Ops for Law
Law Practice Operations
Theory of Constraints
Theory of Constraints in Legal Work
This is a very broad discipline covering many aspects of operations and strategy. But here is a sample application in legal work.
Suppose a law firm has a partner who can sit at his desk and work all day and make $X with certainty. He also has contacts and skills such that if he had time to exploit them, he could bring in much additional profitable business for the firm. The failure of the lawyer to act to grow the firm’s business prevents the firm from making a larger amount of money. But if the firm’s compensation system rewards him better to sit at his desk and work, he will do so as this will optimize his local situation as measured by the present system. Local optimization often does not promote enterprise optimization. The constraint is the firm policy that measures the lawyer’s performance in a way that discourages his acting to increase the profit of the firm.
History of Theory of Constraints
In the early 1980’s, Eliyahu Goldratt and a number of his associates pioneered “optimized production technology.” This software package quickly and effectively scheduled production in even complex environments by separating bottleneck (i.e., the constraint) and non-bottleneck operations. The Goal, a business novel first published in 1984, explained the foundational concepts of bottlenecks and how to alleviate them through the fictional story of a plant manager struggling to improve the performance of a manufacturing facility. With over six million printed, The Goal is among the most widely read business books of all time. Building from this foundation, Goldratt developed TOC as a problem-solving approach relevant to a wide array of settings.
Key Concepts
Bottleneck
Any resource whose capacity is less than the demand placed upon it. A bottleneck is a constraint and may be a machine, a person, a policy, etc. The bottleneck limits the throughput. The busy lawyer with papers stacked high is likely a bottleneck.
Constraint
Anything that prevents a system from achieving a higher performance relative to its goal.
Five Focusing Steps. TOC model for continuous improvement.
- Identify the system constraints. This is the resource, policy, or other element that constrains the performance of the system.
- Decide how to exploit this constraint. This means find ways to use the constraint as efficiently as possible.
- Subordinate and synchronize everything else to the above decision. Assure that every other part of the system makes it possible for the constraint to operate as efficiently as possible.
- Elevate the performance of the constraint. Specifically, if the performance of the constraint is still less than desired, acquire more of this resource so it is no longer the constraint.
- If successful in alleviating the constraint, start over and identify the new constraint. Repeat the following steps.
Goal of the Firm
Make money now and in the future.
Non-Bottleneck
Any resource whose capacity is greater than the demand placed upon it. A non-bottleneck will be idle some of the time and that is OK even though it reduces utilization. A second secretary for the busy partner may be a good investment even though the secretary is not busy all of the time, because the throughput of the firm will increase beyond the cost of the secretary.
Scheduling
- An hour saved at the bottleneck adds an extra hour to the entire system.
- An hour lost at the bottleneck is an hour lost for the entire system.
- An hour saved at a non-bottleneck is a mirage and only adds to the non-bottleneck’s idle time.
Throughput (as defined by Goldratt)
The rate at which money is generated by the system through sales. In contexts other than for-profit ventures, it is the rate of whatever is the desired output (like the rate of wells dug by a charitable organization in disadvantaged communities).
Resources
Goldratt, Eliyahu M. The Goal (Great Barrington, Massachusetts: North River Press: 1984)
Goldratt, Eliyahu M. Critical Chain (Croton-on-Hudson, NY: North River Press: 1997).
Goldratt, Eliyahu M. Theory of Constraints (Croton-on-Hudson, NY: North River Pres, 1999).
http://www.goldratt.com (Avraham Y. Goldratt Institute)