The case for KM

In spite of their notorious hostility to change, the potential benefits knowledge management promises firms operating in a sector as knowledge intensive as the legal industry are palpable. Simon Lelic, editor of Knowledge Management magazine, talks to representatives from CMS Cameron McKenna, Mondaq, Perceptive Technology, ResSoft, Sherwood PSF Consulting, Smartlogik and TFPL, and discusses the impact KM has had on the industry.

For any law firm to stay ahead of its rivals in a sector as rigorously competitive as the legal market, operational efficiency and the ability to fully exploit the intellectual capital at its disposal are critical. It is therefore reasonable to assume that the rewards promised by an effective knowledge management (KM) programme would seem sufficiently enticing to spur any firm, looking to extend its competitive advantage, to invest in KM. But law firms are notoriously traditionalist and conservative in their attitudes to change, which obviously has the potential to create huge problems when it comes to initiating the comprehensive reforms associated with a KM project.

Melissa Hardee, partner at CMS Cameron McKenna, believes the uptake of KM in the legal sector has been noticeably slower than in other industries, blaming what she describes as the natural conservatism of lawyers. "Lawyers like to be able to point to evidence to justify decisions; in terms of investments they make, they like to conduct a straight cost-benefit analysis," she says. "But it is not easy with KM to point to an actual figure representing the improvement to the bottom line. Rather, it requires a bit of a leap of faith." Nigel Oxbrow, founder and chief executive of TFPL, and Andrew Partridge, co-founder and managing director of Mondaq, both agree that law firms have lagged behind organisations operating in other sectors. Together with the aforementioned hostility to change, Partridge attributes this sluggishness to the fact that 'non-billable' activities like KM tend to take a back seat to work that generates revenue directly.

Curiously, however, the experience of Ian Blackshire, sales and marketing director at ResSoft, is that law firms have largely kept pace with developments in the field of KM. "If you exclude financial services, I think that the take up is probably in line, in percentage terms, with most other market sectors," he argues. And both Chris Hooton, strategic account manager at Smartlogik, and Mike Sharples, managing director of Perceptive Technology, believe that uptake has actually been more pronounced in the legal sector. As Sharples says: "In the professional services arena, other than the big five, law firms are probably leading the way for KM adoption." In fact, there is a general consensus that, whatever the situation two or three years ago, a great deal of progress has been made over the last 12-18 months, and there seems to be little doubt that KM has now made a significant impact on the way law firms operate.

"Increasingly, firms are developing their KM functions beyond just having librarians to having skilled, experienced professional support lawyers, who are now being paid commensurate with fee-earning lawyers," says Hardee. "Firms have begun to recognise that having skilled lawyers involved in KM improves their business." And as Partridge suggests, a large number of law firms have intranet and extranet sites that allow them to share information with clients, to an extent that would have been unthinkable even a couple of years ago. "KM is becoming crucial in managing both relationships with clients and internal collaborations, particularly in large firms where relationships can stretch not only over many years, but also across practice groups, where shared information for cross-selling purposes is key." In a sense, of course, and as Julian Boardman-Weston, director of Sherwood PSF Consulting, points out, most successful law firms have been managing knowledge and know-how effectively for years, long before the process was formalised as knowledge management. But more recent efforts to target these processes more directly on quality improvement, cost reduction and service innovation have, in Boardman-Weston's opinion, had an enormous impact, at least on a number of the largest firms.

There remains though, in Blackshire's opinion, a degree of confusion in the legal market as to what KM really is, particularly surrounding KM technologies. "This is made worse in firms that already have a document management system and view KM as just the ability to conduct simple searches on documents," he says. "Our statistics show that of the top 300 firms, only 14 per cent have invested in a KM solution. Of these, most are top 50 firms and they tend to be the early adopters of new technology." Similarly, Sharples believes KM means many different things to different firms. "Personally, I believe that KM could have a much bigger impact on law firms if it was seen as a firm-wide strategic tool to improve client service and fee income, rather than a way of managing precedents and other know-how documents. Knowledge is such an integral part of a law firm's offering that KM should be seen as a necessary part of any firm's infrastructure."

Indeed, in many ways the nature of the business law firms undertake lends itself extremely well to the adoption of KM practices. As Boardman-Weston suggests, KM offers law firms the chance to improve quality and consistency, reduce costs, and enhance their reputations, among customers and employees, with the end results of increased competitive advantage and improved long-term profits. And more specifically to law firms, as Hooton says, in a market as competitive as that of the legal profession, KM can assist ‘niche players’ to become recognised experts in their specialist fields, as well as combating the difficulties associated with clients who demand ever faster responses to increasingly complex problems. "For law firms, their main asset is their knowledge, their intellectual capital," says Hardee. "Not to look after it – manage it better, preserve it, get more use out of it – is almost dissipating one's assets."

Of course, law firms also face their own particular problems when looking to initiate a KM project. "The main problems relate to the structure of law firms," says Oxbrow. "The operational silos that often exist, the divide between 'professional' and 'non-professional' personnel, and the lack of awareness of the value of sharing and communicating knowledge." This is echoed by Hardee, who believes lawyers regard their own knowledge and expertise as representing their individual value to the business. "There is a fundamental problem in implementing KM in the legal sector, because of the concerns of lawyers that if they share their knowledge, they are diminishing their own unique value to their firm," she says. "This results in the 'bottom drawer' syndrome, which is the tendency to keep everything to oneself – copies of useful precedents, and other know-how, in one's bottom drawer." Equally pressing, in Boardman-Weston's opinion, is the challenge of trying to embed as much tacit knowledge as possible in the firm, so that it does not leave when an employee moves from the firm. And the emphasis on client confidentiality, which inhibits how freely lawyers are able to share information with clients, as well as other workers, can also be problematic, as Partridge suggests.

While Blackshire's experience indicates, in his words, that "Cultural issues are somewhat overstated in KM projects", others believe cultural change is the key to overcoming most of these barriers. Hardee, for instance, advocates making knowledge contribution part of the firm's set of key values and, conversely, making failure to share, or abuse of the KM system, unacceptable behaviour. Oxbrow believes a passionate and committed team, with support from senior partners, is also vital, and this is reiterated by Sharples: "Getting the support of top level management is half the battle in addressing the need for cultural change within a law firm. Humans, in the main, will resist change as it brings about risk and uncertainty, yet without change there is no future for KM. A change of this magnitude can only be achieved with the full support and commitment of the board." In a similar vein, Boardman-Weston argues that employees need to be made to understand what KM involves, and should actively want what KM promises to achieve. If this attitude can be instilled, he says, the next step is to ensure that KM practices are properly integrated with broader management practices within the firm.

Most practitioners would agree that cultural changes are the most difficult to instigate; as Boardman-Weston says, there is no simple solution or formula to follow. But there are a number of tools that can at least make the process of sharing knowledge easier for employees. Sharples, for instance, emphasises the value portal technology has added to KM initiatives in law firms, while Hardee highlights the contribution made by internet/intranet developments, as well as computer-aided drafting software and e-learning programs. And as Partridge says, KM technologies are becoming more affordable for smaller law firms: "Formerly KM applications had to be purchased separately from companies like Verity. These were out of reach of the small firms that make up the bulk of the legal market. At least on the full text search side these kind of applications are now often bundled free: Windows NT, for example, includes Index server." Technology does have its limitations, though, as Boardman-Weston points out: "The real gold in a law firm is in tacit knowledge. Unfortunately, at the present state of technical development, no technology exists that can manage tacit knowledge, although phones, e-mail, books and intranets can all help."

Bearing this in mind, a balanced approach to KM implementation should nevertheless allow law firms to reap the benefits. "Ultimately, KM will become the key driver for competitive advantage in the future and should result in better legal solutions for our clients, which in turn will lead to better results, market share and profits for those firms that fully embrace KM as a means of maximising the return on their intellectual capital," says Sharples. For all the confusion that still surrounds understanding of KM processes, and despite, arguably, the dilatory adoption of KM practices within the legal sector, significant advances have been made in an sector traditionally perceived as being largely hostile to change.

Many firms have a long way to go, but this is true for organisations operating across the industrial spectrum. And as Boardman-Weston says, in any professional services business, good KM is essential for survival.