Lean Core Concept: Value vs Waste

Written by Larry Port

Aug 1, 2019

 

If you can get the following set of relationships down pat, you’ll have a firm handle on Lean and systems thinking: We can boost revenue by increasing our throughput rate. We can increase our throughput rate by reducing cycle time. And we can reduce cycle time by eliminating waste.

Waste is a fundamental concept in Lean. It is defined as anything that is not adding value to your client’s experience, either directly or indirectly.

For example, working on a motion has direct value for your client. A two-day billing process does not. Taking CLE adds indirect value to your client, as you cannot serve your client without it. But labor-intensive, manual processes that can be easily automated are wasteful and add no value.

In Lean methodology, we use the word “muda,” from the Japanese word for waste. Taiichi Ohno, who developed the Toyota Production System that inspired Lean Manufacturing in the United States, outlined seven different types of muda that can slow down production. Those include transportation, motion, inventory, waiting, overproduction, over processing, and defects.

Since you want to run your law firm like an efficient factory, let’s explore how these waste factors can affect your case flow and how to eliminate them.

muda or waste types

Transportation and Motion

In a factory, a waste in transportation or motion is when products and/or workers are moved around when they don’t really need to be. For lawyers, such waste can be a sign you need to digitize your firm more than you already have.

Ask yourself the following questions: Can a meeting with a client be done via phone or email so that neither of you have to travel? Can you use virtual tools like Slack to ask your coworkers questions or update them on your progress so you don’t have to spend as much time in meetings? Can you go paperless so you don’t have to hunt down paper files?

Dave Maxfield (co-author of The Lean Law Firm) has even moved his entire law office to a co-working space, which not only reduces the overhead of having an office, but also encourages more virtual solutions for communicating with your team without losing time.

Inventory and Waiting

Waste in inventory for manufacturing is storing tangible products or materials that you don’t really need, which is a huge expense.

The law firm equivalent would be not closing out a case or case unit. In fact, one of the biggest financial drains on a law firm is not pushing your cases across the finish line. There’s a lot of revenue in those work-in-progress cases that can be accelerated.

Furthermore, having too many active open cases at once means that they can’t move through the system efficiently, especially if you are blocked waiting for the next thing to happen, and that you can’t put all your focus on the next case.

And taking too long on a case also might mean that the client can bring a grievance against you, so it’s incredibly important to keep your case flow moving.

Over Processing

As we write in The Lean Law Firm, “In Lean, waste is bad and must be eliminated whenever possible, which is where technology can really shine.”

One of the most impactful things any law firm can do is look at their processes and see what can be automated. For example:

Setting up deadlines and processes for new matters is often a labor-intensive, manual, and error-prone task. Instead, use software that has matter templates to instantly set up matters with the correct deadlines.

Billing processes for most law firms involve printing bills, folding them, stuffing them into envelopes, stamping, addressing, and mailing them out. Instead, electronic batch billing sends bills to clients instantly.

Law firms wait 30 to 120 days for payment, then manually enter payments and deposit checks. Instead, moving to electronic payment processing removes this labor and expense. Furthermore, your cycle time is reduced because money is collected faster, allowing you to earn more per year.

Instead of looking for examples of documents to copy in order to create new ones, employ document assembly, which can instantly create a new document when you need one.

Overproduction

Lawyers sometimes tend to be perfectionists. This is not always a bad thing, as you want your work to be as mistake-free as possible. But perfection can be the enemy of the very good, and it can lead to work that didn’t need to be done in the first place (like lots of pretrial work before you’re even sure if the case will go to trial).

Good enough can sometimes be just that, and if you’re chasing perfection you’re losing time and money for diminishing returns.

Defects

While you don’t want to be such a perfectionist that you over process and overproduce, you do need to make sure to avoid major errors or defects.

When a law firm creates a defect, the result can have no effect—but it can also result in your losing a client, losing a case, or being disbarred. In the legal profession, defects are very serious business.

Even in relatively benign cases where defects don’t cause a catastrophe, you expend a lot of effort when you have to fix those problems. Sometimes that’s just a question of time: When you make a misstep on a case, you have to spend time and energy going back to fix your mistake.

Defects can also cause you to lose clients. Early on in Rocket Matter’s history, we fired a law firm for sending us contracts that had easy-to-fix mistakes in them. They were simple cut and paste errors, but they eroded our confidence in their abilities and called into question the amount of time they billed us to create the document we needed.

Whether you’re a tiny law office or a white-shoe firm, waste is always something that can affect your bottom line. However, by considering where in your process waste is most likely to pile up, you can work on taking out that trash and becoming more efficient for your clients.