Applying Six Sigma, Toyota “Lean” to Legal and Regulatory Work: It’s About Incentives — Or Lack of Them (Part II of II)

In Part I of this two-part series I contended that the vast majority of law firms and in-house departments haven’t adopted Six Sigma, Toyota “Lean” protocols, or other process improvement standards because the legal industry’s cost-plus business model undercuts any incentive for operational efficiency.

Undercuts how?

Law firms and in-house departments “organize” their work by simply assigning bodies (of admittedly smart people) to tasks. 

So the adoption of systematic, measurable processes of the kind long since developed everywhere else in your company would reduce lawyer-bodies-assigned (and hours worked). That’s not what legal industry — its business model — is designed for. 

This Part II addresses a rare exception: The“Electronic Discovery Reference Model” — EDRM — a collaboration between lawyers, companies, technology providers and legal process outsourcers to create business process and technology standards for cheaper and more accurate “e-discovery”. 

“E-discovery” stands apart from most legal industry tasks. Because here the incentives favor — in fact they require — operational efficiency.

“E-discovery” consists of pretrial disclosure between parties to a lawsuit of information that’s been generated or stored digitally.

“Find me every e-mail that refers to ‘Ms. Jones’, or to ‘Barbara’, or to “assistant director of payroll” — in a sex discrimination case about Barbara Jones who was assistant director of payroll. Or: “Identify every document containing the words ‘Acme deal, ‘Acme transaction’, or ‘Kansas City target” — in a contested corporate takeover suit relating to an acquisition of the Acme Plastic Molding Company located in Kansas City.

In pre-digital days when I was just out of law school the “systematic business process” for this task consisted of the client company sending boxes of hard copy documents to the law firm. The “technology” consisted of inexperienced young law firm associates paging through the documents to look for the relevant words.

This state-of-affairs had two drawbacks for the client company:

  1. Cost
  2. Accuracy (no matter how many cups of coffee a 27-year-old law graduate consumes at 2AM — they’ll miss some of what 2018 technology will consistently find).

Today the sheer volume of digital information has forced even the legal industry to look for something more efficient.

Hence “e-discovery” has introduced (1) systematic business processes, and (2) tech tools to a legal industry that (in most other tasks) successfully avoids both.

Lawyers are involved in EDRM — but they’re not in the driver’s seat.

In “From Big Law to Lean Law”, Professor William Henderson of the University of Indiana Law School describes a labor-intensive, technology-averse legal industry that’s far from “lean” in the sense that Toyota used the word — and then writes this:

“I want to be careful to not paint the future with too broad a brush … I visited the annual meeting of the Electronic Discovery Reference Model … an industry consortium comprised of law firms, major corporations, and legal vendors attempting to set standards around methods of conducting electronic discovery.

“Until just a decade ago, lawyers and law firms handled virtually every aspect of the discovery phase of litigation. With the advent of electronically stored information … a myriad of vendors have moved into this market.

” … Out of 84 organizations involved in the long-term EDRM projects, many are the new legal entrepreneurs discussed in [this paper] … roughly a dozen are … law firms.”

EDRM is a shining exception to the absence of business process disciplines — and related absence of technology — that prevails in most of the legal industry:

  1. Only a low single digit percentage of law firms use artificial intelligence-powered technologies — and a similar tiny percentage have adopted process controls like Six Sigma or Toyota’s “Lean” protocols. Therefore EDRM — and e-discovery — need technology-and-project-management hybrid players like Axiom, Pangea3, and exterro.
  2. So within EDRM attorneys collaborate with organizations that aren’t law firms (e.g., Axiom, Pangea3, exterro) — who bring business process controls and related technology to an important legal industry function.
  3. This EDRM collaboration is creating process quality standards whose results can be measured quantitatively using existing technology.

What does this tell us?

At least for those tasks that the legal industry spins off from the isolated confines of law firms and in-house departments — with their default assignment of bodies to tasks — project managers and technology providers can complement the work of lawyers.

And thereby gain measurable improvements in cost efficiency and accuracy.