William Henderson (“Bill”) is a Professor of Law at the Indiana University Maurer School of Law, where he teaches courses on the legal profession, project management, business law, and law firm economics. His research, which focuses on the empirical analysis of the legal profession and legal education, has been published in leading law journals and leading publications for practicing lawyers, including The American Lawyer, The ABA Journal, and The National Law Journal.

Follow Bill Henderson on Twitter at @wihender

Bill Henderson’s extensive experience and research in law and the business of law give him the perspective to recognize long-term trends and the knowledge to put them in a context that illuminates the way forward. That’s why the legal industry today makes him think about the automotive industry in the early 90s. In this morning’s ELM16 keynote speech, Bill shared his belief that today’s law firms and corporate clients can take a lesson from the Big Three auto makers.

American auto manufacturers in the 80s were using traditional systems and processes that emphasized low cost in their supply chain. Not coincidentally, American cars were often associated with low quality and poor workmanship at the time. They had to find a way to improve quality while keeping costs down. In the auto industry, the answer was to look to Japanese auto makers’ principle of kaizen, or “good change,” which was based on trust and long-term relationships within the company and with suppliers.

Bill sees the opportunity for a similar “good change” in the legal industry. Legal departments are almost universally under pressure to reduce cost while delivering good – or even better – results for the company. That means that law firms need a way to consistently deliver high quality legal solutions at lower per-unit prices, improving lawyer productivity. Bill sees that there are changes clients and firms can make in their processes and communication that will deliver better value and increased profits.

Three steps are crucial to making these improvements:

  • The client must clearly define and communicate their goals to law firms.
  • Both the client and the firm should focus on incremental changes that move them toward those goals.
  • Progress must be measured using clear and easily understood metrics on cost, quality, and timely service delivery.

Typically, legal departments should measure law firm performance in areas such as expertise, efficiency, understanding objectives, and other factors that are important to success. The right measures, good metric definition, and clear KPIs are all necessary. But the importance of follow-through and constant feedback can’t be overemphasized. When the results come in, they absolutely must be shared with outside counsel so that they have specific information on what they can do to continue improving in the areas most important to the client.

The result is a better overall relationship because the process yields benefits for both the client and the firm. The client sees quality improve steadily in a way that is driven by their specific priorities. And the law firm holds on to the steady income stream of a satisfied client. Firms can also apply the improvements they make across their portfolio of clients, improving relationships with other clients as well.

Bill is hopeful that the increased use of data and the adoption of KPIs and metrics are a sign that the legal industry is poised to make the same kind of widespread improvements that the American auto industry has seen over the past 20 years. It’s time for a “good change” in the legal space!