MANAGEMENT: Six of the best

Six Sigma is a new corporate management philosophy, which, according to some management gurus, will be the next big thing winging its way from the US. If their predictions are right, in-house lawyers soon will be as familiar with Six Sigma as the partnering concept imported from the US by chemicals giant DuPont in the 1990s.
But, unlike partnering, Six Sigma does not focus on inefficiencies created by external advisers. Rather, its sights are squarely set on internal wastage.
The Six Sigma Breakthrough Strategy was pioneered in the 1980s by Motorola employees Mikel Harry and Richard Schroeder, who have since set up the Six Sigma Institute. Top Fortune 100 companies, including General Electric, Ford, DuPont and Johnson & Johnson have applied the Six Sigma programme to their legal function in the US.
Now it is beginning to make its way over to the UK. General Electric has applied some of the Six Sigma principles to its UK legal function and DuPont is set to introduce it here this year.
Originally devised as a statistically driven business tool to improve quality in the manufacturing industry, Six Sigma’s aim is to streamline every step in a process with a view to cutting wastage and improving quality of service. The goal is to achieve the statistical measurement ‘Six Sigma’, which signifies a 99.99966% defect-free process.
Companies that embrace the philosophy set up an alternative hierarchy that is inspired by ancient Japanese martial arts. Key managers are sent off to the Six Sigma Academy in the Arizona desert, where they are put through a programme, which teaches them to think the Six Sigma way. After 10 days of intensive training, they emerge as Master Black Belts, or Champions, fully versed in the key tenets of the philosophy – define, measure, analyse, improve and control. As masters in the Six Sigma Way they are certified to pass on their knowledge to Black Belts and Green Belts within the company.
Sound strange? It may do, but the philosophy has made inroads in the US, particularly in the old-school manufacturing and chemicals giants.
Jack Welch, chief executive and general counsel at General Electric, is its most famous proponent. A loyal champion of the Six Sigma philosophy, he was largely responsible for popularising it and bringing it into the mainstream in the US in the 1990s.
Many are sceptical that its principles can be applied to the legal service-driven environment, as it was originally devised to cut waste in the manufacturing process. One common criticism is that it does not translate well to transactional functions.
Tom Sager, general counsel at DuPont, which embraced Six Sigma about two years ago, is one of Six Sigma’s fiercest advocates and insists it has a place in the legal department. “Six Sigma principles will resonate with those who believe that legal professionals should bear some responsibility for their clients’ bottom-line success,” he says.
A Champion, at the top of the Six Sigma hierarchy at DuPont, Sager claims the philosophy has brought dramatic savings, cutting the cost of the company’s litigation budget by $6.7m (£4.5m) – almost 10% of the previous year’s budget, which stood at $85m (£56m).
In the last year, Sager has trained five legal Black Belts, three internally and two from outside the legal function.
One of the black belts is an outside lawyer, Scott L Winkelman, who is DuPont’s engagement partner from US firm Crowell & Moring. This year DuPont aims to extend Six Sigma to the legal team in the UK and Europe. At least one in-house lawyer and one lawyer from its main partner firm in the UK – Eversheds – will be trained to be a Green Belt.
Sager says the challenge for him has been translating to the legal department concepts that were originally conceived in an engineering environment.
“Many aspects of the practice of law are poor candidates because they necessarily involve judgement and case-specific analysis,” he acknowledges.
But, he says it can create huge cost savings when applied to appropriate projects within the legal function – particularly those that can be standardised and statistically measured. So far, Sager has applied the Six Sigma principles primarily to paper-driven litigation projects.
In reality, it is unlikely that many legal directors in the UK will be heading off to become Master Black Belts, but the principles on which the philosophy is based could take hold.
Persuading people to take it seriously will be one of the main challenges. Lawyers, particularly in the UK, will be cynical about a philosophy that uses terminology traditionally associated with a cult religion rather than the running of a legal function.
The concepts of the Six Sigma Breakthrough Strategy and Black Belts are likely to be met with snorts of laughter. But if real savings can be shown, in-house directors could pick and choose the elements of Six Sigma that best match the culture of the department.
Dan Mahoney, the architect and former manager of the DuPont law firm partnering programme, thinks Six Sigma will definitely have an impact on legal services on this side of the Atlantic.
DuPont introduced the partnering concept, but it is one of the few corporations that have embraced it wholeheartedly. Although many were dismissive of the idea, a lot of the concepts have been lifted.
Mahoney, who is now working as a management consultant with the Edge Group, says he has known many a general counsel or legal director to assume that law firms are largely, if not entirely, responsible for the inefficiencies and wasteful practices that increase legal costs.
“This, of course, is not true,” he says. “In my experience, the legal department is often at least as responsible as the law firms for creating or tolerating working practices that add wasteful costs and inefficiencies. It takes a well-organised client to create a work environment where legal services can be rendered efficiently,” he says.
This is the key to Six Sigma, which shifts the focus from the external advisers to the internal function. If it goes some way to addressing the internal inefficiencies in the legal department, Six Sigma may well take hold. And if the push does not come from the lawyers, it will come from the companies. Those working in manufacturing and old-style industries may find they have little choice.
“In-house counsel will find it difficult to adapt to Six Sigma,” Sager says, “but there will be several corporate legal departments that will be pulled along by the CEO.”
Like it or loathe it, the cult of Six Sigma is on its way.

The seven steps to Six Sigma at DuPont
So how do you prove savings with Six Sigma?
1. Define the defect. Understand the process and how to improve it. A recent project focused on what becomes of litigation files when litigation ends. DuPont concluded that the process defects were that they retained too much file material and the wrong category of material.
2. Identify the cost variable. The cost variables are the costs associated with closing the file, purchasing the box for off-site storage, shipping the box to storage and the costs of storage and any real estate.
3. Distinguish hard from soft savings. Hard is that for which Dupont actually pays money; soft is the cost of the internal manual labour involved.
4. Identify a measurable unit. This is the cost per box of closed files.
5. Compare the old with the new. This represents the annual savings.
6. Review with an expert. An assigned financial analyst trained in Six Sigma to check the calculations and methodology.
7. Control. Continue to gather data and establish whether the projected savings are proven or disproven.