What lawyers can learn from investment banking and manufacturing

This is the second of a series of three blogs looking at what lawyers can learn from other industries. In part one, we looked at the importance of putting the interests of your clients first (treating them like royalty, no less) and the need to make sure your financial acumen was up to scratch. In this part, I am going to pick on two more industries – investment banking and manufacturing – and explore risk appetite and the elimination of waste.

Investment banking: appropriate risk appetite

Diving straight in at the deep end this week, I am holding out investment banks as an example of an area we can learn from and improve what we do. In the current climate, this is perhaps “brave” (as Sir Humphrey would say), so it had better be good…

For all you can say about the investment banking industry over the last few years, you have to admit that it has generated vast amounts of income. Yes, I recognise it was not always legitimate and there have been plenty of controversies and regulatory issues, but there is something about investment banks that intrigues me – risk appetite.

If we were to draw a scale of risk appetite, most people would tend to put lawyers towards the end marked “cautious” and investment bankers towards the end marked “reckless”. Some lawyers would trumpet this as a mark of their value or intelligence but I do not see that this should automatically be the case. With a few exceptions (eg criminal activity), it is not the job of a lawyer to be the ‘Department of “No”’ or the arbiter of good decision making – we are there to apply the law, assess the risks and provide options to our clients and then allow them to run the business.  The options provided need to run the full gamut, from risky to those which are totally safe (if there are any).

Likewise, when your are negotiating a deal or arrangement, there is going to be a perfect position (which you will rarely achieve) and there is going to be a pragmatic, middle-ground which might not be perfect but will either get you most of the way or will entail taking a risk that you feel is unlikely to arise in reality.

And that is the key point – in the real world, outside of contracts, paperwork, case law and conjecture, what is the chance that the issue you are arguing over will actually arise? If it is slim (and your client can help you assess that), is it worth the effort and time you are putting in? If your client has all the facts and takes a course of action, having listened to you and considered your advice, are you really going to stand in their way? Again, absent a few scenarios, my clear view is no – you are there to support, not eliminate, appropriate risk taking. After all, risk often equals reward…

Manufacturing: elimination of waste

While I highlight manufacturing as the relevant industry here, I am really talking about a process that has been present in business a long time (I mean 1800s and even earlier perhaps) before it was popularised by Toyota – work out what you are doing, what you need to do and, therefore, where you can save either time, material or money.

There are a plethora of experts on lean methodology who know this topic inside out and I neither intend to become one or belittle their knowledge in a single blog post, so forgive my rudimentary summary of the topic.

Where I can perhaps add more weight of experience is discussing how this applies to the law. At first glance, it might seem that a lawyer’s work is about as far away from manufacturing as you can get. However, when you consider it in more detail, you start to see the processes that are inherent in what we do. Take the end-to-end of a contract negotiation: You start with drafting, some reviewing and collaboration, sending to the client for comments, more redrafting, send to the other side, negotiate, redraft (rinse and repeat) and then execution (of the contract, not the lawyer on the other side…). Is there really a stark difference between this and a factory process – clear steps that follow a set order and pattern and reach a similar conclusion?

Once you buy-in to the fact that most work is, in effect, a process, you can start to stop. Nice wordplay aside, the point is you can begin to work out what parts of the chain are unnecessary or more time consuming than they should be. Look at it holistically – it’s not just about you. For example, do you need to copy everyone on every email, seek every single person’s consent to every change, etc. If not, you take people out, right-size your communication and you’ve just saved your organisation time and effort that can be used elsewhere.

Stopping doing things is an empowering activity, if done correctly. In the last year, I have been working (with colleagues around the world) on developing my “stop list” – what activities do the legal team perform which do not require legal input. A product review here, an approval there – it is amazing when you realise how much you sign-off that you don’t actually need to be involved in. At what point, I ask myself, did we become the expert in what was right and wrong?! And so, you build your stop list and work out how to extricate yourself. It might be that you simply are not needed (if, say, another department is covering the risk analysis), or perhaps you can train the business (give them some pro-formas or checklists for example) – and then you STOP!

I say it is empowering and that has certainly been my experience. It frees up time I can then use for other, more valuable and beneficial work that better serves our business. And it is empowering for my non-legal colleagues too! No longer do they have to run everything by Legal: they are in charge, it is their responsibility.

So, look through your chain of work and think about what is necessary (ie what can ONLY you do) and what is not (ie what can SOMEONE else do) and then, from this second bucket, you assess risk and benefit and start eliminating wasted time.

Of course, as long as you keep the time you use to read the Future of Law blogs….

Coming up!

In the final part, I will look at two more examples – retail banking and management consultancy – and discuss the benefits of the adoption of IT and effectively managing change.

Filed Under: Practice of Law

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