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July 6, 2010 6:00 AM

Risky Business: What Law Firms Can Learn from Airlines and Hospitals

Posted by Aric Press

By Anthony Kearns

It is a dark and stormy night, and three professionals are coming to the end of a long day.

Steve became a commercial pilot 12 years ago after flying F14s for the Navy. He has been a captain for the last six. On this flight he has been flying solo for almost 14 hours, as his first and second officers have spent the majority of the trip in the bathroom or in the crew rest area with a suspicious "stomach bug." After circling the airport for almost an hour, he has been cleared for final approach, and his visibility is close to zero. His head is telling him to divert to an alternative airport, but he is tired and his passengers are already angry so he lines up for the landing. Halfway through the descent, several proximity alarms go off. He realizes that he has drifted to the south. He reacts quickly and narrowly misses one of the airport hotels. It was a close call but everyone gets to go home.

For as long as she can remember, Lesley wanted to be a doctor. As the chief trauma surgeon at a major hospital, she has been in her share of high-pressure situations but today has been among the worst.  She has been in the operating theater for almost 16 hours and is working on the fourth victim from a major auto accident. Lesley is working with a team that includes nurses, an anesthetist, and a surgical resident, and nobody is clocking out until this patient is stabilized. Just as she thought that she was finished for the night the patient crashes and the monitors indicate that his blood pressure is falling rapidly. Lesley senses that he is losing blood, but from where? Immediately, the resident opens the patient’s chest cavity to reveal the problem. A seemingly minor chest injury was hiding a ruptured ascending aorta. Had she not acted as quickly as she did, the patient would not have survived.

Paul is a partner in the tax group of a large law firm. He is a second-generation lawyer, and he and his father often reflect on how the profession has changed since the “good old days.” He has been working hard on a major matter for a cornerstone client of the firm. The general counsel of the client has uncovered a potential issue with some recent restructuring of assets that may significantly increase its tax burden, and she has asked Paul to provide an urgent memo on how the situation may be rectified. The problem is interesting to Paul and important to both the client and the firm. To finish the memo, he instructs an associate on his team to write a first draft. Then he pulls five consecutive 15-hour days writing the final memo—and balancing his other work. Proud of his effort and relieved to be done with it, he sends the memo to his client without circulating it to his partners. The memo solves the immediate tax problem, but it inadvertently exposes the client to a risk of litigation and potential breaches of foreign ownership rules in three countries. Luckily, the client identifies the issues and alerts Paul before any damage is done.

While all three incidents involve very experienced professionals making high-pressure decisions within their respective areas of expertise, they played out in very different environments. The clearest difference among them is the tools available to help the professionals manage the risks of their decisions. In the case of Steve and Lesley, they have access to multiple systems that will assist them to maintain “situational awareness”:  instruments and machines giving them real-time feedback on critical functions and feedback loops within the technology, and other personnel to challenge their decision making where appropriate. Steve and Lesley also work within organizations that are committed to providing safety nets. Their human resource effort includes having the capacity to manage issues such as fatigue and unforeseen staffing problems, and to ensure that the safety of passengers or patients is never entirely dependent on a single decision maker.   

Almost none of this risk management infrastructure is available to Paul. Although he is surrounded by other lawyers, he regularly acts autonomously without access to either peers or subordinates at critical decision points. Even when he works in groups, they will generally consist of subordinates who are not encouraged to question his choices. He has few automatic warning systems to help him identify issues. Most importantly, he works in an organization that aspires (and, in good times at least, comes close to attaining) 100 percent utilization of its professional staff, leaving him with limited capacity to offload work, reach out for peer review, or deal with projects that he has understaffed. In this case the client provided the only barrier between his poor-quality decision and a poor-quality outcome. It is arguable that by relying on this as protection, the real damage to Paul and the firm’s reputation may already have been done.

However, the most significant differences among these three environments are revealed by what happens next.

After landing, Steve and his first and second officers will spend the next few hours in a formal debriefing session conducted by independent investigators during which the performance of the aircraft and the crew during the entire flight will be reviewed. The investigators will remind Steve and crew that the purpose of the debriefing is to better understand the drivers of the incident and not to apportion blame. Before Steve goes home, a decision will be made regarding his scheduled flight the following day and an alternate crew will be assigned if he is unable to have sufficient rest before the scheduled takeoff. 

Lesley will be required to produce a detailed report of the incident in the operating theater for the chief of surgery and the hospital's risk management team. If the patient dies or is critically ill, she will be required to attend the weekly Morbidity and Mortality (M&M) Conference. There, she will formally present the details of the incident to her peers for their review in a session designed primarily to improve the quality of patient care through institutional learning.

Unless his alarm clock malfunctions, Paul will come to work at 7:30 the next morning and start another 15-hour day. He will fret over the relationship with his client. He will smack himself across the forehead—metaphorically at least—for making his blunder. But he won’t convene a tax department review session, and the managing partner of the firm will likely not hear about the episode at all for months, until she notices that the client has been reluctant to pay the fee and wonders aloud: “How come?”

In commercial aviation and health care, the response is both immediate and predictable, with the primary aim of improving the quality of future outcomes through organizational learning. It is understood within these industries that the best way to achieve this is to act quickly and in a blame-free environment where the decisions of any human actors are considered in the context of the organizational environment in which they are made.  Any report will therefor consider the relative contributions of individual decisions, systems, and culture to the event and will make recommendations regarding how any or all of these contributors can be modified in order to avoid similar events in the future.   

Again, it is unlikely that Paul will experience any of these responses. In the absence of a major negative financial outcome for the client or the firm, there will be little chance that his decisions will be formally reviewed. In fact, even in the event of such an outcome, it is unlikely that the situational or organizational drivers of his decisions will ever be reviewed.

Why don’t law firms do this?

I have been helping professionals manage risk for more than ten years. I have worked with architects, engineers, and now lawyers, and, of all these groups, large law firms have been among the least invested in systematic risk and quality management. Clearly, the first and primary reason is that lives are not on the line. As far as I know, death or serious injury is not a common result of receiving poor-quality tax advice. However, increasingly businesses that have never had to consider human safety are looking to high-risk environments to imitate elements of their risk- and quality-management systems.

The second reason is the assumption that pilots and doctors make mistakes because they’re acting so fast, and that lawyers are immune as they have time to reflect. This belief is not supported by research that suggests that time to reflect is not particularly effective in eliminating many errors of judgment. This is why most executive education programs now emphasize the importance of understanding judgment and decision making, despite the fact that many management decisions are made and revisited over long periods of time.

The final reason is perhaps the most difficult to counter. Lawyers have long been told that individual intelligence and hard work are the primary keys to success in law. And that these qualities, combined with an encyclopedic technical knowledge, are the ingredients of a high-quality and low-risk practice. While these things are important, high-risk organizations have long ago moved away from relying on them alone.

So, what features can we take from high-risk environments to assist in the management of risk in large law firms?

Historically, most catastrophic incidents in both aviation and medicine have been contributed to by poor-quality decisions by senior professionals. Hence, the primary focus of modern risk management in these environments has been on better understanding the drivers of such decisions and improving their quality and reliability through targeted systems and training. However, success of such systems has relied on significant investments in changing the underlying culture and beliefs of the professionals affected by them: Most notably, the belief that the most technically gifted and experienced professionals are largely immune from error. There is clearly much work to be done to establish a compelling case for partners to accept such an intrusion. But should they choose to proceed down this path, it is worth exploring the elements that could be adopted.   

1. Support for the decisions of senior professionals

Law firms are relatively effective at reviewing the work of young associates but have few systems for comprehensive review of the work of partners. This is despite the fact that most major malpractice claims against law firms involve poor-quality decisions by partners.  Interestingly, true peer review is not often available to expert professionals and as a result, it is not often seen as the primary risk-management system in high-risk environments. Rather, the emphasis in these environments is on training senior professionals to lead with authority and accountability while empowering subordinates and support staff to challenge their decision making when appropriate. In the airline industry this is referred to as Crew Resource Management and has been credited with significantly reducing the risks of air travel. It is also captured in the “obligation to dissent” within McKinsey & Company, but it is not consistently embraced in the culture of most large law firms. 

2. Reducing the effect of fatigue

Lawyers in large firms have always worked long hours. It is a practice that is not only required by onerous billing targets but is culturally celebrated in the oral tradition of the firms: “battle stories” of tireless lawyers pulling “all-nighters” to get the job done. A similar culture persists in medicine, and this is one area of concern for both lawyers and doctors. Unfortunately, the quality of decision making in complex-information environments decreases rapidly with fatigue, particularly where a state of fatigue has been maintained over prolonged periods. Lawyers who consistently work for more than ten hours per day without respite should be cause for concern, not celebration.  

3. Sophisticated error reporting, investigation and feedback systems

In working with lawyers in risk management, an issue that I have been surprised by is the reluctance on the part of many partners to openly discuss their own errors with other members of their firm. Clearly this reflects a significant barrier to creating an effective reporting culture that cannot be addressed by merely creating a more complex reporting system. In order to support a positive reporting culture, an effective reporting system should defer blame during the investigation phase; focus on the role of human error, systems, and culture; and encourage reporting of “near misses” and feedback information to improve process and systems and professional development.

4. Human resource capacity

Ultimately, effective risk management in any human-capital environment depends on access to reasonable levels of human resource capacity. Any firm that regularly achieves effective utilization rates approaching 100 percent leaves partners unable to manage critical risks, particularly on large projects. The absence of centralized management of human resource capacity also leaves them overly dependent on informal and often inefficient peer networks to identify and access what little capacity may be available.   

Obviously, the adoption of these principles presents significant challenges given the way lawyers are trained and law firms are structured and managed. But a great deal can be achieved by merely establishing a conversation within the firm about human error and improving the sophistication of existing reporting and investigation systems. Many partners appreciate the value of mistakes from their own experience but remain reticent through fear that open discussion of their own mistakes may lead to judgment by their peers or complacency in young associates. The former concern may well be justified, but the latter is not supported by research in organizational psychology. Ultimately, this is a change that can only be effected by culturally successful partners leading the conversation. 


Anthony Kearns is an Australian lawyer who has been the national risk manager with two professional indemnity insurers and the chief operating officer of international engineering firm Lincolne Scott. He has recently taken up a position as a principal of Lawyer Metrics LLC and is an adjunct professor at the Maurer School of Law at Indiana University. Kearns can be reached at anthony.kearns@lawyermetrics.com.

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Mr. Kearns: A wonderful article, a call to introduce a systematic perspective to a management practice that too often seems to rely only on luck. In the two examples you lead off with, airline flight and medical delivery we're involved with intense regulations, of course. Does law need a semblance of similar regulation to make the gains needed?

Mr. Kerns,
Thank you for bringing to light these important points. I hope every law firm leader, partner and associate finds your post and becomes inspired to take action. I have been in the legal industry as a marketer for over 15 years and have seen first hand the scenario you describe. What puzzles me most is that law firms buy very expensive professional liability insurance policies yet have shallow (even misguided) protections in place.

With due respect, I believe that the lack of risk management systems in the practice of law can be attributed to the competitive environment embedded in aspiring lawyers from the minute they take the LSAT to the class rank they receive when they graduate and the status of the law firm that recruits them. Throughout, this process rewards individual achievement over any sort of collaboration. Law students are taught that questions of doubt are a weakness that can be attacked by an opponent and although this mentality is necessary for negotiation and trial work, it is counter intuitive to organizational process improvement. It doesn’t surprise me that lawyers do not see mistakes as opportunities for improvement but rather something to hide from your peers because that is what they are taught in order to survive in their profession. Until law schools can find a better approach, I think it will be a difficult paradigm to change.

Well put Mr. Kearns, but my experience is lawyers excel at learning from their mistakes and will informally trade stories to share the lesson. I would promote that cultural tendency of the profession and resist artifice or regulation.

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