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Knowledge management � the leveraging of a firm’s collective wisdom by creating systems and processes to support and facilitate the identification, capture, dissemination and use of the firm’s knowledge to meet its business objectives � should be key to the practice of law. However, for many lawyers, knowledge management remains a narrow theoretical concept. Law is a knowledge-based profession. Regardless of where attorneys practice, knowledge management is about understanding what knowledge they use in their practice and in their business � and how they can leverage that knowledge to achieve their business objectives. The legal industry has faced significant pressures in recent years, making knowledge management a business imperative. Because clients expect lower costs and a faster turnaround time, firms must find more efficient ways to work, leveraging the knowledge of their experts by delegating work to more junior (cheaper) staff. Firms can use knowledge management to work more efficiently. Precedent documents, repositories of prior work product and project methodologies are examples of knowledge management initiatives that reduce the time it takes to draft documents, conduct research and run a matter. Clients often talk about the “proactive lawyer.” Corporations are looking for their outside counsel to practice preventive law � identifying legal issues before they become high risk, and navigating the corporation through these issues. Through creating a culture of knowledge sharing, a key component of knowledge management, a firm ensures that lawyers across different practice groups work together to identify client needs. Clients also want access to their law firms’ knowledge. Increasingly, law departments look to outside counsel to provide access to knowledge. Implementing knowledge management systems and processes in a firm creates the opportunity to market these systems and processes to clients. The Internet has also opened a whole new market for lawyers to sell their services. Lawyers must examine how they will use technology to deliver services to their clients. Online advisory and drafting tools, developed and managed by law firms, are becoming commonplace. Knowledge management systems and processes provide the foundation of these online services. In this age of the Internet and other electronic information services, lawyers face a multitude of information sources, and an exponential increase in the amount of information they must digest. Instantaneous communication tools place pressure on lawyers to find quicker ways to deliver traditional legal services. Knowledge management is all about providing lawyers with the knowledge they need when they need it. Improving retention rates is another goal of firms. It is not unusual for a lawyer to spend less than three years in a firm, and many choose not to practice at all. To attract and retain lawyers, salaries have risen dramatically in recent years. And to be profitable, lawyers need to be trained in a significantly shorter time. Professional-development programs are therefore critical. The traditional large law firm environment of exceedingly long hours does not hold much charm for a lawyer with options. Creating an environment where lawyers are intellectually stimulated and challenged is very important. Enabling lawyers to do their work and go home at a reasonable hour is also important. Knowledge management involves identifying low value-added work and developing systems and processes to minimize the time spent on those elements. This results in lawyers having more time to spend on intellectually stimulating and challenging work. They may also be able to work fewer hours and lead a more balanced life. In addition, the size of law firms has grown exponentially in recent years, with the aim of increasing the firm’s profitability. The result has also been certain diseconomies of scale. For a number of cultural reasons, a large firm may find that there is little sharing of knowledge across practice groups and offices. Thus the firm is not leveraging its multipractice, multioffice infrastructure. Consider the cost to the firm of lost business opportunities due to a lack of cross-selling and increased risk exposure when work is not referred to lawyers with more appropriate skills. Knowledge management focuses on the leveraging of the knowledge of staff across the entire firm and the gain in benefit of a growing infrastructure. Increased Competition As firms grow beyond their traditional local market, they have created new markets for themselves. Conversely, they face increased competition from others. This places enormous pressure on the firm to differentiate itself in multiple markets and from multiple competitors. Firms need to have a thorough understanding of their business and take a strategic approach to their future growth. To understand its business, a firm must manage knowledge about its market position, competitors, key clients and market trends. With this knowledge, a firm can develop a business strategy to build upon its market strengths, address its market weaknesses and differentiate itself from its competitors. An in-house law department cannot demonstrate its value in terms of increasing revenue and profitability; it must demonstrate its value by controlling its organization’s legal costs. This means managing its organization’s legal risk exposure, so that litigation and settlement costs are minimized. It also means controlling the costs associated with operating an internal law department. This includes managing the number of staff, finding the right mix of inside and outside counsel, and managing the costs that use of outside counsel involves. A law department must use its knowledge about legal matters affecting its organization to manage the organization’s legal risk exposure. It must use knowledge about its staff, workload and outside counsel to manage the operation of the law department. It can work more efficiently through the use of precedents and best-practice documents. This combination of pressures forces law firms and law departments to rethink their traditional business models. Because law firms and law departments are knowledge-based organizations, knowledge management is critical to their continuing success. This is not about a management fad. This is about how well firms and departments run their businesses and how well they use their knowledge to address these ever-increasing pressures. Current Approaches Several components of knowledge management already exist in law firms and law departments, such as precedent libraries, work product repositories and professional development programs. But lawyers tend to take a narrow approach to knowledge management. The emphasis is on the capture of explicit legal knowledge. There is little acknowledgement of the importance of managing knowledge about clients and their industries, the skills and expertise of staff or knowledge about third parties. There is also little attention paid to identifying and sharing tacit knowledge. Most law firms and law departments limit their knowledge management initiatives to technology. Having a solid technology platform is critical to the successful capture and delivery of knowledge. However, knowledge may also be captured and delivered without technology. Generally, law firms and law departments have not adequately addressed who will build and maintain knowledge management systems and processes. Knowledge management initiatives are often the domain of the library or information technology department and, consequently, initiatives tend to be narrow in scope. It may be appropriate for the library or IT department to be responsible for specific components of knowledge management, but neither can be responsible for developing content or for ensuring that lawyers and staff contribute to knowledge management initiatives. Lawyers have not yet addressed the many cultural barriers to knowledge management, such as the time-based billing model and the partner-compensation model. In a firm where compensation is based almost solely on revenue generated, and where revenue is generated based on number of hours billed, lawyers hear a strong message that time invested in knowledge management initiatives is not valued. At a firm where lawyers are not rewarded financially for referring work to colleagues, there is no incentive to promote knowledge sharing across practice groups. In some firms, the “knowledge is power” culture means that lawyers believe their career prospects largely depend on their ability to amass a unique base of knowledge. Sharing that knowledge with others would dilute the value of that knowledge. There also has been little exploration of how a firm’s knowledge management systems and processes can be leveraged with clients. Suggested Approaches Since law is a knowledge-based profession, there is a direct relationship between a firm or department’s approach to knowledge management and its ability to achieve its business objectives. Lawyers should therefore be clear on their business objectives before investing in knowledge management. Before any knowledge management initiative, firm managers should ask: How will this initiative help us achieve our business objectives? Do the benefits justify the investment? Measuring the value of knowledge management is key. If a firm has defined demonstrable benefits at the outset, it can measure the outcome of the initiative. Every knowledge management initiative should be judged on how well it meets a knowledge management objective and a business objective. Management support for, and involvement in, knowledge management is key to its success. If management sends a message that knowledge management is critical to the future growth of the firm or department, lawyers will start to pay attention to it. If management addresses the cultural barriers to knowledge management, such as rewarding lawyers for contributing to knowledge management initiatives, lawyers will begin to adopt knowledge management into their daily work practices. Taking a broad view of the knowledge a lawyer uses to run a practice and a business is the first step to ensuring that knowledge management supports the business, as well as the practice. Lawyers must manage their core legal knowledge sources � such as case law, legislation, commentary and interpretation, best-practice (or model) documents and precedents (or form) documents � to operate their practice. They also use other categories to operate their businesses, such as: knowledge about their clients; their clients’ businesses and industries; their firm’s staff skills and expertise; and their firm’s, or department’s, market position and financial position. Beyond Technology There are many nontechnology means of managing knowledge. Professional development programs, mentoring programs and communities of interest are some common examples of knowledge management initiatives that do not involve technology. Even office design can be a knowledge management initiative � by creating a physical environment that encourages knowledge sharing. Identifying, capturing and disseminating knowledge is labor-intensive. A law firm or law department needs central leadership to direct and implement its knowledge management strategy. It also requires knowledge management staff at the practice group level to address the differing needs across practice groups. Existing functions, such as the library, intranet and precedents group, should become part of a wider knowledge management organization. Since knowledge management touches on all areas of a law firm and a law department, careful attention must be paid to the positioning of the knowledge management organization so that it can implement knowledge management across all practice groups and administrative functions. Law firms and law departments need to address cultural barriers by building knowledge management into their business processes, such as the compensation system, career progression model and budgeting system. While knowledge management is not just about technology systems, it needs a solid technology platform, because technology does play an important role in the capture and dissemination of knowledge. Law firms and law departments must have core technology tools, and use them well, to support knowledge management. Knowledge management, like any other initiative, requires significant investment, so it must deliver results. The best way to justify investment in knowledge management is to ensure that knowledge management is directly tied to business objectives. If knowledge management is done well, it will lead to reduced costs, increased revenue, increased profitability and the achievement of other business objectives. Rusanow, head of Curve Consulting based in New York and Sydney, Australia, is author of Knowledge Management and the Smarter Lawyer (ALM Publishing).

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