Feature

posted 30 Apr 2001 in Volume 4 Issue 1

Surveying the future of knowledge management

In March, Managing Partner magazine, in association with Perceptive Technology, carried out a knowledge management (KM) survey to assess how KM is being applied within the legal industry. The report analyses the key findings, and includes comments from Baker Robbins & Co., providing you with an insight into the scope and breadth of legal KM. It will provide you with a useful industry benchmark to assess the progress of your firm's KM initiative. We had a great response, and would like to thank everybody who took part.

Overview of key findings

* 60% of respondents have a KM initiative in place,

* 73% have established a recognised KM initiative in the last two years,

* 50% of law firms have invested between 1 and 99k (£) in KM,

* 62% of KM funding has been allocated to IT,

* 65% of firms have seen a return on investment,

* Only 3% cited increased profit as a benefit of KM, with 30% see the increase in efficiency as a more important benefit derived from KM,

* Only 3% of law firms give clients access to the KM system,

* 50% of law firms update the system daily,

* 47% have incentives in place to encourage partners to update the system,

* 77% consider IT to be critical to the success of KM,

* 73% indicated reasons for implementing a KM initiative were based on internal factors (as oppose to market led),

* 53% are 'working towards' building a culture conducive to KM,

* 40% of law firms do not have a KM initiative in place,

* Of these, 65%, who do not have a KM initiative, intend to develop one within the next 12 months,

* Within 12 months, 94% of law firms will have a KM initiative in place.

The respondents to the survey comprised 39% managing partners, 29% KM personnel/ librarians/ PSLs, 20% solicitors/ partners/ paralegals and 12% IT personnel.

Sample analysis

The aim of section A of the survey was to establish the size and scale of the law firms taking part in the survey, and to gauge the basic application of KM within the scope of the data (Diagram one).

The range of respondents to the survey reflects the readership of Managing Partner, indicating that the results and comments are a credible, and thus unbias, source of data. 52% of the law firms that took part categorise themselves as being 'international' law firms, although one could suggest that part of this data could have been skewed by the advent of web usage, or the origins of the law firm being other than European. 46% of law firms operate within Europe and over half have a local, regional, or UK presence.60% of law firms have implemented a KM initiative, leaving 40% that have not yet formed a workable strategy. The proportion of those that have not implemented a KM structure is relatively high, given the coverage of the subject in recent times. KM is not a new concept, especially for a profession that bases its income on the provision of value-added information.

Section B

Those law firms that have already developed a KM initiative (60%) completed this section of the survey, and the results have been split into 5 areas:

* Duration of KM project and spend,

* Usage and ROI,

* Training and access,

* Incentives,

* Integration.

Duration of KM project and spend

The majority of law firms (73%) have initiated a KM strategy within the last two years (Diagram two). 15% of law firms started to develop a KM initiative 4 to 5 years ago. However, this figure decreased dramatically for those firms implementing a KM strategy 2 to 3 years, and 3 to 4 years ago (3% and 9% respectively). This could be for a number of reasons, including the Y2K computer bug that meant many firms had to concentrate efforts on preventing system failures, or because of economic factors. Whatever the main cause for this drop in implementation of KM, it highlights that even though law firms have been aware of the concept of KM, many have been reluctant to develop a formalised initiative. This would suggest that those responsible for KM still have a long way to go before KM becomes an integral resource.

50% of firms have spent between 1 and 99k (£) on KM, which demonstrates the serious commitment being made to KM projects (Diagram Three). This indicates that as firms have made a substantial investment, it is more likely that they will continue to maintain and develop the systems in place.

It is also interesting to note that a small number of firms are investing in excess of £1m on KM initiatives. Clearly, before committing these sums of money, KM must have demonstrated significant benefits for the firm. This also shows that these firms have firmly moved out of an experimental phase.

42% allocated up to 24% of spend on IT, and a further 46% allocated between 25% and 75%. For many firms it seems that IT forms an important part of the KM strategy, but not the total solution. In fact, these results confirm Baker Robbins' experience in implementing these kind of projects, that it is relatively easy to define one's business requirements and select a product, but to ensure the implementation is a success, considerable effort has to be made in the cultural aspects of the project.

Usage and ROI

A large proportion (44%) of law firms indicated that their KM system is used often, as opposed to 38% of firms who use it all the time, and 18% who use the system sometimes (Diagram four). This is a strong indication that many firms are still only using the KM system as a source of reference and not as a valuable firm-wide resource that everyone should be contributing to at all times. However, cultural issues may have affected the results, and how/what the actual KM system is used for. Perhaps staff do not clearly understand its benefits, have not changed their way of working to incorporate KM, have not fully integrated KM with all systems, and/or have not been clearly informed of the benefits a KM system can deliver. This may also be due to the quality of the information and a lack of maintenance. In all likelihood, most KM systems are not integrated with other legacy systems and may exist as separate icons on the desktop.

When asked about ROI, 65% of law firms indicated that there had been a return on investment for their KM initiative (Diagram five). Given that ROI within law firms is always a topical area for debate, this result shows that firms are seeing some early returns. 6% indicated that there had been no return as yet. However this shows that those same firms are monitoring it and are expecting a return at some point. It would be interesting to develop this area of the survey further to discover the success criteria law firms use to determine return on investment.

The responses to the question about 'benefits of a KM initiative' revealed some interesting results (Diagram six). Surprisingly, increased profits only received 3% of the votes, while increases in productivity/efficiency and reductions in research time received 54%. This clearly illustrates that firms are not implementing KM with the specific intention of increasing profits (at least in the short-term), but are more concerned with improving internal workflow and practices.

This theory is akin to the experience of Baker Robbins. Many law firms implement KM initiatives because they recognise that know-how is being lost and that it is an asset of the firm. They do not address KM with the explicit goal of increasing profits, but of improving efficiencies and quality of their product that will, in turn, have an indirect effect on revenue and profitability.

Increasing client satisfaction was also much lower than expected, gaining only 10% of the vote. Surely if the internal workflow of the firm is improved it would be fair to say that the client should see the benefits, too? However, one could argue that the ratings for increasing client satisfaction as a benefit of KM will not improve until clients have access to internal data through web-based applications or extranets.

Training and access

When asked whether the firm provided training for the KM system, 32% said no. This is not necessarily negative, as some of the most effective KM systems do not require intense training because they have been designed to be easy to use. Even so, the concern remains that what the IT department believes is intuitive is, in fact not intuitive for users. Not providing training on any IT system is a risk factor and encourages lack of user 'buy-in'.

12% of firms indicated that their support staff (secretaries, legal trainees, assistants) do not have access to the KM system. It would be fair to say that these firms are not approaching KM in a holistic manner, and may be loosing relevant and useful knowledge as a result of not making access universal.

Only 3% of firms gave clients access to their KM systems (Diagram seven). This could be for a number of reasons. In all likelihood, it indicates the widely-held belief within law firms that KM systems contain the main information assets, the 'crown jewels' of the firm. Other factors might include insufficient structure to the KM system, security reasons, or incompatibility due to outdated technology. This figure may increase as law firms take up extranet technology, but it will be interesting to see if this trend still persists when technology makes it possible. The question law firms should be asking themselves is 'how long before access to our knowledge becomes just another client service, as opposed to an added extra?'.

60% of respondents indicated that KM personnel (28%), partners (15%) and PSLs (17%) updated the system (Diagram eight). An encouraging figure, as it implies a high integrity of information contained within the system, and also shows the management of the system is in the hands of KM specialists.

In 22% of cases, the KM initiative is updated by everyone in the firm, which is also an encouraging outcome as it implies the concept is owned throughout the firm. However, it is worrying to note that 9% of firms still rely on trainee solicitors to update the KM system. This indicates a cost-cutting approach and underestimates the value added by highly-skilled KM personnel.

Very few firms (12%) update the KM system on a 24/7 basis, but the majority (50%) update daily. For the other 38%, one would suggest that there is a risk of the maintenance of the system falling by the wayside, and a weekly, monthly, or infrequent update is not sufficient to keep the KM resource current. In fact, over 20% of firms indicated the system was updated infrequently.

Incentives

47% of law firms offer incentives for partners to update the KM system (Diagram nine). The incentives that law firms are using to encourage partners to update the system include:

* Chocolate bars,

* Appraisals (on an annual and ad hoc basis)

* Acknowledgement,

* Praise and status,

* Gifts and recognition,

* KM as part of the bonus scheme,

* Good intra-firm publicity

* Monthly contests,

* Part of everyone's performance evaluation.

Gifts, recognition and publicity are the short-term incentives mentioned, but these forms of incentive may be in danger of losing their impact and appeal as a reason for sharing information. The more effective methods of encouraging sharing are bonus, performance evaluation or appraisal schemes that may offer long-term benefits to help ingrain the concept of KM into the culture of the firm. It would send out the message that updating the KM system it is not simply viewed as an 'extra task', but an integral and valuable part of a partner's work. This is also true for the 53% of firms who offered no incentives at all. This is giving out the message that KM is only to be addressed when you have got spare time (which is not a common phenomenon among partners!). If firms want KM to be taken seriously, they have to be prepared to incorporate realistic expectations within everyone's job description.

Integration

Respondents indicated that their systems are predominantly linked to library, client files and email resources. The secondary links were to external sources such as extranets, websites or news sites. Again, this gives the impression that law firms have not fully developed the internal KM systems, and therefore are some way from integrating internal and external resources.

Section C

40% of law firms indicated that they do not have a KM initiative in place. Of these firms, 87% revealed that a KM initiative would be forthcoming (Diagram ten). 65% of these firms plan to develop KM within the next 12 months, and 30% in the next 1 to 2 years (Diagram eleven). Further analysis of the data reveals that 94% of ALL respondents to the survey will have a KM initiative in place within two years.

Critical success factor

77% of firms consider IT to be critical to the success of KM (Diagram twelve). But, technology is not the only aspect of KM that law firms are developing; culture and business benefits are also of importance. It would be fair to suggest that this proportion of firms see IT as critical, as it is currently the fastest developing area of KM.

The 7% who do not consider IT to be critical may be in the early stages of their KM strategy, operate on a smaller scale and therefore may not see the need for a large scale KM operation, or are in the process of developing a paper-based resource. The main features of a KM system that law firms are looking to implement are intranets and improved search facilities. This highlights the need for law firms to expand their KM initiatives to be more than a document management resource. Law firms are also looking to make the system compatible with other company IT systems.

The majority of law firms have a KM system in place and 53% are working towards a culture that is conducive to knowledge sharing (Diagram thirteen). This indicates that law firms are prepared to set the wheels of KM in motion without addressing the cultural issues first. The culture of a law firm is extremely important in the success/failure factor of a KM initiative, but the survey results indicate that many firms have continued to implement systems even though their culture is not completely in tune with the KM philosophy. However, 5% of respondents were prepared to admit that their culture was not conducive to knowledge sharing. It would be interesting to take the analysis one step further and ask whether these same firms are 'working towards it and winning' or 'working towards it and not making much progress'!

Setting budgets and assessing benefits

60% of firms do not have a specific budget for KM, which signifies that even though KM is seen as an important issue to address, it is still not being taken seriously with regard to allocation of funding or resource (Diagram fourteen). Many firms may agree to fund KM on an ad hoc basis, but it does not seem likely that this situation can continue in the long term. Another explanation is law firms may be absorbing the cost of KM in the IT or HR budgets. This may change over time as KM meets objectives and generates expected returns, thus justifying the allocation of a budget specific to KM.

Of the 21% who indicated that they were allocated a budget, 59% have budgets between 1 and 99k (£) (Diagram fifteen). This figure is similar to earlier findings relating to estimated spend. This suggests that firms have initially invested in KM without necessarily setting an upper limit, but the monetary spend is the same with or without a set budget.

The future of KM?

As this survey indicates, to succeed, a KM initiative requires coordination of the cultural, technological and personal elements of the practice. KM is becoming a key focal point in many firms' strategies for developing their knowledge base, increasing productivity and, ultimately, profits. KM systems still require a great deal of time and commitment to deliver demonstrable profits, however it is moving in the right direction and firms are seeing returns on investment in the form of enhanced working practices.

This survey has identified many trends within the legal KM industry and many are familiar to Mike Sharples, the managing director of Perceptive Technology, who comments: "Our experience with clients is that they are starting to see real benefits from their KM initiatives, as this survey has highlighted, with 65% of law firms seeing a return on their investment. Although only a few in this survey mentioned an increase in profits, over the coming months and years we expect this figure to grow, as a result of more firms making KM a critical part of their business strategy."

This is the first KM survey of its kind, and I hope to repeat the process in the year 2002 to find out how the implementation of KM develops; whether more than 3% of firms provide client access to knowledge systems, and to confirm that 94% of all firms have a KM initiative.

Finally, I would like to thank Andrew Terrett of Baker Robbins & Co and Asomi Ithia of Perceptive Technology for their support and guidance in the analysis of this survey.

If you would like to comment on this survey, please contact Helen Lewis-Hassan at hlewis@ark-group.com, Asomi Ithia at ani@perceptivetechnology.com or visit the web site at www.perceptivetechnology.com., or Andrew Terrett at aterrett@brco.com.