What Do ROI, Sedona, and Project Management Have in Common?
Joshua Kubicki* of Legal Transformation published an interesting and thoughtful piece Monday on Using Project Management to Find “Hidden” ROI.
He writes that he’s drafting a new proposal for the Sedona Conference about “establishing a business case for finding the hidden ROI in an organization’s information assets.” He talks about project management as an essential — and missing — factor.
While I’m (obviously) a huge supporter of the right kind of project management in the legal arena, I wonder if project management per se is just a bit of a red herring in the case of hidden ROI.
In the business world, you wouldn’t make any major move without thoroughly considering all the aspects of ROI, an nontrivial exercise. However, the concepts of ROIC, opportunity cost, IRR/NPV, and such seem alien to the way most attorneys practice law — and indeed often to the firms themselves [abbreviations summarized below]. I’m not talking about the terminology per se; there are plenty of ways to debate the net present value of various projects and cases without ever using the term.
What may be a “better” approach would be to apply a greater degree of business logic to the mechanics of the practice of law. I don’t mean attorneys should get a dual JD/MBA any more than I think they should chase PMI certification. Rather, they should develop a certain base level of business (and project) literacy before they are considered as potential members of the partner pantheon. The basic concepts of both disciplines are easily understood; NPV, for example, is a shorthand for discussing the time value of money and opportunity cost, both of which can be applied to thinking about case management without ever cracking a spreadsheet.
I put “better” approach in quotes for two reasons. First, I think it’s essential for senior and partner attorneys to participate in the profitability of their firms or corporations, which means applying business thinking to their work, as alien as some may now find the concepts. Second, given the degree to which this is all thinking from another planet, perhaps project management is after all the right guise in which to slip business thinking into the firm’s mental drinking water.
It’s an interesting article; take a look.
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Simple/simplistic explanations of the business terms used in this post:
- ROIC: Return on Invested/Investment Capital, a more formal name for ROI, Return on Investment. If you put money into a business project, you normally expect to get your money back and then some. Businesses normally fund only projects with high ROI.
- Opportunity cost: If you want to see a movie tonight and want to see both Avatar and It’s Complicated, you can’t be in two places at once. Opportunity cost is what you pass up when you make a choice.
- IRR: Internal Rate of Return. Basically, profit. If I invest $100 and get back $110, the IRR is 10% — very simplistically.
- NPV: Net Present Value. Related to IRR, it’s the value in today’s dollars of a project at completion.
- MBA: Master of Business Administration. A graduate degree that leads holders to believe that they actually know how a business works. See my article The Ten-Minute Legal-Pro MBA (it’s the lead article, starting on page 4, and it’s one in a series of articles I’ve written — and continue to write — about demystifying subjects that tend to develop a priesthood mentality. My book Legal Project Management contains a chapter titles “Lean Six Sigma in 30 Minutes,” for example.)
- PMI: Project Management Institute. It’s like an MBA for project managers, and the same caveats apply as to MBAs. MBAs and PMI certification aren’t bad per se, but they can sometimes (a) delude someone into thinking its holders know more about the real world than they actually do and (b) create an I’m-on-the-inside-and-you’re-not divide.
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*I mistyped Joshua Kubicki’s name. Sorry, Joshua. [Correction made 6 February 11AM]
Steve,
Thanks for reading and then posting your response here. In your response you hit on one of the major challenges I and the other drafting team members of the Sedona paper have been wrestling with.
In scoping the framework of a business case for approaching information assets from not only what the value is today or for a particular use but what the value “could be” for others or at a later time, multiple parties within the organization come into play. Each groups brings with it their own sense of knowledge and processes. Take for instance the C-suite. This group typically addresses issues from a high level, leaving the granularity to subordinates and experts to examine. They consider market knowledge, financial positioning, shareholder return, Board response and other “global” factors. Contrast this with the RIM (Records and Information Management) professionals who are typically sequestered into a realm of paper and data storage and retention. Too often these folks are not allowed into strategic arenas where their approach could enlighten others. In fact it is only recently that they have advanced to a place where they influence such things as legal holds, ediscovery, and knowledge management. Much of this growth has come from self-motivation and bootstrapping these areas along with their traditional domain. Groups such as AIIM and ARMA have been key in this regard. Other groups necessary for this effort are IT, Legal, and front-line business persons – again each with their own sense of “how we get things done” and “what we need to do.” Each indeed injecting their own brand of “business logic.”
As I mentioned in my article – the formation of an Interdisciplinary Team is key. The various types “business logic” of these diverse members are necessary due to the broad and expansive reach of information and the kaleidoscopic definition of “value.” Gathering these different groups together to take on the challenge of finding “hidden ROI” is just the start. Finding a “leader” or rather a person otherwise responsible for the planning, tracking, benchmarking, and sustaining momentum is perhaps more vital as without this person the diverse group will have a tendency to pursue others agendas and may deviate from the overall goals. This is where I suggest a project manager is needed – if to serve no other role than as the gravitational center of the group – keeping it close, moving and always focused on the end goal.
Red herring, maybe. Better yet, a Trojan Horse. Though neither idioms are needed in organizations that claim advanced business logic and represent a culture of information sharing versus silo-ing.
Joshua Kubicki
Great comments, Joshua. Thanks. (And sorry for misspelling your name; now corrected in the post.)
Trojan Horse is indeed a much better metaphor than red herring. However, I fear it will prove to be a Trojan Rabbit (http://bit.ly/9Q235o) unless the records folks learn to speak the language of business. It’s not that they’re not allowed into strategic areas, but that they neither know how to speak the right language nor understand means of gaining entree. Getting their project act together is necessary, but not sufficient, I believe, without solving these other two issues.