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Law is a knowledge-based profession. Knowledge management — leveraging your organization’s collective wisdom by creating systems and processes to support and facilitate the identification, capture, dissemination and use of your organization’s knowledge to meet your business objectives — should be key to your practice and business. However, for many lawyers, knowledge management remains a narrow theoretical concept. Regardless of where you practice, knowledge management is about understanding what knowledge you use in your practice and in your business, and how you can leverage that knowledge to achieve your business objectives. WHY KNOWLEDGE MANAGEMENT IS CRITICAL • Clients place increasing pressure on firms to provide efficient, proactive, commercially focused legal services at a lower cost. Law firm 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 — and cheaper– staff. 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 and conduct research. 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 firm ensures that lawyers across different practice groups are working 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 their knowledge. Implementing knowledge management systems and processes creates the opportunity to market them to clients. • Technology creates an expectation of faster and alternative legal services. Instantaneous communication tools place pressure on lawyers to find quicker ways to deliver traditional legal services. Knowledge management systems and processes enable lawyers to work more efficiently and provide legal services quicker than ever before. Online advisory and drafting tools, developed and managed by law firms, are becoming commonplace. • Lawyers can pursue alternative career paths. It is not unusual for a lawyer to spend less than three years at a firm. Many choose not to practice at all. To attract and retain lawyers, salaries have risen dramatically in recent years. To be profitable, lawyers need to be trained in a significantly shorter time. Professional development programs are critical. Improving retention rates is another goal of firms. The traditional large law firm environment of exceedingly long hours does not hold much charm for a lawyer with options. 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. • Consolidation of firms has led to multi-office, multi-practice organizations. The size of firms has grown exponentially in recent years, with the aim of growing the firm’s profitability. The result has also been certain diseconomies of scale. A large firm may find there is little sharing of knowledge across practice groups and offices for a number of cultural reasons. Consider the cost to the firm of lost business opportunities due to lack of cross-selling and increased risk exposure when work is not referred to lawyers with more appropriate skills. • Global consolidation and the entry of multi-disciplinary practices has 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. To understand their business, law firms must manage knowledge about the firm’s market position, competitors, key clients and market trends. • Law departments must demonstrate their value to the organizations they serve. A 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 costs associated with using outside counsel. 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. HOW KNOWLEDGE MANAGEMENT is CURRENTLY APPROACHED Several components of knowledge management already exist in law firms and law departments, such as precedent libraries, work-product repositories and professional development programs. However, lawyers tend to take a narrow approach to knowledge management. The emphasis is on capturing 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 firms limit their knowledge management initiatives to technology. Having a solid technology platform is critical to the successful capture and delivery of knowledge. However, it is not enough. Knowledge may also be captured and delivered without technology. Generally, firms 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 IT 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 the 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. HOW KNOWLEDGE MANAGEMENT SHOULD BE APPROACHED Knowledge management must be closely tied to a lawyer’s business objectives. 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. Management must be in front of, and behind, knowledge management. If management sends a message that knowledge management is critical to the future growth of the firm, lawyers will pay attention. 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. The scope of knowledge management initiativesbeyond technology. There are many non-technological means of managing knowledge. Professional development programs, mentoring programs and communities of interest are some common examples. Even office design can be a knowledge management initiative — by creating a physical environment that encourages knowledge sharing. Knowledge management needs a culture to facilitate it. 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. Knowledge management needs a solid technology platform. While knowledge management is not just about technology systems, 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 in order for it to deliver results. The best way to justify investment in knowledge management is to ensure that knowledge management is directly tied to your business objectives. If knowledge management is done well, it will lead to reduced costs, increased revenue, increased profitability and the achievement of your other business objectives. Gretta Rusanow is a lawyer, management consultant and author of “Knowledge Management and the Smarter Lawyer.” As the CEO of Curve Consulting, Rusanow advises companies worldwide on their knowledge management, e-business, management and technology initiatives. She can be reached at [email protected]. • Practice Center articles inform readers on developments in substantive law, practice issues or law firm management. Contact News Editor Candice McFarland with submissions or questions at [email protected]or go to www.therecorder.com/submissions.html.

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