Increasingly mobile knowhow in law firms is not only being more flexibly deployed at law firms, it’s being packaged up for clients. We chart the evolution of KM from library to GC’s office.
Lisa Smith, head of knowledge services at DWF, provides a small but telling insight into how far knowledge management (KM) services have come in delivering value through business intelligence to their lawyers. She recalls a recent occasion where a partner had a key client meeting one morning, but there was a major development the night before involving a fire at one of the client’s premises. ‘We were able to alert the partner well in advance so that he was prepared,’ says Smith.
However, the use of knowhow, precedents and business intelligence held by knowledge teams within law firms has become increasingly popular with clients directly. Whereas this knowhow used to be a resource for a firm’s lawyers to understand their clients’ businesses and draw on precedents and documents used in similar transactions, the demand is now there for KM professionals to be brought out of the library and into the meeting room. Nearly every one of the KM leaders we spoke to for this report alluded to the increased demand for client-focused knowledge initiatives.
‘KM has moved out of the library and now permeates all aspects of legal service provision,’ says Rob Martin, director of software services at Thomson Reuters Legal UK and Ireland. ‘The expansion of client extranets, and the demands clients are making on panel firms to collaborate and share knowhow, is clear evidence of both the wider adoption and the value placed on knowhow development and maintenance.’
‘We continue to provide KM advisory support to key clients, but it’s no longer a unique offering,’ she says. ‘It’s much more accepted now for law firms to provide “practice management” support to their clients, including on areas such as corporate social responsibility and IT, as well as KM.’
This increased demand often stems from an abundance of resource at many law firms in contrast to their clients. In addition to mandated legal advice, in-house counsel recognise the value that law firms can bring to bear with precedents, economic analysis, and sector and industry-specific knowhow. This is why some firms have reported clients using their KM resources to prepare for pitches, and why others report providing knowhow to a general counsel (GC) that is moving to another company in another industry and needs to get to grips with developments in their new sector.
However, this demand doesn’t mean that knowledge teams have eschewed their traditional role of supporting content and legal training – rather they’ve developed teams to include some business information and intelligence experts that are client facing, providing those services direct to key clients, for example, on the progress of a piece of legislation.
‘Client-centric services from KM are absolutely increasing,’ says Kate Stanfield, head of KM at CMS Cameron McKenna. ‘Every firm gives away training, but clients don’t rate that as much because they can get it from anybody. KM advice is actually valued quite highly. You’re not just using KM to ensure you keep getting work from clients, you’re using it to recognise client needs in your organisation, and change the way you think and work with all clients. For us, our relationship with the firm’s clients through KM is not just “I need a standard form”, but trying to be part of that client’s support structure.’
This is supported by our recent in-house survey, published in October. One of the key factors in choosing an external law firm that was rated highly by GCs was quality of service delivery (selected as very important by 74% of respondents and important by 96% overall), of which KM support is an integral part. However, there is a risk of overdoing things and above all else the quality of legal advice is what counts, as emphasised by Carol Aldridge, head of KM and information services at Burges Salmon.
‘Obviously, quality of legal advice is the most important criteria for clients in choosing a law firm and the value-add is always in support of that top-quality legal service,’ she says. ‘It only makes sense to harness the tools that the client uses to enhance the quality of service, but we need to think about client appetite for KM support. Not all clients are the same so we have to listen to what each needs.’
Return on investment
One of the main benefits of a more direct role for the KM function with clients is that it helps tackle one of the thorniest issues associated with KM: accurately benchmarking performance and measuring the return on investment (ROI) in KM by law firms. In a blog published by CMS’ Stanfield on the Integreon website last year, entitled ‘What has knowledge management ever done for law firms?’, Stanfield concedes that objective measurement of how KM benefits the profitability and performance of an organisation is difficult. ‘Full analysis of how much time is saved, how much risk is reduced, how much the quality is improved, how much write-off is saved and how much more profit is made by good use of knowledge work, can often be overshadowed by whether the relationship with the client was well-managed or not,’ she writes. ‘That perception of “good work” or repeat work is difficult to isolate to any one contribution. Rather, knowledge work contributes to the whole final product.’
Measurement is challenging because KM is not just about metrics – firms can track the use of resources, but the benefit of good KM is also about its effect on people and culture. In larger international firms particularly, KM helps to bring together different parts of the business so that it can leverage collective knowledge and resources effectively in ways that contribute to the bottom line.
Direct client feedback is useful in shaping client-facing KM initiatives. Clients expect law firms to impart knowledge and part of every firm’s strategy is to meet and hopefully exceed client expectations. For internal KM initiatives, professional support lawyers (PSLs) get direct user feedback from their practice groups, not just partners and fee-earners, but all stakeholders – from board directors, to business support functions – particularly risk, business development, learning and development. Law firms are becoming more conscious of this and some of the larger firms, such as Linklaters and Clifford Chance, conduct firm-wide surveys to find out what resources staff use and value in their day-to-day work, and what makes life easier for them. They can then crunch together the results of this qualitative research with the quantitative metrics they get from online resources, ie which guides/documents/webpages have the most hits/downloads.
Co-publishing feature
The future of knowledge management: out of the library into the front line
– Ian Mason and Rob Martin, Thomson Reuters
Others in the KM business find benchmarking an equally nebulous challenge but recognise that client satisfaction provides useful evidence of ROI for knowledge management. ‘You can’t do much better than talking to people,’ says DWF’s Smith. ‘As head of the team, I’m talking to people all the time. We do a lot of support on our bids and pitches and strategic account leadership client work, so I can look at the list of client wins and the added traction that we get into our key clients, and we know where we have contributed to that.’
Derek Southall, a partner at Wragge Lawrence Graham & Co, oversaw a complete overhaul of the KM function at legacy Wragge & Co a couple of years ago in his role as head of strategic development. The project aimed to help deliver knowhow faster and more efficiently to the firm and clients, and achieved cost savings in the region of £2m. For Southall, investment in KM is all about returns, to the extent that Wragge & Co knew its total knowledge spend per fee-earner – around £3,250 per year in 2012/13.
‘The KM function is there to help the firm achieve its mission statement of doing the most profitable work as efficiently as possible to the highest quality,’ he says. ‘We produce a key performance indicator pack every year. We look at how much of the KM products are being used and what the spend is per fee-earner, and how many hours of PSL time are being used per fee-earner. We do a lot of ROI.’
Rob Martin at Thomson Reuters says that improving the effectiveness of your firm’s information and knowledge management can have a direct impact on profitability, and this impact can be measured using Harvard academic David Maister’s formula for the law firm model: net income per partner = (1 + leverage) x blended rate x (utilisation) (realisation) x (margin). ‘All elements are interlinked and it is hard to adjust one without having a direct and immediate impact on others,’ says Martin. ‘Small improvements in efficiency can have a dramatic impact on net income per partner by driving up the realisation percentage, with minimal or no impact on other elements of the formula.
‘The challenge is to get senior partners to accept that small efficiency improvements do actually deliver the returns. Using statistics from services like Practical Law – where firms can see what documents are used, by whom and how often – is something that can help determine an amount of time saved and this saving can then be used to model the impact of doing nothing or continuing to improve knowhow adoption.’
Recognition of the use of KM within law firms, particularly on client matters, is critical. Stanfield argues that one of the biggest problems is that partners understand the value of KM, but the law firm model of client chargeable time works against encouraging it with very few firms considering KM time as valuable as client chargeable hours in terms of remuneration and bonuses. ‘We’ve gone a long way in terms of it being part of performance reviews and part of the development from trainee through to partner, but the only firm I know that has done this meaningfully is Latham & Watkins, where KM time is chargeable alongside client hours,’ she says.
Elsewhere, firms such as Berwin Leighton Paisner, Clifford Chance, Lewis Silkin and Linklaters recognise time spent on KM by fee-earners in bonuses and appraisals.
Recorded delivery
Aligned with improving the efficiency of KM to clients and measuring its impact on firms’ bottom lines is the issue of effective delivery of knowhow to internal and external clients. This is keeping KM managers awake at night as they wrestle with the fact that although the knowledge content of the firm may be of the highest quality, whether that knowledge gets used effectively can be real a headache.
The answer, in part, is down to systems employed and one KM veteran is particularly dismissive: ‘I’m amazed at how rubbish most firms’ KM systems are. Fundamentally there are still very few people doing anything impressive and nobody doing anything phenomenal.’ Getting people to use resources means ensuring they are visible and easily accessible – if people aren’t aware, they won’t be looking. The holy grail for KM professionals is to make knowledge exchange almost an unconscious activity throughout the business – the automatic exchange of knowledge and ideas. This boils down to an effective culture of collaboration, both internally and, crucially as far as clients are concerned, between law firms.
‘One thing we see with things like e-journals is that law firms don’t seem very collaborative, so if you’ve got some good content you might want to share it,’ says Smith. ‘The surfacing of information on multiple delivery channels – client extranets, intranets, customer relationship management systems – we know we have great content and previously it was quite labour-intensive to push that content out to various final destinations. What I’m seeing now is those various pressure points starting to be released and it’s becoming easier to multi-use the content that we have to make sure it’s delivered in real time where it needs to be.’
This relates to another point on the danger of information overload. It is all too easy to overwhelm clients with the knowhow available, the ability to find, correlate and leverage information across multiple channels is the real trick. The development of effective systems and processes to provide relevant information in context is crucial.
‘One thing I’m very interested in at the moment is process mapping and transaction mapping,’ says Stanfield. ‘Looking at each stage of a transaction and really disaggregating that, really analysing the organisational set-up of any firm and all of its practices, disassembling the work and looking at who is doing what and how much it costs, etc – if you really question that you can get some quite startling responses and you can review the whole organisational structure of how you do things. If you’ve got time and can do that properly, KM can really help and draw out those things.’
Less is more
Law firms need to get their exploitation of KM right to fashion a distinct competitive advantage over other firms and service providers. With clients placing more emphasis on knowhow, it is important that firms continue to find a way to harness their investment in knowledge more directly. Clients’ articulation of their requirements in KM is a fairly new development and so far many firms have relied on guesswork as to what clients’ needs are in this area. This business imperative is thrown into sharper focus considering recent moves by accountancy firms, which have large consultancy arms to their businesses, to enter the legal arena again.
‘There is an emerging recognition of KM as a business tool to help us to transform the focus on the chargeable hour as the measure of value,’ says Aldridge. ‘Over time, people are going to realise that KM is the way to think smart and deliver what we need to, while it costs us less and still delivers excellent service delivery for the client.’
The cliché is ‘knowledge is power’. But increasingly the trick is knowing how to wield it. LB
mark.mcateer@legalease.co.uk