At a recent gathering of senior law firm knowledge management experts, an attendee asked two provocative questions: If all the knowledge management personnel in your firm were to fall off the face of the earth today, would it result in a decline in firm profits? And, if what we are doing does not have an impact on firm profits, why does it matter?
As with many provocative questions, it dazzles initially but doesn’t always hold up well under further analysis. The reality is that KM, like many other support services within a firm, does help with the delivery of client services, but it isn’t always possible to draw a straight line between the KM activity and the benefit to the client or the firm. In part, it’s because we simply have not been rigorous about the metrics or, in fairness, finding and tracking the right metrics has been difficult. For example, let’s say you received a request from an associate who was trying to pull together a package of precedents for a new client engagement. Of course, you would provide that lawyer with a full package, but would you be able to state with any certainty how much time and money you saved that client? In order to do that, you’d need statistics on the amount of time lawyers usually spend trying to gather precedents or, worse still, how much time they waste working with the wrong precedents. Do you have those statistics? Most likely not. Unless you are very lucky, it has been a long time since decision makers within your firm analyzed how much and why billable time is spent unwisely.
An added problem is that with the worsening economy, business decisions are likely to be made on the basis of available metrics. If the only metrics you have concern activity levels (e.g., time spent by KM personnel, number of tasks completed by KM personnel, etc.) rather than productivity levels (e.g., money saved, realization rates, etc.) you aren’t any further ahead than the knowledge manager providing the precedents in my earlier example. You may be doing great work, but the decision makers need more than your word for it. This is a case when tooting your own horn results, at best, in a hollow sound.
I’ve been thinking about this problem for some time now, and am working towards some answers. However, I’d be very interested in your views on this issue. If we can’t explain why and how knowledge management matters within the specific context of our own firms, how can we make a winning argument for the survival of our teams?
[Photo Credit: woodleywonderworks, Creative Commons license]
Above and Beyond KM 
You are “working towards some answers”? That is tough and I would be interested to hear where you come out.
My theory is that in a law firm billing by the hour, knowledge management will have a direct negative ROI. Inherent in knowledge management is producing better work, more efficiently. Law firm KM should result in less time being spent on a specific task. With a billable hour model, less time = less revenue. So negative ROI.
The value for KM has been the indirect benefits:
Clients may not be willing (and should not be willing) to pay for the inefficiency without KM.
Lawyers are happier that they can get work done quicker.
Smaller bills mean happier clients, stronger relationships and more work.
But it is hard to directly attribute those things to KM and therefore it is hard be measure the positive side of KM.
The other side of my theory is that if you move from the billable hour model to a flat fee or other model, then KM efficiency can be measured and KM can deliver profits.
One of the LTNY KM sessions was titled “KM and Client Service,” and that is certainly one area where KM can really make a difference. If we can smooth the bumpy path of communication and information sharing between busy partners, matter managers, and marketing professionals, we’ve established value. If we help get that proposal out the door by encouraging a business process to get the relevant information before we need it, we’ve added value. Just ask one of the attendees at the senior KM gathering, whose group was formally merged with the Marketing Dept. Another woman there I talked to (where there isn’t really formal KM) does *nothing* at her firm that is not client-focused.
On the “traditional” KM side, I think search and document management system statistics are another little-used source of metrics. The average litigation associate at my firm uses the top work product retrieval product tool over 480 times a year. If I can prove I’ve greatly enhanced the use of that tool, I’m adding value to the firm, through enabling higher quality work faster.
I think one of the problems for KM is that it is a slow-burn activity. If you remove the KM team today, the impact on the health of the firm is not likely to be felt for a year or more — as good habits start to fade and the tools and processes put in place start to become a bit rusty. Once that happens, replacing the KM team is equally unlikely to have a positive impact for another year or so. That makes it more important to communicate the importance of KM early and often.
(On Doug’s point about KM and the billable hour, I am not sure that this is entirely true. In the first place, clients will always resist the extremes of pricing — KM can help make sure that the time recorded on a deal is limited by allowing key documents to be drafted according to precedents or using an automatic system. Secondly, one of the outcomes of KM can be to improve leverage so that firms get more out of their juniors — who are the most profitable members of a team.)
I received the following comment today via e-mail and thought it was worth sharing.
– Mary
” Well stated. Metrics about results not about effort are the goal for every successful enterprise. Results are often measured in quantity= money saved or generated, time saved; quality = the absence or presence of something. Example of the measure of quality: when a speech writer prepares a speech that an executive delivers to an important audience `without changing a word,’ the customer (executive) has provided evidence for the quality of the speech writer’s work.”
I have seen many sites before and most of them do not look this good. Thanks for the excellent content…
Regards,
SBL Document management services