The last decade has witnessed some of the most intense changes in the legal community in generations. Mergers and acquisitions have transformed the legal landscape. The rise of the multidisciplinary practice has ushered in new opportunities from within and new competition from the outside. Clients have become more sophisticated, less loyal and demand greater value from their law firm in exchange for their business. Fee-earners have become more mobile, defying the generations-old lock-step system, defecting in increasing numbers to competing firms when opportunity knocks.
The nostalgic legal practice of old is gone, but sometimes, change is good. What we see emerging are sophisticated organisations that are well-schooled in the discipline of commerce and the science of technology. The modern law firm has learned that good business makes good sense.
A basic business principle states that in order to maximise returns from a capital asset, that asset must be invested in, maintained and leveraged. Manufacturing companies, for instance, constantly assess when to modernise and invest in new plants and equipment. If substantial increases in yields which exceed the costs of the investment can be expected, then that investment is worthwhile. But what exactly are the capital assets that law firms possess when the bread and butter of their trade is knowledge? What investment can be made in knowledge assets to maximise return?
The knowledge that drives a law firm's business basically falls into two categories: what you know and who you know.
What you know: expertise
Law firms and lawyers have always invested heavily in assets pertaining to what they know – their expertise. This investment starts with the fee-earner's legal education and continues throughout his or her lifetime. Legal research also falls within this category, with firms investing substantially in libraries and other information resources. Investment in expertise has always been so fundamental to the survival of any law practice that it has not radically changed, despite the transformations we have seen elsewhere in the industry.
The options for investment in expertise have broadened, especially with the explosive growth of legal technology. Online research tools, document management and practice management systems all represent modern investment vehicles that empower firms to increase their returns on their expertise assets.
Who you know: relationships
The modern law firm's most significant opportunity for new investment is in the knowledge category of who you know, or more simply, relationships. Relationships form the core of any legal practice, serving as the glue that binds the client to the firm.
New business development materialises through relationships. Through close contacts, lawyers learn which companies are in the market for new counsel, or which clients are embarking upon new business ventures that will require additional legal services.
Law firms have always understood the importance of relationships on their future viability. Lawyers join business, social and cultural organisations as a means to make contacts and form relationships with potential clients.
Yet transforming the age-old art of relationship management into a repeatable science has been difficult for many firms. Most fee-earners are confident in their role as adviser, but are less comfortable in the business development or sales role. So rare and revered are the 'rainmakers' at most law firms that they are given unique status. They possess that special quality enabling them to cultivate new client relationships and bring in business with seeming ease and aplomb.
Relationship intelligence: cultivating relationship assets for business advantage
With increasing intensity, law firms have been seeking ways to transform their internal knowledge about people, companies and relationships into an asset that can be exploited on a firmwide basis and not just by the talented few rainmakers. The expectation is that this relationship intelligence could be aggregated and managed in a similar way to expertise knowledge and used to reveal the unique and complex connections between firm contacts and relationships, empowering fee-earners to leverage who and what they know to increase revenues.
Historically, firms have faced two significant challenges in utilising relationship intelligence as a corporate asset: institutional and technological.
The greatest historical barriers preventing firms from capitalising on their relationship intelligence were institutional. Firm management focused more on the delivery of legal services than on business development, the thought process being to provide outstanding advice and the clients will follow.
Contacts and relationship information were not viewed as firm assets and were not widely shared among firm members. Fee-earner compensation did not favour collaboration, but instead supported competition among lawyers. And there were no internal processes that supported the accumulation of relationship intelligence information in any significant way. As a result, a culture promoting the maximisation of relationship intelligence as an asset was not possible.
But the institutional challenges impeding the proliferation of relationship intelligence have largely dissipated. The understanding that law firms must function like the businesses that they really are permeates the legal community. Firm principles are providing the vision and leadership that is necessary to create truly client-centric cultures intent upon maximising the client experience. And firmwide processes are being increasingly put into place to support a client-facing strategy.
Coupled with institutional challenges, technological barriers also prevented the proliferation of relationship intelligence. In bygone days, centralised systems for creating, aggregating, managing and delivering relationship intelligence to fee-earners did not exist. So even if firm culture and leadership did promote the utilisation of this information as a firmwide asset, there was no appropriate infrastructure in place to allow firms to discover, manage and deliver this information on an organisation-wide basis.
But this impediment no longer exists. Client relationship management software capable of delivering relationship intelligence is now in use at some of the most influential firms in the UK. This technology empowers firms to aggregate information about who and what they know, and manage it as a centralised resource. This information comes from many sources, such as contact managers, personal information managers and practice management systems. Important relationships are derived from this scattered data, managed by the system to eliminate duplicate data and ensure proper security, then delivered to the fee-earner.
History and technology have coalesced to provide law firms with an unprecedented opportunity. Relationship intelligence can serve as a firm's most powerful asset for uncovering new business opportunities, cross-marketing services to existing clients, differentiating from the competition and enhancing client service. Law firm leaders now recognise the strategic value of relationship intelligence and are spearheading cultural and institutional transformations to support their ability to leverage this asset. Moreover, the technology has sufficiently evolved and relationship intelligence solutions can now provide the necessary infrastructure firms require for their client-facing initiatives. As competition intensifies firms can no longer afford to underutilise this valuable resource.
John Lipsey is director of communications at Interface Software