowing will likely founder.

Venn diagrams consist of circles that overlap other circles to a degree that indicates the two circles’ shared aspect. A circle that represents female lawyers in US corporations, for instance, would overlap perhaps 35 percent of a circle that represents all lawyers in corporations. In a three-circle Venn diagram, more relationships can be represented.

For example, a law department could show for its four primary corporate firms how large a slice of the litigation pie they handle. Visualize four circles, and have those circles overlap another circle that represents the total amount paid for litigation representation. The amount of the overlap of each circle would correspond to the corporate firm’s proportion of litigation work.

Another step is to make the size of each circle correspond to an amount, such as the total amount spent on the firm in the past year. Then the Venn diagram conveys both absolute dollars and percentage of the litigation spend pie. If you color the Venn circles, you can depict even more information.

Every year, the same basket of goods and services costs a bit more – retail price increases in recent years have run in the two-to-four percent range. Because of this trend, it’s misleading for general counsel to use nominal (raw) numbers to compare spending over a period of years (See my post of March 12, 2006 on nominal data, which is not adjusted for inflation.). For example, if a law department spent $10 million in 1995 on outside counsel and ten years later, in 2005, spent $12 million, how has it performed after adjusting for retail price inflation in the United States? According to an easy-to-use site, the original costs of legal services would have inflated to $12,759,083 – so the law department has actually held the line against inflation.

Whenever a law department shows and explains spending figures over multi-year periods, it should convert those figures to constant (inflation-adjusted) currency amounts so that the effects of inflation do not insidiously distort the analysis.