The Importance of Transaction Checklists

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I’m a big believer is developing and using checklists in connection with legal work in general, not just in connection with transaction closings.  And to that I’m sure a lot of you will say “no duh, Brad.”  But in my experience many lawyers don’t use checklists even in connection with transaction closings and those that do often prepare the checklist just a couple days before the scheduled closing–often too late to effectively manage what needs to get done.  Instead I suspect many lawyers and paralegals rely on memory, email chains, Post It notes, and the conditions precedent sections of the relevant documents.

A well thought out transaction checklist prepared early in a transaction (at the latest when primary transaction documents are agreed) will allow a lawyer to spot logistical, commercial and other issues well in advance of the closing.  It will also provide a central location for keeping track of the status of the checklist items, developments and changes in the transaction and any other ideas and thoughts relevant to the closing of the transaction.  A checklist is also a great way to share information among the lawyers and paralegals on a deal.

When I see a young lawyer or paralegal overwhelmed with the logistics of an upcoming closing my advice is usually something like this:  “After the transaction documents are signed, closing a deal is relatively easy.  Make a detailed list of all the things that need to get done for the deal to close, and then make sure each item gets done.  That’s it.  Look at each item on the list at least once every day and ask yourself ‘what can I do to move this item forward right now?’ and then do it.  Closing a deal involves a finite number of steps; you just need to identify them and make sure they get done.”

Here’s a link to a New Yorker article about checklists.  The article is about the use of checklists in the medical profession, which use is unfortunately not as prevalent as you may expect (and hope).  (The article also has an interesting discussion of the introduction of checklists for pilots.)  Below is an excerpt about a medical checklist:

“In 2001, though, a critical-care specialist at Johns Hopkins Hospital named Peter Pronovost decided to give it a try. He didn’t attempt to make the checklist cover everything; he designed it to tackle just one problem, the one that nearly killed Anthony DeFilippo: line infections. On a sheet of plain paper, he plotted out the steps to take in order to avoid infections when putting a line in. Doctors are supposed to (1) wash their hands with soap, (2) clean the patient’s skin with chlorhexidine antiseptic, (3) put sterile drapes over the entire patient, (4) wear a sterile mask, hat, gown, and gloves, and (5) put a sterile dressing over the catheter site once the line is in. Check, check, check, check, check. These steps are no-brainers; they have been known and taught for years. So it seemed silly to make a checklist just for them. Still, Pronovost asked the nurses in his I.C.U. to observe the doctors for a month as they put lines into patients, and record how often they completed each step. In more than a third of patients, they skipped at least one.

“The next month, he and his team persuaded the hospital administration to authorize nurses to stop doctors if they saw them skipping a step on the checklist; nurses were also to ask them each day whether any lines ought to be removed, so as not to leave them in longer than necessary. This was revolutionary. Nurses have always had their ways of nudging a doctor into doing the right thing, ranging from the gentle reminder (“Um, did you forget to put on your mask, doctor?”) to more forceful methods (I’ve had a nurse bodycheck me when she thought I hadn’t put enough drapes on a patient). But many nurses aren’t sure whether this is their place, or whether a given step is worth a confrontation. (Does it really matter whether a patient’s legs are draped for a line going into the chest?) The new rule made it clear: if doctors didn’t follow every step on the checklist, the nurses would have backup from the administration to intervene.

“Pronovost and his colleagues monitored what happened for a year afterward. The results were so dramatic that they weren’t sure whether to believe them: the ten-day line-infection rate went from eleven per cent to zero. So they followed patients for fifteen more months. Only two line infections occurred during the entire period. They calculated that, in this one hospital, the checklist had prevented forty-three infections and eight deaths, and saved two million dollars in costs.”

I’ll come back to this topic later and discuss checklists for other legal tasks, like document review.