Knowledge rules OK?

Discussion of the downturn in legal circles has frequently focused on its distressing effect on private practice, which faces reduced, yet altered, demand and severe pressure on costs. For in-house departments, costs are just one issue that they face.

Ch-ch-changes…

What are these issues? While in-house departments vary enormously, generic elements can be identified. Beyond simply reducing costs, the predominant themes are (a) improved value; (b) changes in both the nature and delivery of services in an altered world; and (c) transparency. Be it a local authority facing future funding cuts, a Government agency faced with justifying its existence, or a large company under scrutiny from shareholders, investors or regulators, legal departments face the cold wind of unavoidable change.

Given that cost will be an overriding issue, how can in-house departments deliver a quart from a pint pot?

Legal work, but not as we know it

I highlighted some of the ideas discussed here at the recent Law Society of Scotland 60th Anniversary Conference. I find many lawyers instinctively feel uncomfortable with the concepts expressed but, given that in-house legal departments are likely to be asked to produce more for less with little expenditure, the circle will often only be squared by new thinking.

Let’s start with some fundamentals. All legal practice is a mix of “knowledge” and “rules”.

• Rules-based activities directly arise from specific ascertainable events.
• Knowledge-based activities depend on learning, experience and intellectual capability.

Carrying out almost any reasonable volume of work using a “knowledge/rules split”, with or without technology, is, compared to traditional methods, (a) far less costly; (b) more flexibly organised; (c) less prone to error; and (d) easier to manage.

This is NOT about using:

• paralegals as against solicitors – generally paralegals are simply cheaper “knowledge” workers;
• fancy computers and blue skies thinking.

It DOES mean:

• analysing and disassembling work into distinct elements which together comprise an end-to-end progression;
• allocating to each of those elements attributes that define whether it is “knowledge” or “rule”-based, and the relevant required technology, control processes and verification procedures;
• rearranging the resources available to the department so as to maximise efficiency in carrying out the work – remembering that it is often the case that the elements may be able to be used for several different areas of work.

Although there is a time investment involved, the return at many levels can be remarkable, with substantially improved efficiency levels and consistent service.

A good analogy would be the “just in time” parts supply concepts introduced by Toyota, which allowed that company to become the envy of other vehicle manufacturers and ultimately the global leader.

Indeed, this article would not be regarded as “rocket science” in other areas of commerce where tight margins have meant widespread use of disassembling traditional approaches into simpler flexible components.

Take as a simple example the NHS restructuring delivery of specialist care to patients. In the past a nurse with, say, cardiac care qualifications may have spent part of his or her day on general nursing or admin. This wasted a valuable asset: now those elements are provided by less experienced individuals who have access to the knowledge of the cardiac care nurse who in turn has access to the cardiac doctor.

In many legal environments, the cardiac surgeon and the cardiac nurse are still, in metaphorical terms, concerned with making the beds as well as carrying out the surgery!

From silos to clusters

Most legal departments are organised as per the diagram “Traditional Silo Approach”. Within the silo the entire life cycle of the specific type of work is maintained. The individual silos within both the internal departments and external suppliers lead to duplication, delays, bottlenecks and expense.

Many legal departments and most external suppliers will have case management systems. Such systems help, but their structure overwhelmingly mirrors traditional work divisions. Even where advanced communications such as extranets and data sharing are involved, the silo structure predominates.

As an alternative, work can be distributed according to its knowledge content onto a “structured cluster”, an example of which is shown on the diagram. Abandoning the silo approach results in traditional divisions (such as litigation or property) being irrelevant. While those names are helpful in describing the services that are supplied or managed by the department, they do not need to dictate their organisation or content.

Likewise the role of external suppliers: the structure would allow external suppliers to fulfil many different component functions. The involvement of external suppliers could range from a truly virtual legal department to simply overflow arrangements.

The structured cluster in practice

Let’s start with a very basic example. Much legal work involves administrative elements such as receiving signed documents. The act of receiving a signed document may represent one task for a lawyer or paralegal, but in reality is made up of several separate elements.

• (1) What document is this?
• (2) Should there be more documents?
• (3) Has it been signed correctly?
• (4) Has it been signed by the right people?
• (5) Does the receipt of this document trigger other actions?
• (6) How should the document be stored?

So this one administrative act is in fact multi-faceted. Lawyers would argue that this is a good reason why a legal transaction or matter should be handled in entirety in a knowledge-based traditional manner. But:

• (1) the cost of the time of the lawyer or paralegal in dealing with this is substantial;
• (2) lawyers are generally poorer at dealing with administrative elements than dedicated administrative staff;
• (3) the lawyer retains much of the information as head knowledge, making absences of that lawyer difficult to accommodate as well as time costly (“I will just check the file”);
• (4) tracking and costing progress in the matter is difficult.

Most manual systems and many case management systems don’t always help a great deal. Although purportedly systematised, many will treat what I have described here as one event or milestone: “Date document X received”. Some systems will consider what actions are triggered by this milestone, but most of the six elements I have described will still depend on head knowledge of the person dealing with the matter. As such, case management systems frequently are more of an electronic filing cabinet than anything else.

Even those that run systematised legal functions generally end up with a mix of systematisation and traditional approaches. This outcome (a) substantially reduces the value of the investment in systems; (b) increases training for non-legal staff; (c) raises staff costs; (d) increases the likelihood of error; and (e) creates management issues.

But by expressing each step as a component we create a “building block” environment. This is controlled by a “meta language”, an example of which is shown below for receipt of documents. By adding all these components together, work is reduced as far as possible to common “rules” modules and “knowledge” areas.

So the “receipt of documents” component can be used for the receipt of any signed document, with only columnar changes. Thus whether a received document is for litigation, property or anything else this procedure is a reusable component.

None of what is described in this article requires to be implemented in a “big bang” approach. Imagine upgrading a motorway to create a new junction. You cannot simultaneously create that new junction and allow existing traffic to run. Accordingly the first step is to create a new slip road which is then used temporarily by the existing motorway traffic until the next stage of the new junction is complete and so on. Similarly the ideas here represent building blocks until the “construction” is finalised.

Sharing the inter-web thingy?

There may be a feeling that this would need a mammoth IT infrastructure and lots of development time. I would reiterate that this transformative process can be implemented in any manner from a manual system to an integrated database/sharepoint system.

What does help enormously is using “sharing” concepts. So far we have moved from traditional communication to email, but the next step is simultaneously sharing and updating information via the internet. This is one (easy) way to achieve the seamless interaction with external suppliers or other departments. And, as an example, for £33 a year you can have such a system securely using Google Documents.

These are difficult concepts to explain within a short general article but, suffice to say, the revolution in data environment can open huge opportunities to implement inexpensively the ideas expressed here.

In-house? Out-house?My house?

A recent survey questioned in-house legal departments in the United States as to their likely actions in response to the downturn. There were substantial responses to both taking more work in-house and sending more externally.

Using the methods described here allows legal departments to cost their options and consider alternatives in a clearer light. As I hope will be clear by now, breaking down legal processes means that “legal advice” functions can be separated from mainstream administrative elements. At its extreme, with the assistance of some computerisation much greater use can be made of lawyers who work from home.

Alternative billing structures: the future!

Alternative billing structures are a substantial subject in themselves (you can read more at www.lawpracticeconsultancy. com/inhouse/index.htm), but the methods described in this article generate natural opportunities to create transparent billing structures with external suppliers. It is the disassembling of the process into component elements that allows this to take place. The bottom line is lower costs and better service throughout the whole process.

A final word

Some will have a dim view of these arguments and genuinely feel that legal work will continue in the same form as previously. As I have said, the ideas are not rocket science and sooner or later these concepts will prevail. Lawyers and paralegals are expensive knowledge workers and they need to position themselves as providing knowledge-based services. A substantial proportion of legal work contains repetitive administrative elements; for many legal departments, with heavy demands in a cost-conscious environment, the ideas expressed here will represent one viable long term solution.

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