KM for SMFs

Have you ever faced these problems?

You have a serious problem with a file, with no obvious solution. You’re sure someone somewhere in the firm knows the answer, but you don’t know who.

You have just finished a tricky document (a contract, a lease, a statement of case) which has taken significant time. On your way home, you bump into another fee earner who mentions that they’ve just finished the same tricky document and you secretly fear their answer may be better than yours. How will you bill your clients?

You need to review a particular case for some research, but Joe, who you usually phone when stuck, has been made redundant and you don’t know where to start.

You are Managing Partner of a High Street firm and you wonder how to differentiate your firm and compete with “Tesco Law” following the Legal Services Act 2007 (LSA).

You may think that Knowledge Management (KM) is only suitable for Magic Circle, but all Law firms are knowledge businesses and KM may be your solution.

This article aims to explain what KM is and some of the potential benefits to small and medium-sized firms (SMFs) which place KM at the heart of their businesses.

What is Knowledge? What is Knowledge Management?

You can divide “knowledge” in a number of ways in order to understand it better: some academics even divide it into “data”, “information”, “knowledge”, and “wisdom”1. Most lawyers, however, instinctively understand what is meant by knowledge, although two definitions will be used in this article: “explicit knowledge” (objective facts and figures) and “tacit knowledge” (subjective insights and experience), as this article will show how solicitors can differentiate themselves in the new competitive landscape.

The definition of “Knowledge Management” is still subject to debate2. KM definitely isn’t IT systems. It isn’t having Professional Support Lawyers. It isn’t even understanding web 2.0 and having collaborative worksites. Magic Circle firms may not have begun formally developing KM systems until 1980s, but lawyers have been “doing” KM in practical terms since lawyering began. In simple terms, KM is at the very heart of law firms and is how firms create, capture, access, apply, interpret and utilize the combined knowledge of their employees to improve their businesses.

What benefits can KM offer?

In a knowledge business such as a law firm, the benefits of successfully implemented and culturally integrated KM systems (“systems” in the broadest sense, not IT systems) are many and continuing.

KM systems can:-

Capture and document valuable existing knowledge for use by all fee earners Avoid knowledge leakage when individuals leave a firm Enable a firm to produce documents more efficiently

1 See “At a glance jargon buster” at www.theknowledgebusiness.co.uk/knowledgebank.php2 ibid

Improve profitability Aid transfer of knowledge between lawyers to ensure knowledge is available for re-sale by

others Improve communication and collaboration Improve quality, consistency and enable a firm to speak with a “house-style” Improve risk management and reduce the cost of professional negligence suits Improve training and learning Improve employee satisfaction, attract talent and reduce employee turnover Help to integrate new starters and reduce lead-in time Improve customer satisfaction and build client relationships Improve knowledge-based marketing Offer a sustainable source of competitive advantage into the future and ensure growth and

sustainability of a firm

Improving efficiency and profitability through KM

Turning to the list of situations in the introduction, how often has one of your fee earners finished a tricky piece of research or document only to discover later that a colleague had done something similar before, and possibly reached a better solution?

KM systems, such as precedent databases (externally provided or developed in-house, in a paper format or online), knowledge packs on an intranet, quick guides, document management systems, a well-organised library, even shared e-mail or document folders, workflows, checklists and case management systems, can all help to avoid this problem, preventing costly write-offs, enabling fee earners to take advantage of best practices and avoiding unhappy clients. Such systems also help to improve consistency and quality, leading to a reduction in litigation costs and professional indemnity insurance. They can also improve the productivity of support staff, enabling a firm to manage with fewer without compromising quality.

Where existing knowledge is captured and supplemented by workflows and appropriate collaboration, mentoring and supervision, work can be commoditised, improving leverage. Where bills are based purely on chargeable time, this won’t necessarily improve profitability, but it can improve volume of work, client satisfaction and profitability in fixed billing. Senior fee earners may resist commoditisation of their work, believing it to be too complex, but a surprisingly large number of tasks can be satisfactorily commoditised, and, once embedded, this improves senior fee earner morale as it frees time to develop client relationships, work on more complex legal matters or develop new products and innovations. This commoditisation can also help smaller firms to attract senior talent who appreciate being freed from more mundane tasks to concentrate on building a client following.

Smaller firms new to KM can benefit from the learning curves of larger firms and early adopters in relation to such internal knowledge sharing. Research3 suggests that codifying explicit knowledge doesn’t necessarily deliver as great a return on investment as systems which encourage collaboration and the sharing of tacit knowledge. Therefore, once basic precedents and workflows are in place, a smaller firm can get a greater return by concentrating on connecting people and

3 “The New Organisational Wealth: Managing and Measuring Knowledge-Based Assets” Sveiby

encouraging collaboration and a knowledge-sharing culture, than by spending money on costly technology.

In the internet age, a vast amount of information is freely available, so clients expect a clear “value-add” (a lawyer’s experience and insight) to justify the cost of instructing a professional. This is where law firms can differentiate themselves in the future: by the added tacit knowledge that they can apply to the explicit knowledge available to all.

Also, once the LSA takes effect and SMFs compete with “Tesco Law”, law firms may find that business clients will not pay lawyers to deliver work in apparently inefficient ways and even if price and quality are actually the same, so without KM systems to differentiate themselves, they may lose clients.

What would happen if an important client phoned your firm out of hours with an unusual problem? Would the last fee earner in the office be able to put them in touch with the right person? What if the relevant fee earner was sick? Would another fee earner have access to sufficient knowledge to begin work or manage the crisis until that expert was available? Well-designed and integrated KM systems (such as a White Pages, a well-designed knowledge database, a training and networking programme) can help others tap into expertise and generally help to ensure that work is assigned to the right fee earner, improving quality and customer satisfaction.

Do you exploit all the talents within your firm? Many fee earners may be excellent technical lawyers, but poor at seeing the commercial potential of their knowledge. Do you have systems in place to connect your technical experts with business-minded individuals? Why concentrate on developing new products and income streams, when you have existing knowledge within the firm that is not yet fully exploited?

Are your in-house training systems tailored to your staff or is it a last minute scramble for CPD? Are there plenty of opportunities for staff to collaborate and learn from each other across practice areas? It is often through collaboration opportunities that innovative thinking, the kind that offers competitive advantage, occurs4. KM systems that encourage collaboration and networking, such as team work, seminars, cross-practice meetings, on-line discussion forums and communities, can all help to encourage collaboration. Firms can supplement seminars with e-learning, webinars and on-line chats and then re-use knowledge in client-facing marketing.

Lastly, many SMFs fail to exploit the full potential of their knowledge-based marketing, such as newsletters, e-zines, client seminars and social media such as Blogs, Twitter and Facebook. If the knowledge within your firm is organised and your tacit knowledge shared openly, then its reuse as articles, blog-posts, client seminars, internal training events etc becomes far easier, meaning less effort by your fee earners and lower non-chargeable time spent on marketing.

Conclusion

When implemented correctly and embedded within a firm, successful Knowledge Management systems enable a firm to fully and efficiently exploit their existing knowledge and offer a sustainable future competitive advantage that is not easily replaced or imitated by others. Whether a firm

4 “The Knowledge Management spectrum – understating the KM landscape” Binney 2001 p37

works with its existing technology and people or invests in new software and advice will depend on its circumstances. There are plenty of steps a firm can take to improve its efficiency and profitability without investing in costly technology if it places strategic Knowledge Management at the heart of its business.

Author profile

Hélène Russell of The Knowledge Business provides consultancy services in Knowledge Management to the legal sector. After a decade as a solicitor specialising in clinical negligence litigation, she cares passionately about practical solutions to help lawyers work smarter. Her book “A lawyer’s KM Handbook” will be published next year. Hélène is also Founder of Knowledge Network West, the knowledge-sharing and networking group for KM professionals in the West.

Contact her on 07548 912 779, visit www.theknowledgebusiness.co.uk, follow her on twitter @heleneadby, or e-mail her at helenerussell@theknowledgebusiness.co.uk.

For the month of November, Helene is offering a free KM Healthcheck (usual cost £250) to the first 10 firms which apply quoting “SOL-JO-10”i.

i Terms and conditions apply and are available on The Knowledge Business’s website www.theknowledgebusiness.co.uk