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DuPont is not the first large American corporation to bring Six Sigma principles into its in-house law department. The General Electric Company, under CEO Jack Welch, was one of the management theory’s early adopters, and certainly has been among its most visible champions. General Electric’s in-house legal department marches to the Six Sigma beat, along with the company’s other departments and business units. Corporate Counsel senior editor Anthony Paonita talked with GE general counsel Ben Heineman, Jr., about Six Sigma and how its precepts — which the company’s Web site describes as “the disciplined methodology of defining, measuring, analyzing, improving, and controlling the quality in every one of the company’s products, processes, and transactions, with the ultimate goal of virtually eliminating all defects” — apply to an in-house law department like his. Heineman stressed that his department not only examines, in Six Sigma terms, its own practices, but also the methods of the far-flung company’s manufacturing and business units. Q: When did you begin using Six Sigma principles? A: We started using Six Sigma in 1996, as part of a company-wide initiative. In looking at how the legal department applies the theory, it’s important not to slavishly follow a theory unless it’s appropriate, and then use it with common sense. Six Sigma is basically about process: improvement, measurement, accountability, and then further improvement. The legal process naturally doesn’t have the same statistical rigor as manufacturing. And we shouldn’t pursue the use of the technique blindly, in the name of phony statistical precision. So we apply Six Sigma principles where we can measure a process and audit its effectiveness. Q: So how do you apply Six Sigma to a service rather than a manufacturing process? A: The idea is that our application of Six Sigma principles comes down to systematic common sense. Everything we do, and look at, has to meet these tests. It’s got to be: • commonsensical; • systematic and/or auditable; • measurable; and • important. Q: What do you mean by “important”? A: Meaningful change. For example, measuring typos in memos isn’t important. But looking for prior contractual concessions is. You’ve got spell-check software to take care of typos. Q: Before we get into specifics, are there any general principles for applying Six Sigma techniques to your legal department? A: We start out with three goals for our quality projects: • Avoid future costs; • Reduce existing costs; and • Creatively enhance revenue and profit for the business unit we’re working with. Q: How do you avoid costs? A: We started what we call the “3T” initiatives: training, tracking, and testing, using systematic, computer-based tools. We track every key job; assign risk; develop appropriate training modules for each position; and then make sure we have a training schedule each time a new person fills the job. We’ve also tried to make training more systematic. People get trained in a timely way. Then they’re tested. We’re in the process of Web-enabling basic training, so the trainee can access a Web page and learn interactively. People should be up to speed on basic compliance much more quickly. Second, in terms of cost avoidance with our consumer products, we’ve designed a robust safety-approval process. Products are tested throughout their development, systematically, with an eye to eliminating any costs that might be associated with potentially unsafe products. This process can be audited regularly to ensure that all the tollgates and milestones are being approached in a timely and proper way. We’ve always had product safety programs, but quality [processes] help us make these programs more disciplined and rigorous. Q: How does a legal department find ways to save money? A: We don’t just look for savings in the department per se, but in our company’s business and industrial practices. Here’s an example of one initiative. We use alternative dispute resolution in labor cases. There are three steps: conciliation, mediation, and finally, nonbinding arbitration. Each employee must go through that process before filing a court case. This systematic process can, again, be audited, and we’ve found a significant decrease in court cases and transaction costs. Q: Are employees willing to talk and go through ADR? A: They’re the ones initiating the process, and most understand it’s in their interest to proceed in this way. We tell new employees about the dispute resolution process when they’re hired. Often there is some fault or some misunderstanding on both sides, so it’s a good way to get everyone talking at an early stage and resolve matters quickly and equitably. We also try to encourage dispute resolution when people or companies sue us. This is another quality initiative called Early Dispute Resolution. Every quarter, teams in each business evaluate whether EDR is appropriate in all sizable disputes. We encourage mediation — again, it’s better to talk things out and end a dispute in one year, instead of letting it drag on for four years of hammer-and-tongs litigation, with an uncertain outcome if the issue is money (no fundamental issue at stake) and the facts are not open-and-shut for our side of the case. We also try to come up with savings in worker health and safety. We look at what people do, look for patterns. What is the main source of injuries? We’re one of the leading companies in the United States when it comes to workers’ safety. We have more than 40 “Star” certifications from the Occupational Safety and Health Administration. Because we’ve accomplished a certain level of process quality, we get audited less by OSHA. Q: How do you use Six Sigma theory to increase margins and profits? A: One example: We have a “transaction hand-off” project. The deal team often negotiates for months and writes voluminous contracts and schedules. But when the deal is handed off to the integration/implementation team, those people are not always aware of all the terms of the transaction documents. Now our deal team looks through all the paperwork. What’s in the nice binders? The lawyers boil everything down to a systematic list and come up with a commonsense road map for deal implementation: what are the possible price adjustments, the indemnities, other dollar-related items? This road map must be created after each deal, and it should be followed. Both actions can be audited and can help enhance the financials of a transaction.

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