Daily Archives: April 29, 2009

Don’t Pontificate, Innovate! … After All, Lean Was Forged in Tough Economic Times

Supply Chain Digest recently ran a great piece by Jim Womack, the founder of the Lean Enterprise Institute who points out that while this may be the worst recession some of us can remember, recessions are part of the natural cycle (and severe recessions do happen every two to three decades and they are, in fact, an incredible opportunity for success). Those who rise to the challenge and get lean and innovative will emerge from the recession victorious, while those who don’t … well, we won’t have to worry about them much longer, will we?

In his article on how lean thinking was forged in similar economic times, Jim notes that as the Japanese economy entered a steep recession back in 1950, the Toyota Motor Company ran out of cash, which was tied up in inventory for products that customers no longer wanted. Under the control of bankers, the company was split into separate firms, dividing the sales and marketing functions from the product development and production functions. This created a crisis which could have put the company out of business. Instead, the leaders of the production function developed what was to become the Toyota Production System.

Starting with a few simple ideas — minimize lead time (to free up cash), remove waste (to reduce costs and enhance quality), and take action now — the founders of Lean (Taiichi Ohno, Kikuo Suzumura, and Eiji Toyoda) used their scientific discipline to understand the current state, document improvements they believed would improve matters, implement those improvements, measure the results, and use these findings to continually refine the process. Over time, these improvements were refined and assembled into the Toyota Production System, mainly to explain it to suppliers. But these improvements, which led to the great company Toyota is today, were made when the company was struggling for its very survival … proving that true winners — who won’t be too busy coming up with excuses as to why they can’t develop, deliver, and market — are born during periods of chaotic markets and falling demand.

Shared Legal Services: Risk vs. Reward

The Shared Services & Outsourcing Network recently ran a great article by Leland Forst of The Amherst Group Ltd on mitigating risk when implementing legal shared services that I see as a must read for anyone considering the consolidation of their legal function into a shared service organization.

Most organizations outsource traditional back office functions like Human Resources, Office Management, Accounts Payable, and even invoice management because a specialist organization, that can leverage expertise and shared services, can often do these tactically-focussed functions better, faster, and cheaper when the right processes and controls are in place. Well, unless your primary revenue stream is litigation or IP licensing, these days, legal is also a back office function and one that should be considered as eligible for a shared-services outsourcing model because, as the author points, out, it can:

  • provide lower fees through economies of scale,
  • provide volume leverage to negotiate lower hourly rates with external experts,
  • allow you to scale up or down as required without expensive recruiting or severance costs,
  • provide you access to more subject matter expertise,
  • improve case management,
  • provide alternative methods of dispute resolution (such as negotiation, mediation, and arbitration) with a large pool of personnel, and
  • provide you access to better legal service management systems at a significantly reduced cost.

Especially when you focus on outsourcing your discretionary, and leverageable, legal services. While the following governance services are non-discretionary for most large corporations, and not good candidates for outsourcing (as you often need to keep these functions within your control to insure regulatory compliance and/or trade secret protection):

  • corporate annual meeting preparation and board resolutions,
  • political action committee management, and
  • mergers, acquisitions, divestitures, and joint venture legal support

The following discretionary, and leverageable, law services are great candidates for a shared services organization:

  • litigation / arbitration that is being considered,
  • trademarks, copyrights, and patents are being pursued, and
  • anti-trust/competition scenarios that are perceived.

As the author points out, as long as any risks are properly identified, and dealt with up-front, this model can prove very profitable for some organizations. So if your firm spends a lot on legal, internally or externally, take the bell off that sacred cow, determine whether or not your really getting value for money in the current model, identify any confidentiality requirements or situations which would require a quick response, define key performance metrics, and go to the market. You might just save your organization a few million in the process.