From laggard to leader? How the legal sector is finally embracing KM

The legal profession stands accused of being slow in its adoption of knowledge management practices, a particularly damning charge considering its reliance on expert knowledge and know-how. But is the industry as behind as people say it is? By Sandra Higgison

In case-based magazines such as Inside Knowledge, it is often the companies doing the risky trailblazing work that get all the column inches. The rest of us pick out the nuggets from these experiences and look for places to embed them in our own environments. In the slipstream of these pioneers, listening to their lessons learnt and working towards their examples of best practice, are the followers who can see the vision but want to lessen the risks and avoid the pitfalls.

When it comes to knowledge management (KM), the legal profession has been accused of being absent from both these groups. Sitting on the sidelines is not an attractive quality especially when industry analysts and the profession’s own press highlight how law firms have displayed slow and almost begrudging moves towards knowledge management. As a knowledge-reliant industry, KM can offer law firms, lawyers and their clients indisputable benefits. Turning that recognition into action has taken time but it is happening and there are some impressive stories to tell.

While further discussions about the barriers to change will encourage more firms to demolish them, acknowledging the considerable progress that has already been made offers even more value. Many players within this conservative, insular and often aloof profession are freeing themselves from the shackles of fear and resistance to change. Helping to unlock this new mindset, the pressures of changing market conditions and client demands for greater value, collaboration and transparency have played key roles.

As Bob Bater, author of the recent Ark Group report, KM in the Legal Profession, says, law firms faced two major threats towards the end of the 1990s. First, they were losing market share to new players such as the big accountancy and management-consulting firms, also known as multidisciplinary practices (MDPs). Even supermarkets had started to compete for business. Second, the growth of technology and the internet in particular were threatening to remove the need for one-to-one legal advice. Industry expert Richard Susskind predicted at this time that common legal services would become a commodity and sold at competitive prices via the web. Technology looked set to undermine the role of the lawyer.

All industries and organisations have inherent peculiarities that prevent seamless adoption of knowledge-management principles and activities. It may, however, be safe to say that law firms had – and still have – more than most. Bater identifies some of the problems:

Change, any kind of change, was a matter largely beyond their ken;
Technology was proving enough of a challenge, partly because it too required change;
Because of the preoccupation with technology, many law firms tended to regard KM as just an extension of IT;
The conventional structure of law firms inhibited adaptability to market conditions and the resourcing and management of in-depth change;
Many traditional working practices were so deeply engrained that to question them was tantamount to professional blasphemy.

Firms began to recognise that they were their own worst enemy when trying to adapt to their rapidly changing environment and, in particular, apply knowledge management. “A gut reaction among firms large and small was the ‘merger madness’ of the years straddling the millennium,” says Bater. “Mergers made firms focus on law more as a business than a practice. The new organisations recognised early on that knowledge was their primary resource and a commodity that needed to be managed.”

Restructuring the traditional partnership model to reflect other businesses has been a growing trend that is, among other initiatives, helping firms become more flexible and receptive to the modern legal-services landscape. And just as other industries are bringing in practices and technologies to support organisational disciplines such as customer-relationship management, risk management, business-process management and marketing, the legal sector is doing the same.

As the profession has taken on more business-like activities, the role of KM has become clearer and more important. “Knowledge management pervades and underpins all of the [organisational disciplines], as indeed they pervade and underpin KM,” says Bater. “The practice of law is now a business and needs to learn from other businesses how to survive in the modern knowledge economy. Those law firms that have adopted a flatter, leaner profile, which manage knowledge as their key resource and asset, which manage their relationships, measure performance and nurture a collaborative culture are those on track for the future.”

The number of firms on this path is not insignificant. In the same way that other industries are moving through the KM generations, law firms are also making worthy advances. “Over the past five years, I think there have been two significant changes in knowledge management in law firms,” says Juliet Humphries, managing director of Pierian Spring Consulting and former director of knowledge at Linklaters. “First, in the firms that have been involved with knowledge management for some time, it has moved from being a discrete activity – often referred to as know-how – that was focused on legal knowledge, to an activity that is seen to permeate across functions and boundaries. Second, KM is no longer seen as the preserve of the larger firms, which is due to improved articulation of the KM message by practitioners and an increasing appreciation of what the benefits of adopting KM principles can bring.”

Before examining practical examples supporting Humphries’s assertions, it is worth looking at the business drivers she believes apply to all or some firms in their pursuit of knowledge management:

Clients expect firms to have knowledge systems that they can use to their benefit rather than constantly reinventing the wheel. The growth in demand for value-added services is mostly knowledge based;
Firms are getting larger, employing more lawyers and expanding their geographical reach, all of which make traditional ways of knowing who knows what more difficult;
Greater efficiency is required to make certain types of work pay;
As employees demand a work/life balance and flexible working, retention of staff is becoming a big driver. Firms must be able to support this and make changes to working practices effective;
The realisation that some of the technology in the market might actually make a difference.

Many firms are already using knowledge management to help address these challenges. Indeed, some claim to have been doing KM, although maybe not by that name, for over 15 years, and have seen it evolve during that time. Marcia Cooper, director of knowledge management at Canadian firm Blake, Cassels & Graydon, describes KM’s transition at her firm. “The early initiatives tended to focus on discrete legal know-how needs, such as establishing model precedents and a collection of research memoranda. These objectives have broadened to address a wider range of explicit knowledge and tacit knowledge capture. KM is more than legal know-how, comprising client and firm information. We aim to leverage our information and knowledge on a global basis for reuse in practice and application in business development, client service, risk management and the firm’s operations.“

Knowledge management at international firm Freshfields Bruckhaus Deringer has evolved in a similar way. “The focus changed from supporting individual practice groups with research and updating to developing a firm-wide, global KM strategy,” says knowledge-management lawyer Elizabeth Thomas. “We aim to achieve a fully integrated and connected KM community that assists our lawyers and exceeds our client’s expectations.” To ensure initiatives stay in line with the business, Freshfields Bruckhaus Deringer created the KM Review Group in 2003, which involves the top KM leadership and selected senior partners representing the firm’s key practice areas.

These firms are not alone in their approach and they reflect Bater’s view of how the profession is changing. “The legal sector is beginning to understand that KM is about leveraging the firm’s competence and experience to deliver better value products and services to customers, rather than simply improving internal processes,” he says. Using knowledge management in this way sharpens a firm’s competitive edge, gives lawyers tools to work together more effectively and, ultimately, delivers higher levels of service and enables collaboration with clients.

In terms of competitive advantage, Humphries says, law firms need two core components to make them successful: clients and lawyers. ”To attract clients, KM activity needs to demonstrate the firm’s expertise and experience,” she says. “It then needs to be part of the hook that retains them through the provision of real added value.” Bater believes the combination of KM and technology can help firms move away from traditional emphasis on the breadth and depth of legal services to a more proactive approach that uses the knowledge firms have of their clients to actively define and address their needs.

Knowledge management and new technologies are allowing firms to leverage their lawyers’ expertise as a competitive tool. Bater talks about making more cost-effective use of lawyers’ skills and abilities. “It is still unknown whether a firm can gain competitive advantage by commoditising services that don’t require continual lawyer input to deliver them online or by other means,” he says. “While this can provide a revenue stream with minimal human effort, releasing lawyers from repetitive tasks should allow them to focus on services requiring their core expertise and deliver greater client value for money. I think that is where competitive advantage arises.”

To deliver these benefits, firms must, and are, improving the way lawyers use their knowledge internally. Providing lawyers with an infrastructure to access and share knowledge is a fundamental KM activity that some firms are already doing on a global basis, often ahead of their peers in other industries. Earlier this year, Freshfields Bruckhaus Deringer launched Athena, a repository for the entire firm’s know-how from its 27 offices in 17 countries. “For the first time, the whole network has a fully interconnected legal know-how system with fully integrated and standardised KM working practices,” says Thomas. “This will result in huge time savings for our lawyers. Athena allows our fee earners to produce high quality work faster and more efficiently, and make quick and accurate judgements about the quality, authority and completeness of content without having to contact KM staff.”

The legal sector is no different to other industries where investment in technology alone does not come with shrink-wrapped knowledge-sharing behaviours that are automatically adopted by a firm’s employees. Culture change is a sticking point for all knowledge managers, but it could be said that a firm’s individualistic culture, which Susskind describes as ‘a coincidence of sole practitioners’ rather than a single practice, is one of the most challenging for any KM initiative. “The prevailing culture is perceived to dictate that to become a partner, a lawyer must build a personal knowledge base that he/she must not share with others lest they lose their unique ticket to partnership,” says Bater. “This needs to change before any knowledge manager is able to tap into real knowledge flows, capture what they can and nurture the rest.”

Communicating the value of knowledge management to employees will help firms clear the culture hurdle. “The greatest challenge here is making it tangible to the average working lawyer,” says Jason Marty, global director of knowledge management at Baker & McKenzie. “Using precedents and know-how is standard practice for most lawyers. But doing so as part of a KM programme, contributing to systems without a clear sense of the benefits and encouraging non-billable activities are not traditional. To get buy in, we have had to refine our communications and focus on tangible objectives with clear benefits for our lawyers.” According to Humphries, even the least receptive firms can come around. “Don’t blame culture for failure,” she says. “Understand your culture and find ways to change it slowly by choosing the right activities.”

Despite these obstacles, there is considerable KM activity to show how lawyers and partners are sharing knowledge and working collaboratively. Thomas, Marty and Cooper all highlight the global practice groups, or communities of practice, in operation at their firms as current and well-established examples. These groups are supported by document and knowledge-management tools and take knowledge sharing seriously. “At Blakes, cross-disciplinary topics are often discussed at meetings as lawyers from other practice groups are invited to speak about particular issues in their areas of expertise,” says Cooper. Marty says lawyers at Baker & McKenzie have always collaborated and shared knowledge. “One great avenue for developing this collaboration is the preparation of legal training opportunities for associates,” he says. “They are eager to contribute their know-how to help create better prepared teams to work on client matters.”

The overlap between knowledge management and professional development within firms is yet another emerging trend. “The two functions are inextricably linked. Good KM is about supporting and developing people in the right way. We work with our learning and development team to ensure KM best practice is built into staff development and induction processes,” says Thomas. At Baker & McKenzie, both departments report into the firm’s knowledge and professional development committee. “In general, the KM group focuses on legal content and training, and the professional development group focuses on attracting, developing and retaining the best lawyers in our markets,” says Marty.

Although many firms are focused on developing their lawyers and encouraging collaboration, the profession’s ongoing reliance on time-based billing can stop many initiatives dead in their tracks. “Quite apart from obscuring any notion of value for money from a client’s perspective, time-based billing presents a formidable obstacle to effective KM in law firms,” says Bater. “It reinforces what has been called an ‘eat what you kill’ culture, which poses a barrier to interpersonal and cross-team sharing.” Humphries agrees and adds, “If fee earners have chargeable targets that relate to their bonuses, why would they want to give up time to contribute to knowledge activity?”

Thankfully, it seems that some firms are starting to recognise the rod they have made for their backs. Although the number of firms revamping their remuneration models is still low, many are setting aside a set number of hours each year to know-how. Baker & McKenzie, for example, has a standard that requires a minimum investment of non-billable time each year in areas of knowledge and professional development. Blakes’s associates are offered billable-equivalent credit for work on model precedents, while Freshfields Bruckhaus Deringer also recognises contributions to knowledge management in appraisals. However, as time-based billing also makes it harder for firms to compete in an environment where agility not rigidity is required, Humphries says they have to decide whether they want to drive change or be ready when it arrives, which is likely to be due to client pressure.

Demands from clients in other areas are creating yet further facets to knowledge management in the legal sector. Pressure from an unforgiving economy has forced organisations from all industries to demand increased value for money from suppliers, which includes their legal advisors. To meet this requirement, law firms are using knowledge-management activities to deliver higher levels of service. “Knowledge processes can ensure that work is done quicker, consistently and to a higher quality,” says Humphries. “The direct impact on clients is improved service, and greater efficiency in turn around or reduced costs.”

In addition to value-added services, clients want new collaborative ways of working from all their service providers. As more suppliers are delivering their services online and on-demand, law firms are expected to follow suit. Although it can be said that firms and their clients already collaborate through their usual working practices, clients want more. They are demanding greater and easier access to information and the firm’s intellectual capital. Baker & McKenzie, Blakes and Freshfields are among the many to respond by creating extranets that give clients direct access to the information held on them as well as some of the firm’s know-how.

If it is difficult to encourage firms to share knowledge internally, Bater says the prospect of collaborating with clients will be equally as challenging. However, the activities of some firms are proving that knowledge sharing with clients is not simply considered a loss of intellectual capital. Freshfields works with its clients to provide current awareness and seminars, as well as online training. Blakes and Freshfields also help clients develop their own knowledge-management strategies by sharing their expertise with their clients’ in-house legal departments. Knowledge managers are therefore leading the collaboration charge by example as they work directly with clients, an activity that may put them ahead of many of their knowledge peers in other industries.

As collaboration, internally and externally, becomes entrenched in a law firm’s daily activities, few commentators can claim that the industry has yet to acknowledge the value of knowledge management. Considerable and innovative headway has been made, but there is still much to do. Bater suggests that the current trends will continue and will trickle down to smaller law firms that have been put off by the cost of developing a KM infrastructure. A recent example of collaboration between firms in Scotland, however, could light the way for this important part of the profession. In 2002, 15 firms came together to start providing content to a database on Scottish law, which is then shared with clients through their websites. If similar initiatives become the norm, the value of knowledge management will be recognised by practices of all sizes.

The challenges, opportunities and developments identified here barely skim the surface of KM in the legal profession. Such a complex industry with strongly held beliefs and centuries-old working practices was never likely to change quickly. But while law firms may not be taking MAKE awards from the oil and management-consulting firms just yet, the laggard label is clearly unjust as some firms are hot on the heels of these leaders. As the examples profiled here show, there are countless nuggets from the profession’s KM experiences that can be adopted by organisations in other fields. As Bater says, “Law firms play an important role in the spread of KM because if law firms can implement it successfully against all the barriers presented by their entrenched culture and practices, then other businesses can too.” There’s a lesson in there for us all.