With growing competition and downward pressure on fees, it is more important than ever for service firms to understand customer value and the cost base of your services business. The Lean philosophy of maximizing value addresses this by defining value as seen by the client and making sure that value is delivered every time.
A key Lean method of maximizing value is by eliminating waste. Eliminating waste from professional and business processes reduces your costs and improves your customer satisfaction with on time delivery and perfect quality at the right price. Developed in manufacturing with the Toyota production system, Lean has been applied successfully to services from the late 1990s.
What is Waste?
Lean separates “value adding” from “non-value adding” work. For Lean, waste is “something that adds no value.” Work adds value if it meets three criteria: that is, it changes the client situation; is something the client is willing to pay for; and is done right the very first time. If not, it’s waste.
Every services firm needs to aim to eliminate waste. No matter how good a professional you are, your firm has waste: rewriting documents, changing images, correcting errors, looking for files, waiting for responses …
“The most dangerous kind of waste is the waste we do not recognise” (Shingo)
In many organisations, few people have the ability to change products or services to increase customer value, but everyone can reduce waste.
The 8 Wastes: Who is TIM WOODS?
The 8 Wastes provide a central theme to Lean.
Each relates to a specific wasteful activity typically found in businesses. The 8 Wastes can be remembered by the mnemonic T.I.M. W.O.O.D.S. (or DOWNTIMES ...)
Transportation waste is any excess or unnecessary movement of people, information and materials in the firm. In a digital world, this may be seen as less of an issue; however it often adds zero value. Is digital data such as client documents or shared flies copied or stored in many places? Does it annoy or reassure clients to receive multiple emails or drafts?
Inventory is a visible waste in service cpmpanies with “piles on the desk”, documents awaiting signature and even oversupplies of stationery. It can also be less visible as excess work in progress (WIP), unanswered emails and voicemail, or mismatches in the supply chain. Time
or material tied up in these have costs that are not recovered until the work is actually sold.
Motion waste is any unnecessary movement of people or information in the processes. It can be physically seeking a file or a Partner, extra steps to access the photocopier, research or filing cabinet, or wasted clicks to find the electronic document store. Follow a worker for a few days and see the multiple and different paths, various wild goose chases and backtracking.
Waiting is one of the most common wastes in service firms: when people, information or equipment are sitting idle: waiting for at the photocopier, getting up to speed when switching between tasks, waiting for a colleague or client to get back with comments, or waiting for a computer to be fixed. This idle also increases lead time to the customer.
Overproduction waste is doing more than is necessary. Examples range from simply printing too many hard copies or copying too many people on emails to less obvious forms such as multiple people working on a file and charging for both when a junior does research and the senior reviews it, or when company managers pay high professional fees to externals when in-house people already have tailored solutions.
The waste of Over Processing occurs when the client is given more than they need or want. Examples include the multiple “steps” in the process of a file, giving a client the “Ferrari version” when they only need the Ford, taking a “cover all bases” approach when a targeted one is required or failing to systematically address knowledge management to avoid fragmentation and re-discovery of knowledge in the firm.
Defects waste is poor quality or wasted materials and labour – or simply mistakes. While Lean sees review, re-drafting and corrections as waste, in law there is often a lot of this. Yet how much of this is valuable as compared to formatting or style changes? Even if a re-draft “fixes” a mistake or omission, how much is wasted because it was not done correctly the first time – especially in transactional areas or even in complex technical areas where your firm is an expert.
The 8th Waste is falling to fully acknowledge and use the potential of your workforce’s ideas and creativity, experience and abilities. For example, failing to allocate work to the most appropriate resource, failing to delegate, or running a hierarchical culture with limited communication.
Eliminating the 8 wastes can be done through implementing Lean. Steps include examining the processes in your services firm, identifying the 8 Wastes, identifying their causes and minimizing or eliminating those causes.
Warning: Do not just identify and remove the 8 Wastes. It is vital to use Lean principles to ensure you are implementing value-adding as seen by your clients. Otherwise you risk “doing efficiently that which should not be done at all” (Drucker).
The results of successful change: Lean and efficient legal and business processes, reduced costs, more time to spend on value-add activities, happier professionals and staff, and more satisfied clients.