Knowledge management played a pivotal role in creating ‘Big Law’, but it must now be used as an agent of change
By Matthew Whalley client knowledge manager and head of legal risk services Berwin Leighton Paisner
Faced with cost-reduction drives from clients and a migration of talent into in-house teams, the legal services model is under pressure. This is not a temporary adjustment. Supply is outstripping demand and with in-house legal teams increasing their own numbers, this looks set to continue long term. In the midst of this most tenacious of vicious cycles, law firms have begun to realise that now is the time for change.
We can all still remember the golden days for law firms. Between 1995 and 2009, the legal market in the UK grew by £15.4bn, peaking at £24.7bn in 2009. During that period, law firms could do little else but grow. Keeping pace with client demand meant increasing numbers of trainees, lateral hires and law firm mergers and acquisitions.
This growth was supported within each firm by changes in working practices that enabled practice groups to leverage legal know-how for multiple clients. Knowledge management (KM) became commonplace in all but the smallest of firms. Supported by developments in technology over the same period, KM played a pivotal part in the industrialisation of the legal market – and the creation of ‘Big Law’.
From their humble beginnings drafting standard-form agreements, the majority of KM departments are now judged by a much broader set of outputs:
- Checklists, legal know-how and standard-form agreements;
- Horizon scanning;
- Training (overseeing the technical skills training from trainee level to 4/5yr PQE);
- Advice to fee-earners (junior through to partner);
- Research and issue analysis;
- Contributions to marketing themes and content;
- KMIT projects.
These outputs are, of course, important to the day-to-day running of a firm. But at a time when fundamental change is required, KM teams should do more. Having played such a pivotal role in industrialising the legal profession, these early pioneers of legal efficiency are in the perfect position to help their firms thrive in the new market. They are packed with talent and are intimately familiar with the process, energy and drive required to deliver change-the-firm initiatives.
The key question for any change-the-firm strategy is how to manage that change without adversely affecting business in the short-term. Change rarely happens overnight, rather it is a series of small steps that themselves add up to much more than the sum of their parts. This requires long-term commitment and levels of investment that many firms will find difficult to meet.
This is where KM teams can really help. The two core objectives that firms should look for from their change programmes are listed below, with some insights into how KM teams are already set up to help:
- Support the need for internal efficiency and continued profitability: KM teams already deliver efficiency in high-end tasks. They know the people in the firm who will support change and are perfectly positioned to analyse transactions and client deliverables. They are the secret weapon in any largescale process change initiative.
- Deliver improved value to clients from the know-how their firm generates: By bridging the implementation gap between perceived and realised service value, KM teams can, through their research and client-facing bulletins, help their firm demonstrate a clear understanding of clients’ macro needs. For firms that begin to use their KM teams in this way, the outputs for KM will be different. Rather than high-end standard form-type tasks, there will be a split over the next few years between ‘run-the-firm’ and ‘change-the-firm’ tasks and projects.
For fee-earners, this will support a broader move towards legal service teams that have regular direct interaction with clients, discussing project scopes, pricing and delivery methods, supported by slimmed-down specialist practice groups which deliver the legal advice.
Early examples of change can already be seen in the market. Addleshaw Goddard’s Transaction Support Team are tasked with carrying out 10 per cent of the firm’s work by 2015. Allen & Overy’s Support Services Centre opened in Belfast in 2011. Clifford Chance has had a low-cost operation in India since 2005.
My own firm’s adjacent business programme, which generated Lawyers on Demand, Managed Legal Services and our new Legal Risk Consultancy, creates new ways to deliver legal services to take advantage of this market.
Legal process mapping
Today’s lowest quote wins client culture is putting firms under constant pressure to deliver more cheaply or face a slow and steady decline in profits. But whether you work for a City, national or magic circle firm, before you can make any efficiency savings you need to understand how your firm carries out legal work and gets under the bonnet of what your fee-earners do on different types of transaction.
Legal process mapping is the starting point for disaggregation. It separates a seemingly complicated process into its component parts, analyses the tasks completed by members of a transaction team and maps them on to paper or computer screen. Tasks are categorised by roles within the practice group – where the process is internal or by organisation – where collaborative client project work is being reviewed.
After you have mapped your process, you can identify ways to reduce the cost of particular portions of work,
or of re-modelling the working process more radically. Whichever path you choose, transaction teams (and ultimately clients) should expect to see one or more of the following deliverables:
- Clarity of current effort and cost: By getting a clear picture of how work is carried out, you will identify bottle-necks, high cost pockets and get an overall understanding of how the cost of a transaction develops. This will enable you to price jobs more accurately and pitch with greater confidence.
- Action plans that identify how workflows can be made more efficient: Where the workflow can move down the fee-earner hierarchy, you can save on costs and improve future gearing. This enables teams to quickly compete at price levels that were previously beyond them.
- Plans to streamline back-office services: By understanding their input into the profitability of common work types, this enables the business to grow more efficiently (and quickly) when the market picks up.
- Information on how to position the firm as lead adviser on big client projects:. Understanding the different interactions in a collaborative client project will help to position lawyers as the lead partners among advisers and safeguard lucrative client relationships to win more work for the firm.
To deliver on the aims set out above, KM functions themselves will need to operate under a different model (see graphic, page 28). Priorities should be set at a firmwide level and budgets for change-the-firm work should be held at the centre, with central accountability for costs and for service. This will position the KM director to work with the board to prioritise projects that have a tangible and realisable firmwide benefit.
Clients will always need legal advice, but the premium for that advice is reducing quickly. For law firms to continue to prosper, they must re-model themselves along the lines of the big accountancy firms, offer solutions that deliver measurable value to their clients and charge according to the value they bring. The changes outlined in this article support evolution along those lines, transforming the law firm from a collection of relatively self-contained practice groups to an organisation with a full-service client solution group supported by smaller specialist legal practice teams.
There is no going back to the golden days. The end result may look different to that outlined here, but we need to effect real change in the way we deliver services to clients, and we need to start doing this today.