Conversation with Doug Hubbard

Quality is a big point of differentiation between outsourcing vendors. But how can law firms and corporate counsels determine that their prospective vendor can deliver on quality? Moreover, how can contracting firms manage quality of their outsourcing vendor even if the processes are not performed under their direct supervision.

The key for managing quality is measuring quality. To measure quality, it needs to be explicitly defined. More succinctly: Defining Quality => Measuring Quality => Managing Quality

This past week I had the pleasure of speaking with Doug Hubbard regarding his thoughts on measuring and defining quality. Doug is the author of the very insightful book, How to Measure Anything. Below are some of his thoughts from our conversation.

“When measuring quality, the most important thing is recognizing that quality is not ‘intangible’. Rather, quality is quite tangible and has observable consequences. If it didn’t have observable consequences, why would we care so much about it?”

Hubbard believes that lawyers should excel at defining quality: “At its core, the practice of law is defining legal issues. For example, it is the lawyers’ job to explicitly define each clause in a client contract,” he stated. “It’s all about avoiding ambiguity. The same principles and skills can be used to define quality.”

Defining quality invariably requires defining errors so they can be avoided. “To define quality requires defining what an error means and the appropriate scope of that error,” Hubbard explained. “Events defined as errors can’t be so rare that the error rate is consistently zero. This is misleading about the underlying risk of error. By measuring lower consequence-higher frequency errors, one can use these findings to make more accurate assessments of quality, as the low consequence errors are often indicative of high consequence-low frequency errors. For example, in space travel, if one were only to measure the loss of a crew member as an error, for the first Space Shuttle missions the risk of error would appear to be zero. But if one were to measure the number of high frequency-low consequence errors such as the number of times an O-ring burned through or when foam fell off the external tank, this error rate would be much more indicative of the actual risks.”

Following the same principles outlined by Hubbard, lawyers cannot define errors purely by high-consequence-low-frequency errors, such as avoiding a malpractice lawsuit or sidestepping a default judgment. These events occur infrequently and often do not directly correlate to quality. Rather, when creating a quality management system, legal professionals must use as a barometer high frequency-low consequence errors such as a typographical error or missed redaction.

*These above quotes and others also appear in our upcoming publication, Implementing a Successful Legal Outsourcing Engagement. More details on the book to follow.

A Broken Business Model?

While I do not think that the law firm is fundamentally “broken” nor do I profess the end of lawyers, below are some interesting points from an article published in the National Law journal titled “A Broken Business Model," by Joel Henning.

There is a lot of talk about moving away from billable hours, but alternative fee arrangements are neither new nor making much headway. Greater use of contract lawyers, offshoring, fewer equity partners, a cutback in associate salaries and more differentiation in associate pay and promotions — are all being discussed and even modestly implemented. But all of this has been around for at least a decade, and none of it has so far done much to make clients happier either about their legal bills or the quality of the services they pay for.

The concluding statements of Henning’s article note that law firms need to be run from more of a business perspective.

I particularly enjoyed the article since it emphasizes that outsourcing or other cost saving measures are not the solution in and of themselves. Rather outsourced legal and legal support services are component of a multipronged approach so for legal firms to better serve their clients.

The Billable Hour Debate Is Not About the Billable Hour

Another interesting blog post by Bruce MacEwen on the Adam Smith Esq. site - The Billable Hour Debate Is Not About the Billable Hour. The post addressed the ensuing debate of the “demise” of the billable hour. It is very interesting how Bruce reframed the debate as a basis of trust and not the other typical issues that cloud the dialogue.

Definitely worth a read.

Who Will Dominate Offshoring in 2020?

While reading through the interesting article in BusinessWeek - Who Will Dominate Offshoring in 2020?, written by Noshir Kaka, director at McKinsey based out of Mumbai, one point caught my attention in particular.

India graduates three million students every year, while the entire outsourced service industry employs 2.1 million in total. Therefore, India is effectively utilizing only 10 percent of their available workforce. Room for expansion is huge.

Kaka also discusses difficulties in the education system as well as language barriers, which are concerns for potential service buyers in more effectively utilizing this vast talent pool.

In our experience, we have seen the same trends with the legal outsourcing industry in India. We hear the often-quoted statistic that India produces approximately 80,000 legal graduates every year. But across the board, vendors typically recount the difficulties of recruiting qualified staff. In higher-level service areas such as legal outsourcing, based on our experience with a number of Indian LPO vendors, we see a significantly lower utilization rate for law graduates than the 10 percent noted by Kaka.

For the legal outsourcing industry to continue on its current growth trajectory, an increase in the supply side of the labor equation will be critical.

UK Openness

I just wrapped up my UK trip. While there, I met with a number of very intriguing firms in the industry. The US and UK have comparable levels of legal services outsourcing, but firms in the UK are markedly more open about it as compared to their US counterparts. I am not sure of the reason for this trend.

While I have a number of theories, I suspect that the upcoming Legal Services Act is influencing firms to be more open about the changes taking place at their organizations.