Knowledge management is perplexing the legal profession. Liam White reports on definitions ranging from simply making internal systems more efficient to automating every aspect of legal services. But what is clear is that all firms need to get on board in order to survive in the technology-led future
Knowledge management (KM) is the latest buzzword to hit the legal profession. Some firms are doing it, some plan to do it and others are wondering what it is. Depending on the firm, KM seems to cover anything from a computer system which learns how to do people’s jobs to simply better procedures. What is certain, according to IT services company CSC, is that everyone is trying to implement it.
CSC says 70% of IT decision-makers in global firms rate KM as their top concern. Research company IDC believes US Fortune 500 firms are losing $12bn a year through poor information management.
“It is very detrimental, this buzzword status, to
knowledge management,” says French Caldwell, a senior analyst at IT industry watchers Gartner Group. “Our
definition is it is a business process for managing corporate intellectual assets – it is not a set of tools.”
Caldwell worked in KM for one of the big accountancy firms for three years, and has been with Gartner since September in a KM-specific role.
“The whole competitive environment here in the US is now changing for law firms – it looks as if audit firms will be allowed to practice law here in about two years and there seems to be a market shift towards ending the billable hour,” he says. “You cannot buy KM in a box. And as yet, very few firms have someone responsible for intellectual assets. The greatest challenges to organisations implementing KM are still procedural. Often it is thrown over to IT people by senior management without much understanding – and without any business objectives being considered. If you do not have a lawyer as your chief knowledge officer, then it is a recipe for failure – probably within a year.”
It also appears that many people seem to consider the
majority of any knowledge management project to be about making better use of a firm’s knowledge assets, and that this does not need any technology. Certainly, areas where a firm has a genuine strategy towards preventing re-work (or three people working on the same problem at once without knowing it) or indeed where it ‘pairs’ new recruits with old hands could fall within Caldwell’s definition of KM.
But surely, if there is anything new in KM at all – apart from a bit of renewed vigour in the fight for corporate efficiency – there has to be new technology employed which increases efficiency through enabling entirely new business processes or automating existing ones. Typically, this system will be for extracting useful knowledge from unstructured data. Most such systems will monitor the content of documents placed on it by employees and habitually scan it with text-recognition software operated by a separate ‘smart’ software component. Such documents are then sent automatically to the desktops of users whose writings – or word patterns within the text – alert the system to the possibility of a duplication of effort or suggest collaboration as a good idea. Users might then fine-tune the system by rating documents which they automatically receive from ‘useless’ to ‘interesting’ or ‘valuable’. But the problem is the obvious possibility of being simply bombarded with total rubbish.
Head of strategic development at Wragge & Co, Derek Southall, is keen to avoid any such hassle. “We set up a team with a mixed skills base for e-commerce and best practice a year ago, and within it we have a knowledge manager.”
Wragges’ KM strategy is based on its document management system Fulcrum, from PC Docs, which was recently bought by Hummingbird. Southall’s main focus is on keeping it manageable. “We have clear objectives – to produce a state-of-the-art knowledge base, in which we only put the best opinions and letters. We want a small sack of high-quality charcoal, rather than a lorry-load of coal. It is about achieving a high-quality consistency of service. It is definitely about spreading best practice rather than automating any work currently done by lawyers,” he says.
Once again, this raises the question of what KM is all about. Extreme scenarios show the systems growing in
intelligence at a frightening rate, absorbing everyone’s skills by watching the business processes, becoming an automatic mirror system of the company, and providing all services over a website with the result that there is less need for people. There is also a feeling that KM is about automating as much as possible of any process, including giving advice, so that it can be delivered by a website.
According to Caldwell this is already happening, but mostly with things that are simpler to automate than legal services, such as sales. “Where people have started to automate business processes, XML (extensible markup language), which is a customisable web-page format, is definitely the keystone to those projects. However, it is currently mostly confined to customer relationship management, rather than KM applications.”
That is, the automation and provision of services over the web is generally occurring in areas other than law. Caldwell obviously has not met Paul Nelson, the man behind Blue Flag – the first web-based system to enable banks to get rapid advice automatically on cross-border trading rules. It is a well-designed automatic system painstakingly put together by experts, which takes every possibility into account. But Nelson is at pains to point out that clients are not just filling in the gaps in electronic forms.
“We are creating virtual documents, not templates. They are decomposed into automatic components which follow the process a lawyer goes through with no human intervention. Of course, the knack is being able to get the questions at the right level of granularity, and at a high enough level, that becomes nonsense,” Nelson says.
So what kind of legal services will be delivered this way in the future? “All of them. Any legal service can be automated – it is a matter of applying rules – and anything that can be commoditised will be. We are rolling out a system to deal with the whole capital market over the next two quarters.”
And this is in addition to several existing services. Nelson has very clear advice for people who want to automate things – first you have to tackle how to get the knowledge from the workforce. “First, obviously, do your market research and determine whether the planned project is worth doing – both for the firm and for its clients. Then you need practice buy-in, because you have to organise for the lawyer to be sitting down and working as they would normally, while re-configuring the process so you can assimilate that knowledge in a new environment. The shape of the knowledge changes a lot in that process.”
The key is to have a system for the reward of those people who give out their knowledge.
“Management needs to take the long-term view,” says Nelson. “As a business, the law is notorious for taking the short-term view, but our senior management had vision.”
Nelson also believes the junior lawyers are happier, because no longer are they simply expected to rack up so many billable hours – there is more focus on the quality of work. But Blue Flag raises interesting questions for KM, as the system pretty much ignores the idea of capturing knowledge except deliberately and carefully by a special project.
“Many lawyers say this is hype and there is nothing new here as we have always managed knowledge,” says Andrew Terret, a project manager in the law technology centre at Masons, and author of ‘Business Strategy for Law Firms’, which Richard ‘The Future of Law’ Susskind was nice enough to describe as “mandatory reading for the entire legal profession”. Terret’s view of knowledge management is focused on the idea that currently, while documents and expertise lie around on one side of a firm, someone in another department screams desperately for the help they could provide. Meanwhile, if various unloved documents were put together in front of someone, it might present a way of improving a whole business process.
“This tacit information presents the most interesting and difficult problems, and this is where most law firms fail. Mostly, I think, because there is no incentive for employees to share knowledge, colleagues just do not hand around tips as much as they could to improve a firm’s efficiency.”
Terret says it is not until people have a problem they cannot solve that they actually get up and start picking brains. “These tacit knowledge issues are not really owned by anyone in any business at the moment. There needs to be some kind of internal market for this information, and business managers need to be able to provide some kind of consideration for improvements. You need to change
culture to release tacit knowledge.”
But what about automating processes? “I think KM is partly about automating the simple bits of what lawyers do. Why re-invent the wheel? Clients want to pay for the value-added bits of the service.” If parts of the process can be commoditised, it will. “Every law firm has to respond to Blue Flag – at first it was considered a novelty, but now every major law firm is saying, ‘We have to have something like that’. I do not believe each area of law can be commoditised – only areas relating to compliance are suitable.”
Terret expects greater variety in how legal services will be paid for. Some form of value billing will appear, maybe some subscription-based services over the web, and almost certainly experimentation with other pricing models too. Putting a price on knowledge is likely to cause problems both within the firm, and between the firm and its clients.
But most agree that automating all legal processes is going to be beyond technology for some time.
There is also little thinking going on in most firms as to how to reward staff for contributing to any such system. Incorrectly handled, staff will feel threatened by KM. But KM and associated technologies are certainly likely to shake up a lot of the law business, and automate some of the more routine legal matters.
