Maximising return on your knowledge management investment

In the September issue of Managing Partner, we published the results of our KM survey 2002. One of the resounding messages from contributing law firms was that KM success equates with firm-wide support for the initiative. Byron Sabol, the CEO of Sabol International takes up this theme to explore what other factors can ensure the success of your KM investment.

An issue of concern for law firm management when considering a capital investment in information technology (IT), and more specifically, an investment in knowledge management (KM), is the return on that investment. Depending on the size of the firm, an investment of money, lawyer and staff time to advance the knowledge management resources of a law firm can run into the hundreds of thousands, if not, millions of pounds or dollars. According to experts, more than half of all knowledge management initiatives fail to live up to expectations. Establishing sophisticated databases or repositories does not mean lawyers will use them. ‘Build it and they will come’ does not work for knowledge initiatives within law firms. When investing firm money – partnership money – in KM, return on investment is a very legitimate concern for managing partners.

Frequently, knowledge management is merely a support function of a law firm’s client development programme, a passive participant contributing a fraction of its potential to firm profits. When effectively embedded within the firm’s marketing programme, KM makes meaningful and measurable contributions to firm income. This article does not attempt to assess the technological issues of law firm KM systems. This article explains:

1) What effective application of knowledge management can do for a law firm;

2) How strategic client service planning ensures KM marketing success.

Two questions that firm management should consider before investing in KM are:

1) “Is my IT department providing our firm’s marketing function with the maximum support it is capable of providing?” The firm’s IT department needs to be more than a support function if the firm’s KM initiatives are to return the investment that managing partners expect;

2) “Is my marketing leader seeking the KM assistance of the IT department on a regular basis for business generation purposes?” If not, the marketing function is missing opportunities to play a direct role to increase firm revenue.

Let’s begin our journey with a brief definition of knowledge management. KM is a systematic method to identify, capture and leverage the knowledge of individual lawyers so that this knowledge becomes an organisational resource benefiting clients, firm lawyers and the law firm. Knowledge management is not a depository of firm newsletters, lawyer authored articles or related information about the firm and its practice capabilities. Nor is KM a listing of continuing legal education that firm lawyers have completed. That’s all nice to know, and may be a part of a firm’s marketing materials and website, but it is not law firm knowledge management. Knowledge management captures and stores precedented work and the tacit knowledge that lawyers create, acquire and apply in the performance of client matters and schemes.

What effective application of KM can do for a law firm

KM directly influences a law firm’s reputation To differentiate themselves in the market, law firms invest substantial energy and money to be perceived as being better, more responsive, more commercial, more service driven and more client focused than other firms. Firms that make KM a part of their culture create a market differentiator. These firms become known for anticipating client needs and interests. They build a reputation for being more creative, client focused, efficient, better skilled and for large firms, they become more efficiently connected. For a growing number of law firms, KM is their market differentiator.

KM saves the law firm time and saves the client money

Existing clients, and particularly prospective clients, are interested in knowing how efficiently the firm handles client work. With KM, a law firm has at its disposal a powerful marketing resource: the capacity to communicate and demonstrate how efficiently the firm handles client work by reducing the time required to access previous firm work, which translates into saving the client money.

KM supports team effort

With an efficient KM repository, a lawyer can quickly identify firm lawyers who have expertise with specific areas of the law and experience with certain types of companies and industries. Powerful teams of lawyers with this expertise and experience can be assembled to service existing clients or prospective clients. The capacity of a law firm to educate a prospective client on how efficiently the firm can locate relevant previous work and can assemble the lawyers who have this expertise will win new business.

A North-American based international petroleum company awarded major underground storage tank litigation work to a US law firm because of the law firm’s team approach to KM. Although the petroleum company did not initiate communications regarding the KM capabilities of the four prospective law firms, one firm took the initiative to identify the value the prospective client placed on KM. Only one of the four law firms had in place a KM system to retrieve forms, documents, and research work product. The winning law firm’s 70 litigation lawyers could access from their notebook computers precedent work and do so in a timely manner. The petroleum company realised the law firm’s ability to meet two important criteria: the capacity to quickly access previous similar litigation matters; and a means for all litigation lawyers to share information and to exchange tacit knowledge as it related to the matters at hand.

KM accelerates the rate for younger lawyers to become self-sufficient

The sooner junior lawyers become proficient in creating and maintaining a client roster, the more lawyers and the law firm benefit. The sharing of information between more experienced lawyers with younger lawyers – which KM stimulates – provides junior lawyers with the opportunity to accelerate their learning curve. This sharing of information among lawyers reduces the potential for those associates, that managing partners want to retain, from leaving the law firm prematurely.

A mid-sized law firm in the midwest of the US retained me to assist them following the defection of a quarter of their associate lawyers to a competing law firm. The reason for the defection was the lack of confidence the associates had in the partners to generate the volume and quality of work to keep the younger lawyers stimulated. The time required for a young lawyer to gain valuable knowledge that case work, notes and matter strategies can provide is substantially reduced through the firm’s KM resources. The sooner associate lawyers gain this knowledge and experience, the sooner they acquire the independence to manage client matter work, and to attract the type of work they seek.

How strategic client service planning ensures KM marketing success

Today, more clients want their lawyers to provide them with greater efficiencies as defined by the client. The DuPont Model is a classic example of a proactive approach to drive greater efficiencies within law firms. To reduce their legal expenses,

the DuPont company reduced its pool of outside law firms from approximately 300 in early 1990s to about 35 today. Certain criteria that the model seeks from its law firms, such as incorporating a rapid and aggressive evaluation of each litigation matter; use of technology to promote rapid communications and share information between law firm and client; and knowledge capture and re-use, are achieved in part through efficient law firm knowledge management.

Today’s law firms need to develop systems that reduce the time spent reinventing the wheel – or better yet, eliminating the reinvention all together. Law firms need to make the best use of the knowledge held by partners, associates, librarians, legal assistants, in-house consultants, secretaries and other administrative staff. While putting KM technology in place in the law firm is important, the key to KM new business success is knowing how to put people together to make that technology work to produce new client business. A vital ingredient in knowledge management is that the resources are shared.

Acquiring the support of obstinate lawyers who must contribute to and use KM systems represents a substantial challenge to the success of any KM initiative. The inability to overcome lawyer resistance is the most frequently noted reason for the failure of law firm knowledge management. Even for the most enlightened firm management that recognises that contributing to the collection of knowledge is as important as billing hours, does not ensure that partners will make those contributions. Implementing a successful KM system in a law firm is no different than any other initiative that requires partners to give up billable time. Time spent sharing information is not time billed. Certain lawyers, particularly partners, will find reasons not to get involved in a KM initiative if that activity does not answer an all-important question: “What’s it for me?” Senior partners have the most to gain if their firms are able to leverage intellectual assets in ways that retain lucrative clients, expand services to existing clients, and attract new clients through service efficiencies. Enter strategic client service planning (SCSP) as the KM driver.

While knowledge management initiatives are successfully launched within practice groups where lawyers share a common knowledge interest, SCSP provides a method for measuring new business generated through the firm’s KM programme. Strategic client service planning identifies the legal needs, service standards and the KM needs and interests of a specific existing client and matches the resources, including the KM resources, of the firm to client needs. SCSP brings together in a face-to-face meeting those lawyers who service an existing client. This format overcomes lawyer resistance to KM because the focal point of the session is the lawyer’s client. While the session is driven by the firm’s marketing function, the firm’s IT group must play an active role in the strategy session and follow up. The planning session produces a more thorough understanding among the lawyers of the value the client places on KM as a generator of service efficiencies. The result is a more profitable relationship for the client, for the client partner and for the law firm.

Depending upon the complexity of the client, the strategy session normally requires approximately four to six hours of lawyer time. The session agenda reviews the following key issues:

Client business strategy for the next 12-24 months;
Client satisfaction with law firm’s work product and service delivery;
How well the firm’s lawyers who service this client understand the client organisation’s key decision makers
Value of knowledge management as perceived by the client, including a determination of the following:

Have any of the other law firms who have worked for this client applied knowledge management to the service they have provided?
How have these law firms utilised KM in serving the client schemes and matters?
What benefits does the client believe it has gained from lawyers using KM to service its matters?
What KM needs does this client have that we can provide?
What KM needs does this client have that we currently cannot provide?
Strategy to provide client with law firm’s knowledge management resources that will exceed the client’s KM needs and interests

The SCSP session produces a focused, achievable plan, which measures increases in income resulting from the application of KM to a specific existing client. With strategic client service planning as a driver, a law firm has the capacity to protect the work it has, to generate additional income, and to measure the all-important return on its knowledge management investment.

Byron G. Sabol is CEO of Sabol International inc. He can be be contacted at Byron@byronsabol.com or at www.Byronsabol.com.