Institutional memory — a diversity problem?

The BBC has discovered that knowledge management is important, at least in the form of improving institutional memory. In a report for Radio 4’s Analysis programme, Phil Tinline writes:

Each time someone leaves their job, a chunk of the organisation’s memory leaves too. How, then, do you run complex systems, see through long-term projects, or avoid past mistakes?

Short-term contracts and outsourcing reduce the appetite for learning company or product history. And when job losses land, even more knowledge is lost.

In 2012, one institution found that, as City firms poached its bright young employees, its staff turnover was hitting 28% – faster, apparently, than McDonalds.

And for Her Majesty’s Treasury, after its experiences during the financial crisis, this was rather scary.

The report describes a number of initiatives in commerce, industry and the public sector, but I was particularly struck by the inclusion of the UK civil service as an institution suffering particularly badly from organisational amnesia. How is it that one of the world’s pre-eminent administrative cadres, studied by academics of all types, with record-keeping and archival traditions dating back hundreds of years, can forget experiences and decisions made just a few years ago?

SIgning the way

Tinline suggests that staff turnover is an important component of the problem and I suspect that, as with many other organisations, the faster pace of work probably also plays a part. But what struck me was a reference to ‘folk memory’ by the outgoing Treasury Permanent Secretary. Without trying to read too much into the Permanent Secretary’s words, I think there may be a slight, but significant, difference between ‘folk memory’ and ‘institutional memory’.

When I learnt, and then taught, constitutional law, the civil service was still regarded as a very traditional force within British government. The research of Peter Hennessy and the comedy of Yes Minister suggested that centuries of experience were distilled into power exercised gently but forcefully to sustain a variety of constitutional norms. Almost invariably, senior civil servants were men, Oxbridge-educated, and with good networks across government through which traditions could be maintained. Those traditions contribute to a particular kind of folk memory that allows people to communicate and work more efficiently, since they can rely on a shared understanding.

Even when I was a student, this traditional approach was changing. The civil service recognised the need to improve the breadth of its recruits — drawing people in from roles in the private sector, and working to improve the diversity of recruitment — more women, and more non-Oxbridge graduates. At the same time, the civil service also found itself competing with political appointees — special advisers — for the ear of ministers. Yes Minister gave way to The Thick of It. There is no easy way for folk memory to be transmitted in a more fragmented system like this. What is needed is a concerted effort to develop and sustain shared understanding — the more formal institutional memory.

In a sense, folk memory can be sustained by lazy adherence to outdated standards of recruitment and advancement that lead to a lack of diversity. As organisations (not just the civil service) become more diverse, the benefits that come from diversity are matched by a new burden of finding new ways of ensuring that there is a proper understanding of the organisation’s history. This might be a personal obligation, as shown in the obituary of the late Chris Martin, the prime minister’s principal private secretary.

Martin, who has died of cancer aged 42, had always thought deeply about the place of the civil service in the constitution. He wrote his university dissertation on its role, and was a compulsive reader of biographies and political works that helped him understand its history and its place in the British story. The network of relationships he built up through successive jobs at the top of Whitehall was not just tactical; he used it wherever he could to enlist support for the civil service as an essential institution.

In Downing Street he set up a History Board with Anthony Seldon and Peter Hennessy to record and preserve No 10’s own story.

But organisations cannot rely on there being people like Chris Martin to take responsibility for learning like this. The range of examples provided in the BBC report show clearly that organisational amnesia is a widespread and pernicious problem. Overcoming it should be a priority. Doing so demands careful consideration of the problem, how best to address it, and proper resourcing of the prescribed remedy. What organisations should not do is avoid good current actions (such as improving diversity), simply because they may lead to future forgetfulness. That approach stands in the way of inevitable progress and is lazy.

Lawyers moving into business services: good or bad?

Practising lawyers sometimes find themselves moving into operational roles in other areas of their firms. This tends to occur most in areas of business services (especially knowledge management, but also business development, risk, HR and learning, or procurement) where legal skills are relevant or where no particular expertise is needed. (IT, finance and facilities tend not to attract lawyers, except in management roles.) This flow raises two separate questions for me: are lawyers right for these roles; and should the firm be looking externally, rather than moving people within its walls?

Dalí's easel, Castell de PúbolThe Lawyer’s website today features the story of Linda Zell: a litigation lawyer at Olswang who became the firm’s head of corporate responsibility (CR). Her progress into that role is a really good example of how moves like this come about. Her introduction to CR came from a need to add a paragraph to a client pitch document, and then grew over time to a real interest, then a drive to see it promoted properly within the firm. After a time juggling CR and lawyering, she is now responsible full-time for leading Olswang’s CR strategy. One of the firm’s partners is quoted, “we asked her to write a paragraph on CR and she set up a whole department instead.”

This kind of transition is not unusual — in fact, I did something similar when I moved into a lead knowledge role. Firms need to be aware that good and bad things can flow from such a move.

The upsides

On the positive side, when a firm’s lawyer moves into a new business services role, the firm gets the benefit of someone who knows how the firm and its lawyers work. They therefore have an edge over outsiders who might take a while to get under the skin of the business. This may be particularly valuable in roles like KM or CR, where a significant part of the job involves careful influencing and persuading, so that understanding people is at a premium.

Another benefit is that the lawyer who moves into such new roles is likely (as I think may be the case with Ms Zell) to be especially driven to succeed. When a firm is taking a new direction, this zeal can be very useful.

Most firms consider it important to support their people develop their careers. This might easily be done within existing career tracks. Lawyers may move smoothly from trainee to partner, whilst business services professionals might advance from entry-level roles through management to leading a function. It is much harder, and therefore more laudable, for a firm to show its commitment to career development when someone makes an unusual move such as from lawyering into business services.

The drawbacks

The areas where lawyers tend not to take roles, such as Finance and IT, often depend heavily on technical expertise that lawyers do not have. This is becoming true of some other areas (such as HR and marketing), which have previously been destinations for lawyers moving out of practice. In newer areas, such as CR and KM, firms still have a choice to appoint people with experience and expertise in the field in preference to their own lawyers.

Appointing an expert from outside might allow the firm to be more confident that they were getting the benefit of the most up to date thinking in the area, which could mean that the function could mature much more quickly than if it were led by an internal lawyer. In some situations, the firm’s partners may be more respectful of acknowledged expertise as opposed to a more familiar, but untested, internal appointment.

External appointees might also their own networks of people in similar roles who could swell the ranks of the team quickly if that is what the firm needs. It may take some time for ex-lawyers to be able to develop their new teams around themselves.

Getting the good without the bad

Fortunately, there are ways to get the benefits of internal appointments without the downsides. (Or at least minimising any negative impact.)

One critical step would be to get external validation of the firm’s choice to create the new role in the first place. It may be too easy to give in to the pressure of a lawyer to create a new business services function for them to lead. Most disciplines have a community of consultants who can advise on the adviseability of embarking on this new activity. They might also help to define the purpose of the function, and help the firm to develop a role profile for the ideal leader. If the internal candidate matches this role profile, then the firm would know it was on the right track.

The new appointee might also benefit from external support, and good firms should budget to pay for this. No matter how enthusiastic someone is, starting up a new support function is a hard task. Almost inevitably, in this scenario, the new appointee is the person in the firm who knows most about the job. Without an internal mentor or coach, they may not get the right kind of constructive support and flounder quickly. If they are able to draw on expertise from outside, the firm will get some of the benefits of making an external appointment.

On the whole, then, I think firms should continue to help their lawyers move into different areas of the firm, but they need to be aware of the possible risks and manage them sensibly.

(In case it needs saying, I have provided support of the kind described for knowledge roles. Please get in touch if you are new to a knowledge role, or if your firm is thinking of creating or extending its knowledge function.)

Pulling the right financial levers

One of the links I provided in my last post was to a Financial Times report from six months ago, “Professional services at heart of UK productivity problem”, which suggests that depressed productivity is a particular problem for services sectors:

Lawyers, accountants and management consultants lie at the heart of the UK’s productivity problem, explaining almost a quarter of a shortfall since 2008.

Financial Times research shows that the stagnation of productivity since the crisis is largely explained by just four sectors — professional services, telecommunications and computing, banking and finance and manufacturing.

Why might this be? The article’s authors suggest a couple of reasons:

Productivity in professional services has stalled for many reasons including corporate reluctance to fire staff even as business dried up in the recession and subsequent new hires taking time to become more productive.

And they also quote a view from the legal sector:

Stephen Denyer, head of City and International at the Law Society, said staff in law firms were spending more time than before on activities that were not “billable hours”, such as business development and compliance.

“You have to work harder to win each mandate, and a lot of time on compliance, the requirements not only of our regulator but also in relation to money laundering, sanctions, particularly for people doing international work.”

These are probably good explanations, but a much more thorough analysis was provided by Steven Toft for the UK Commission for Employment and Skills. In his piece, Toft concluded that poor productivity at the national level stemmed from poor performance in the workplace.

Much of the fall in productivity is due to what the ONS calls Multi Factor Productivity (MFP) or Total Factor Productivity (TFP):

Output growth which cannot be explained by increasing volume of inputs and is assumed to reflect increases in the efficiency of use of these inputs.

In other words, how resources like capital and labour are managed. As the Growth Through People report comments:

One big part of TFP is the ‘black box’ of the workplace, and how employers turn skilled workers and tools into products and services which customers value. We may have a more qualified and – if qualifications are of good quality – a more skilled workforce, but are those skills being used effectively? It seems that as world markets have become more difficult in the past decade, many of our work-places have struggled to adapt.

The inability to turn a highly skilled population into high productivity is a symptom of failure in the workplace.

By comparison with some enterprises, law firms derive much more value from their people. Without doing the comparative revenue per lawyer analysis that I described in my last post, it is impossible to be sure that law firm productivity is not stagnant. My suspicion is that even if the sector as a whole looks more productive, few firms stand out as particularly good performers. (Sadly, I don’t have access to the relevant data and I can’t afford to buy it at the moment.)

Twisted rootsMy conclusion comes in part from thinking about a very simple model of law firm operations. (Please excuse the very basic nature of the next few paragraphs. I find it helpful to go back to first principles.)

(In the background to this analysis is a continuing downward pressure on fees. One reason for productivity apparently being depressed is that, although output (if measured in terms of chargeable hours worked) may be constant, clients are no longer willing to pay the headline hourly rate for that work. The need to extract maximum value from each hour worked only reinforces the importance of increasing productivity or yield.)

At its most basic, a firm can be understood as a facility for producing legal advice, information or execution capability. It contains people who do those things in return for fees. There are a number of ways in which their output can be increased.

  • If there is still capacity for additional work, any new instructions (and the fees that come with them) go straight to the bottom line — all additional income increases profit and the profit margin.
  • If there is no additional capacity, new work will require additional people to do it. In this situation, additional work will not increase the profit margin, but it should increase the size of the firm’s profit.
  • In order to extract additional value when capacity appears to have been reached, a firm may insist on more intense production. If, for example, the current target for chargeable hours is 1400, the firm might push for a higher target of 1600 or more hours. (Information about the current range of hours targets in the UK has been collated by the Legal Cheek website.) A change such as this is unlikely to be possible in a short time period, and will almost inevitably come with a cost as salaries rise alongside the additional work requirement.
  • Firms can make changes to the fee-earning machinery. They can shift work from qualified lawyers to paralegals. They can move staff from high-cost centres like London to cheaper areas of the country. They can change their resourcing model to use more contract staff rather than permanent employees. If the value of the work produced does not change, any and all of these changes will shift the revenue per fee-earner equation in a positive direction for the firm. It will look more productive.
    But each of these shifts (what Bruce MacEwen calls ‘labor market arbitrage’) is a one-off gain. Once work has been moved to paralegals and contract staff in a low-cost city, that tactic cannot be tried again. In effect it is a re-basing of the productivity curve, giving no recurring advantage to the firm. It is also a tactic that is easy to adopt, so it gives no firm a lasting advantage.
  • Looking to more long-term changes, a firm might turn its back on low-value work and build a capability to do higher-margin work. This is not an easy strategy, unless few other firms identify the same opportunity.
  • Real increases in productivity or yield will only come if firms find ways to generate more income from the same amount of fee-earner work.
  • Alternatively, continuing improvements to productivity and yield come from products or services that can generate income without incurring costs at the same time. At present, however they resource the work that they do, most firms incur salary costs at a similar rate to the income they generate (unless they run below capacity). Firms with products or services that ‘make money while we sleep’ (as a managing partner once described them to me) will produce income that goes straight to the bottom line once the investment costs of creating those products or services have been met.

Looking at these options, there are clearly limits to the power of firms’ business development (sales and marketing) or HR functions to improve the long-term financial health of the firm. They can affect work levels and resourcing (the first four bullet points), but they are unlikely to play a central role in shifting the firm’s focus (the last three bullet points).

To go back to my agricultural metaphor, the combination of successful sales/HR work is like a farmer buying a new field. The farm will generate more income with that field, and more profit, but overall profitability or yield is not changed. Real improvements in yield come from using the land more intelligently by developing better farming techniques or leveraging new technology to extract more value.

Similarly in law firms: changing the way work is done, the kind of work that is done, or the products and services the firm provides, is a job for those who understand the work best — together with those who can see into the future. In a law firm, those people should be in the leadership function together with knowledge leaders and (because that is the direction of travel for the foreseeable future) technology leaders.

Firms that really want to make lasting changes to their productivity beyond one-off improvements to process or labour market arbitrage and without overworking their staff, need to use their knowledge and technology teams better. If they continue to rely solely on BD and HR, their gains are more likely to be short-lived.

When firms turn to their technology and knowledge teams, they need to be sure that those teams are capable of providing the help needed. That will be the subject of the next post.

Measuring success

I have written before on the difficulty of measuring the return on investment in knowledge activities. Prompted by a couple of recent conversations, I have been pondering the issue a little more. What follows is a rumination on how successful knowledge activities might be identified within a law firm, especially over a period of time.

It's a prickly questionIn the past, some knowledge folk might have responded to a question about the value of the work they do by pointing to volumes of documents in a know-how database. All this demonstrates is the amount of work done — it doesn’t help people understand how the firm benefits. Nick Milton helpfully summarised some ways in which business might benefit in a blog post earlier this year (together with survey results showing which measures were most commonly used).

In addition to the kind of successes that Nick points to, I have also been fond of using qualitative assessment of knowledge activities. Often it is easier to ask people (whether inside or outside the business) about their experience of KM work. Their responses serve a double purpose — as well as indicating how successful past activities might have been, they can also suggest fruitful directions for the future.

However, I have become more doubtful about the merit of highlighting one-off successes or of depending on how people feel about a service that is designed to make them feel good. These may give an impression of how well certain parts of the knowledge function perform, but they don’t help with a wider picture.

After reflection, I think the answer can be found in an analogy I have used before. Back in June 2014, I likened knowledge management to farming.

In order to improve the yield of the organisation (by whatever measure is appropriate), managers need to enhance people’s natural capabilities (fertilising for growth), while reducing the impact of adverse conditions (sheltering crops from bad weather). That isn’t possible without a deep understanding of the environment within which the organisation works, the natural capabilities of the people within the organisation, and the value of whatever the organisation produces.

The key to measuring the value of our knowledge activities is yield. If the set of things that we do to improve productivity are successful (allowing for the fact that some may be more successful than others), the firm’s yield will improve.

The next question is how yield might be measured in a law firm. The answer here, I think, depends on whether you want to consider the firm in isolation or compare it with the market as a whole. Financial data that is available within the firm may not match what is made available for publication.

Generally speaking, productivity is an expression of the ratio of outputs to inputs. At the national level, the UK Office for National Statistics derives labour productivity estimates by dividing measures of output by some measure of labour input. In professional services, productivity is measured by the turnover of companies adjusted for average wage rises in the sector.

Within a firm, inputs and outputs can be measured precisely. Firms know how many people they employ, how much they are paid, and how long they work. They also know which of these people contribute directly to the firm’s turnover. Productivity could therefore be measured as a ratio of turnover per person (full-time equivalent or otherwise) or per hour worked. Such a measure would not be useful for comparison over time, since inflation might increase fees without a real increase in yield. Using the ratio of income to salaries would smooth out such variations, since inflation in fees is likely to run at a similar rate to pay inflation.

Over time, then, a firm can see how productivity changes from year to year. As law firm knowledge management efforts tend to focus on the income-generating side of the business, examining the productivity of fee-earners in isolation over a significant period might help to show whether those efforts have had a real impact.

If comparison beyond the firm is needed (does our productivity match changes in the market?), then firms need to find publicly-available datasets. The most easily-accessible data is collected annually by The Lawyer (in the UK) and The American Lawyer (in the US). Both the Lawyer UK 200 and the AmLaw 100 calculate revenue per lawyer (RPL), which can be used as a proxy for more precise measurement of productivity. Because this measure does not take account of inflation, comparison between firms is only possible in a single year. On its own, that comparison is almost worthless. Factors such as the firm’s employment profile (does it depend on low-cost associates or is it partner-heavy in high-cost locations?), its client types, or work profile, little real insight is possible. At best, firms might pick comparators they know to be broadly similar.

There is a useful way to use published figures for revenue per lawyer. That is to compare the trend in a firm’s performance with a larger set. For example, the median RPL figure for the top 100 firms can be plotted against time. That line is likely to ascend, with occasional dips when the wider market was under stress. (I would use the median in preference to the mean, in order to reduce the impact of particularly high- or low-performing firms in any given year.) When the RPL for a single firm is plotted alongside the whole set, one can see whether the profile of the line matches that for the whole set (performance in line with the market) or whether it rises more steeply (outperforming the market) or more shallowly (underperforming against the market).

This graphical information, when combined with what is known inside the firm about any special factors, allows the firm to understand better how well it is doing in the market and what might be causing any difference in performance. The special factors could include investment in knowledge activities, as well as significant client wins or losses, so some caution is still needed.

I suspect very few firms do this kind of meaningful analysis. In a later post, I want to explore the implications for law firm support teams of not having this kind of insight.

Knowledge-sharing cars

I am ambivalent about the current efforts being expended by Google and others on autonomous vehicles. As a society we appear to have backed ourselves into a corner where the only way out is to shift a ton of metal alongside driver and passengers. Self-driving cars don’t do much to change this, and hand-wringing articles about how the trolley problem might be resolved by autonomous vehicles are a distraction.

Nonetheless, it appears that the efforts of Google and others will produce self-driving vehicles for the mass market, so it is interesting to look at the work they are doing. Google has been particularly forthcoming about their research, as shown in this TED talk by Chris Urmson, who has headed up Google’s self-driving car programme since 2009.

There is a lot of interesting information here about what Google is doing with its cars and how they are coping with real-world traffic situations. He is particularly persuasive on the safety point — human beings are responsible for many more accidents resulting in death or serious injury. If the future of transportation has to involve cars, far better that those cars are not driven by distracted and borderline incompetent human beings.

But the point I found most intriguing comes when we are introduced to the way Google’s car sees the world. (This runs from about 7’48” in the video.)

The starting point, basic driving on grade-separated highways, centres on perception (where the car sees itself and the other road-users in the world) and experience (what has happened before that might happen again). This is roughly where Google were when they started serious work in 2009. (What Chris Urmson calls “a geometric view of the world.”)

Once Google moved the cars onto city streets, there was immediately much more complex information to handle. The cars needed to be aware of objects other than other vehicles — pedestrians, animals, road works, litter, and so on. At this point, the cars need to be able to deal with a range of different signals — flashing lights on police vehicles or school buses, for example. They also need to judge and work around the behavioural expectations of other road users at a host of different levels — some signalled and some implicit. At 10’09”, Urmson tells us the key to their success in this effort:

The way we accomplish this is by sharing data between the vehicles.

At first this is just sharing information about the location of hazards like road works between vehicles, so that their shared understanding of the environment is constantly updated. Over time, this has developed into a massive shared database of all of the things that all of the cars have seen over time. Hundreds of thousands of objects have been observed by the cars in multiple dimensions. All these objects (cars, people, animals, cars, trucks, cyclists…) can be used by Google’s cars later on to help them understand novel objects and situations by comparison with what has already been seen and recorded. Further than that, this data can be used to build a model of how different objects might behave in the world — improving the predictive capability of the fleet immeasurably.

Google’s cars will always be better than humans in terms of their capacity for observation, speed of reaction and ability to deal with crises calmly and decisively. Urmson shows in detail how this is achieved even when a hazard is partly concealed by other traffic in the section of video from 12’30” to 13’24”. That gives them an edge as individuals. Their constant sharing of data is where the real differentiation occurs. They are constantly learning by sharing.

Humans will never have the processing capabilities of an autonomous car. But there will always be somethings that we can do immeasurably better than technology. The key to future success is working out what those things are and concentrating on them. But we can also learn from Google’s cars. By sharing what we know as widely as possible and actively using what is shared with us, we can develop a better picture of the world and act within it.

Your knowledge-sharing capability is almost certainly nowhere near as good as a dumb car. But the car can show you why you should be better at it. Google’s cars understand that more can be achieved by sharing than by hoarding. We should learn the same.

Knowledge and Risk: box-ticking considered harmful

I had been running the knowledge management function for a couple of years in my last firm, when the decision was taken to build a proper risk management team. Until then, the firm’s partners had managed risk themselves, with support from some key litigators and a team of staff to handle client and matter intake (conflict checking, information barriers and so on). The firm had grown, and the regulatory landscape had become more complex, so that there was a compelling case for professional risk management. And so a risk director was appointed, who very quickly identified a need for a larger team of risk lawyers.

2015-04-21 08.51.17-1I was initially nervous about this development. I feared that the new regime would arrive with a list of ‘do nots’ and thereby undermine the work I and the PSLs were doing to encourage knowledge sharing around the firm. I had heard scare stories from my peers in other firms about clashes between risk and knowledge teams: each having a completely different perspective on openness than the other.

In the end, my fears were misplaced. There may be risk professionals who see their role as restrictive, but ours did not. Nor did they interpret the rules as a recipe book for prohibitions. In fact, I found that the goals of the risk and knowledge teams were closely aligned in some significant ways.

Until 2011, the rules governing solicitors in England and Wales were contained in a set of documents combining general principles and detailed rules. This approach worked moderately well when law firms were all fundamentally similar. As the market opened up following the Legal Services Act 2007, it was clear that the myriad of legal business models would need a different type of regulation. The new Code of Conduct combined a set of high-level principles with mandatory outcomes and indicative behaviours. The Solicitors Regulation Authority (SRA) gave firms real flexibility in how they achieved the desired outcomes:

The SRA Code of Conduct (the Code) sets out our outcomes-focused conduct requirements so that you can consider how best to achieve the right outcomes for your clients taking into account the way that your firm works and its client base.

The message that firms had to think carefully about their own approach to risk was communicated very clearly by the SRA’s executive director of supervision, risk and standards, Samantha Barrass.

Addressing a risk management conference in London, Ms Barrass said the SRA is concerned that some firms might see the indicative behaviours that help interpretation of the 10 core principles as a checklist, rather than possible examples of practice – the SRA is likely to take a “dim view” of this.

She said: “The indicative behaviours are not mandatory, they provide examples or a starting point to aid thinking on how to deliver the outcomes and principles. Unthinking reliance on the indicative behaviours is not a risk-free approach to compliance; they do not cover all regulatory scenarios or compliance requirements, and certainly focusing attention on the achievement of the behaviours alone could actually lead to a firm overlooking or de-prioritising emerging risks.”

She said that some solicitors “have proudly told me that in preparation for outcomes-focused regulation (OFR) they had extracted the indicative behaviours, and ticked off every one that could possibly be relevant as being present in their organisation in order to present a model of best-practice compliance to the SRA”.

Ms Barrass asked: “But can the firm say, hand on heart, that this approach really gets to grips with the nature of the firm itself and its business practices?”

Since 2011, no firm in England and Wales should take a ‘box-ticking’ approach to risk.

Another significant change in the new Code was that it applied to the whole firm: not just solicitors. Everyone employed in the practice was expected to demonstrate that they were working in support of the mandatory outcomes.

These changes meant that our new risk team was focused on helping people across the firm understand their obligations. Their goal was to shift people’s working practices to meet those obligations.

My goal was similar. Rather than establish a set of rigid knowledge activities and measure compliance with simple KPIs, I wanted our work as a knowledge team to support the firm’s desired outcomes. For me, success would be measured in improvements to the way people developed and handled knowledge in their everyday work, rather than counted in numbers of precedents or items in a knowledge bank.

Good risk management and good knowledge management have these things in common. They work best when there are clear outcomes. Those outcomes may require people to change the way they work. Risk or knowledge regimes that allow people to tick boxes but carry on working as usual merely store up serious problems.

So, the firm’s knowledge and risk teams had much in common. We had a similar (but not identical) message to convey to the firm, and we had an equally strong interest in the firm doing things properly. As a result we worked together pretty well.

Our common interest was most strongly manifested when the firm started to develop a formal quality programme. Most of the products of that programme were driven by risk and knowledge teams together or were strongly influenced by people from both areas. The approach adopted was also similar. Rather than aiming for external certification, the firm defined a number of desired outcomes. Those were driven by known shortcomings in the way work was done. Like the risk and knowledge teams, the quality team avoided a mechanical approach to achieving the desired outcomes.

Over the past few years, I have seen a number of firms (and not just in England and Wales) combining one or more of risk, knowledge and quality in one role. Whilst this isn’t a model for all firms, it seems to work well for those that have adopted it. If, however, there is antagonism between any of these functions, the firm will undoubtedly suffer. Even separated, there should be substantial common interest.

Whether separate or together, each of these teams should “really get to grips with the nature of the firm itself and its business practices.”

Where to start with law firm knowledge development?

The history of knowledge management in law firms can be simply sketched:

  • Lawyers and publishers started with standard documents and forms, then moved on to more discursive materials — often managed by librarians;
  • The bigger firms employed dedicated knowledge professionals (PSLs) to create and maintain bespoke material, training and current awareness;
  • PSLs became more common, so firms began coordinating their activities
  • This coordination evolved into strategic support for the firm’s wider goals, and often extended to include information and research professionals and/or learning professionals;
  • Greater strategic focus led to increased diversity of activities between firms — encompassing technology-supported practice, client-facing activities and so on.

This account isn’t perfect, but it covers the main inflection points. However, it also contains the seeds of misdirection.

Chatsworth sundialWhilst there are firms that have reached the final stage, many are still approaching KM as a new activity. They may subscribe to the major services. They may also have some of their own internal knowledge material, drafted by practising lawyers. They might even have a nascent knowledge system of some kind. What should be their next step?

The natural thing to do would be to learn from what other firms have done. (A standard knowledge management tactic.)

How should that learning progress? One approach, which appears to have been suggested at today’s KM Legal conference, is to follow in the same steps as other firms. I am not at the conference, but following some of the tweets.

The advice to start with PSLs without coordination or a vision is risky. It feels right, just as the historic biological view that “ontogeny recapitulates phylogeny” appeared to make sense. The better choice is to start from the current state of the more mature firms. By all means learn from the work already done by those firms, but there is no need to go through the same process to do so.

The most experienced firms have concluded that successful knowledge activities require coordination or governance, and a vision that is congruent with the firm’s strategy. In learning this lesson, they made mistakes and had successes. Firms coming afresh to this work should learn the same lesson without having to have the same sequence of experiences. Learning from other people’s experiences is a critical knowledge principle in itself.

Does it really matter? If only a small investment is possible, why not start with a PSL or two and see how they get on?

The problem with that approach is that without informed guidance as to what the firm needs and/or the experiences other firms have had, there is a real risk that the PSL has to bend to the will of the lawyers they work with. Without an organising force outside the practice group, PSLs will often be forced to support old-fashioned ways of working.

The vision may not need to be detailed. It would be enough for the firm’s leadership to be clear about the things that need to improve. Armed with simple goals like that, PSLs would be able help their practice groups develop in a coherent direction. They could help build a modern firm without having to go through the Enlightenment first.

(As an aside, one thing firms could do to emulate their more forward-thinking peers would be to drop the title ‘PSL’. It is essentially meaningless. Other versions, such as Practice Development Lawyer, Knowledge Development Lawyer, Training and Knowledge Lawyer, are much more helpful.)

If you or your firm is thinking about these issues, and would like some personalised guidance, please get in touch.

Why do you want to ‘do KM’?

My recommendation to anyone new to knowledge management is to start by reading and reflecting on David Gurteen’s presentation to KM Middle East in 2011, “Don’t do KM.”

Despite David’s high profile, and the fact that this message has been repeated by him and many others over the past four years, I still see the same mistake being made. But it’s now being made at an organisational level, and that causes problems further down the line.

Here’s an example. A law firm has decided that it should have a knowledge management function. So headhunters are briefed to find someone to lead that function. Sadly, neither the firm nor the headhunters understand what is needed.

The firm probably has a sense of what might need fixing, but they don’t know what measures could be taken. The headhunters have a better understanding of the ambit of traditional KM, but may not be allowed any insight into the firm’s real needs.

The result: a role description that indicates how important KM is (“a strategic function”), but also lists various ‘information assets’ that need to be managed. In short, a description of KM that limits the function to pre-defined boundaries separated from the performance of the firm.

In reality, of course, a role description can be ignored. But it acts as an anchor. Presented like this, it is difficult for a new recruit to persuade the firm that they shouldn’t ‘do KM’. It also means that investment in change or in unexpected activities that would make a real difference are harder to justify.

By contrast, advertisements for leadership roles in business development and marketing are much more likely to refer to the need for things like “new and innovative approaches on winning business”, “driving forward pioneering initiatives”, or “distinctive client experience”. Even though firms may have a better idea of what might be involved in this discipline, they rarely dictate at the outset in detail what these roles should do. The result is that these recruits are trusted much more to lead the firm (not just their own teams) in the right direction.

Just as people with ‘knowledge management’ in their titles should avoid ‘doing KM’, firms should avoid thinking that they need KM. They don’t. They may need to use their knowledge better because they have identified a problem. That’s a much better starting point for recruitment. You don’t need a Knowledge Director or CKO just because everyone else has one.

Measuring the difference: law firm metrics

One reasonable response to my recent posts suggesting KM delivers most value when it acts as some kind of irritant to conventional law firm practices is to ask “how can one know when things have improved?”

Major Road AheadI have tried answering a question like this before, but this time I want to approach from a different direction. Previously, I looked at how much a firm might reasonably invest in knowledge management (the input). This time, I am more interested in outcomes.

When considering law firm financial matters, my first call is usually to Bruce Macewen’s site. As expected, I was not disappointed. A commonly used public measure of law firm health is a simple one — profits per equity parter (PPEP or PEP). The legal media like it because it gives them a handy figure to build into headlines and league tables. But actually it tells us nothing meaningful — it is too easily gamed. Bruce dislikes it too, and in one article suggested a host of alternatives that firms could use for themselves.

  • On the quantitative side:
    • Revenue Per Lawyer
    • Compound annual growth rate (CAGR) of revenue over a multi-year period
    • Realization rates (implying, I would argue, clients’ perception of value-for-services-received)
    • Associate retention rates (or attrition rates, measured negatively)
    • Percentage of business from clients of long-standing duration (say, more than 3 or 5 years)
    • Percentage of all legal spend from top 10 (20/50/100) clients
  • On the qualitative side:
    • Client satisfaction
    • Lawyer morale
    • Commitment to and investment in professional development
    • Commitment to and investment in such things as diversity and pro bono
    • The quality of firms the firm takes lateral talent from and the quality of firms they lose lateral talent to
    • The quality of firms the firm wins assignments from and the quality of firms they lose assignments to
    • Quality and morale of professional and support staff.

Any one of these would be a good starting point for assessing the value of any activity within a firm. If one makes a change and then sees a shift in one or more of these measures, it is possible to ascribe the shift to the change. However, there are two very important caveats.

Workshop at Highland Folk MuseumFirst of all, it is important not to cast any of these metrics as targets. Setting a target doesn’t help people understand what they should do to meet it (and also implies, rather rudely, that people aren’t already doing all they can to help the firm perform at its best).

Secondly, many of these performance indicators depend on a huge number of interrelated variables. Take the first, for example: revenue per lawyer. (I would prefer to measure this by reference to all employees, not just lawyers, especially as law firms come to rely increasingly on non-traditional roles for client service.) This is a metric approved by McKinsey, and is easily measured and reported. It makes particular sense in a business that depends on people to deliver a service. A large firm with significant fixed costs (buildings, insurance, technology and other infrastructure, for example) will find it hard to make a real change to this number without also affecting some of the intangible factors — client experience, staff turnover, etc. It would be foolish to hope that a single activity (whether that be better knowledge management or improved marketing) could be responsible for a real change in the firm’s financial health. Things are too messy for that.

So how should we approach the problem? This raises four questions for me:

  • Which factors matter most to the firm?
  • What variables might affect the selected metrics?
  • What does the firm know about those variables?
  • What can be done to improve things?

The first should be obvious. There is no point addressing revenue per lawyer (or profit per employee) if the firm is actually more bothered about its exposure to a small number of key clients than about its profitability at present. This is a strategic question, but I think few firms have such a clear view of their priorities without seeing a list such a Bruce’s of the issues that might concern them. Once they do, it is important to work out which factor is the most important — which will always command more investment than any other?

The second point is an expression of my second caveat above. Once we know what really drives the firm — what is its highest priority — we need to understand how performance in that area is influenced by activities, actions and culture within the firm as well as the wider environment. That might be possible as a desk exercise, but it is a task better done by engaging with a wide cross-section of the firm.

This is the third point — in most situations, the collective knowledge of the firm itself will give the best insight into how things are now and what might be possible in the future. That engagement could uncover knowledge about clients and their markets, about the firm itself and the people within it, and about infrastructural or other opportunities and challenges. Exposing this knowledge is something that should be at the heart of the firm’s knowledge activities. A survey won’t do — what people say when they mean what they say needs to be carefully uncovered and intelligently analysed.

Once there is a better understanding into the way things are, the firm can start to think about what activities and actions might change things for the better. Sometimes that will be an obvious choice, but often it will be necessary to test a number of different actions and see which ones make a lasting difference.

Sadly, many firms start with the fourth step. Worse than that, they invest significant sums in large-scale activities that they cannot then prove to have the benefits they expected. The result? At least, wasted time and money. At worst, disenchanted clients and people, to the extent that the firm risks collapse.

If you are interested in going about things the right way, using this four-stage process (or something tailored to your needs), please get in touch: I can help.


Legal KM: what is your impact?

I finished my blog post on the need for unavoidable irritation with a promise to look at the purpose of knowledge management in law firms. On reflection, I think impact is a better word than purpose. What difference can KM make to the performance of a firm, and what will the firm’s experience be? In other words — how irritating can legal KMers be so that they generate most value?

Pothole and yellow linesAs a reminder, the goal is to be considered indispensable by the firm, whilst still promoting goals that might be uncomfortable to individual lawyers. This might sound unnecessarily aggressive, but it actually matches the kind of work that has been done over many years in many successful firms.

Consider, for example, the use of standard documents or precedents to assist lawyers’ drafting (or their modern equivalent, the automated document). Amongst other things, these approved ways of working will force lawyers into a single, consistent contractual format or style. For some, this undermines their right to decide how best to draft or to present the document. (I have lost count of the number of times I have had to listen to lawyers grumbling about their firm’s style rules.) On the other hand, clients appreciate consistency across a firm’s documents and the efficiencies that come from part-drafted or automated standards are undeniable.

In this example, we can see the essence of the value of legal KM: it creates value for the firm by seeing better ways of using knowledge, bringing them into being, and encouraging people to use them to work differently (since legal work is knowledge work). The irritant comes in that final stage — any change to the way people work is likely to create a bit of discomfort.

The most successful people in legal knowledge management are those who bring about the most valuable change. (This group includes, in my experience, Chief Knowledge Officers, Heads of KM, PSLs, Knowledge Officers, and a host of other titles at all levels.) In order to have that impact, they have a few characteristics in common.

  • Clarity of vision/purpose: they work out at an early stage what they stand for, and why the firm should value it.
  • Connectedness: they build relationships across the firm, so that they have a better understanding of the complete range of work done, not just the area they work in.
  • Communication skills: they can present their perspective well, whatever the audience.
  • Diplomacy: they know which battles to fight, and when to back down.

These common characteristics (together with others that are more role-specific, such as the twelve listed for knowledge leaders by Arthur Shelley) allow for the greatest impact. These people can generate more value for their firms by being sufficiently irritating — they create pearls.

By contrast, some KM folk have found it easier to make themselves indispensable by producing just what their teams ask for, without questioning the underlying assumptions. By doing so, the only change they create is a culture of dependence. This is similar to the situation described (in reference to a different context) in the following video.

Demands for knowledge ‘products’ are common in law firms. Just like the managers in the video, partners feel more comfortable when their KM teams are creating tangible items. Equally, producing those items usually feels easier than trying to change the way people work. There are equivalents in other areas of business services — finance teams are sometimes asked for spreadsheets they know to be worthless and BD teams may be expected to support unwinnable pitches. The best professionals in those areas will challenge the requests and explain why there are better things for them to do. Good KM folk should do the same.

Ultimately, the test for impact is the same for knowledge management as it is for other professionals within the firm. How much difference are you making to the firm?

For HR people, the answer to that question might lie in recruiting great people or in managing career changes for those who are doing less well. IT professionals could point to improvements in client service using new technology tools.

For KM professionals, the difference should be found in changing the way people work for the better. Activities such as updating precedents and producing briefings are unlikely to be as valuable to the firm as challenging the way legal work is done and actually changing the way clients get the benefit of the firm’s legal knowledge.

Even diplomatic challenging is irritating, but it is necessary to create the pearls firms need.