Gretta Rusanow is a lawyer, management consultant and author of Knowledge Management and the Smarter Lawyer, published by ALM Publishing. As the CEO of Curve Consulting, a New York and Sydney-based management consulting firm, Gretta advises law firms and law departments worldwide on their knowledge management, e-business, management and technology initiatives.

Knowledge management is the leveraging of your firm’s collective wisdom by creating systems and processes to support and facilitate the identification, capture, dissemination and use of your firm’s knowledge to meet your business objectives. It’s about recognizing that practicing law is a knowledge based profession-and managing your knowledge is key to managing your business. In essence, knowledge management is about working smarter.

In December 2005, 71 of the world’s leading law firms participated in a comprehensive survey of law firm knowledge management conducted by ALM Research and Curve Consulting. The survey covered a broad range of topics relating to knowledge management, including scope, culture, organization, technology, measuring value and relationship with client service delivery. The survey was also the first to collect comprehensive data relating to the size of the Knowledge Management organization and staff compensation, knowledge management budget and spending and technology products used by law firms as part of their knowledge management systems.

The average firm responding had 611 total FTE lawyers, including 193 partners, and 787 FTE support staff, a mean revenue between USD200 million and 299.9 million, and an average 9.3 offices.

It’s clear from the survey results that law firms have embraced knowledge management as a critical function. However, the Knowledge Management organization is typically isolated and faces challenges in engaging the firm in the broad scope of what knowledge management is – and can bring to this knowledge-based business.

Key Findings

Scope – Law firms have broadened the scope of knowledge they manage, though the emphasis is still on knowledge relating to the practice of law, rather than the business of law. Law firms have broadened the scope of knowledge they manage to include both explicit and tacit knowledge. There is a strong emphasis on managing knowledge of the firm as it relates to the practice of law. There is however little emphasis on managing the firm’s financial information, market position, prospective client information and competitor information – suggesting a lack of focus on managing knowledge relating to the business of law.

The leading knowledge management initiatives implemented so far are precedents/forms, legal research tools and systems, a best practice document repository; and practice group meetings. Roughly half of the firms have also implemented know-how files, skills and expertise locators, clause libraries, professional development programs, client relationship management (CRM) systems and third-party contact databases.

When it comes to collaborating with other functions, knowledge management initiatives are underway typically with Business Development/Marketing, and Learning and Development. There is little focus on working with Human Resources and Finance on knowledge management initiatives.

Approach – There is not enough alignment of knowledge management with the firm’s business objectives. 2/3 of firms take a hybrid approach to knowledge management – where a central knowledge management function sets the direction for knowledge management and provides the infrastructure for practice area knowledge management. Initiatives are typically initiated by a combination of practice groups and the central Knowledge Management function, with some differences across the regions.

Just 61% of firms have a formal knowledge management strategy which suggested that knowledge management may not be adequately aligned with the firm’s business objectives. Also, 75% of respondents report they develop a project plan before implementing a knowledge management initiative, though only 62% of respondents develop a business case to go with it, suggesting that many firms may not be adequately engaging management and the partnership in understanding how the knowledge management initiative will bring value to the firm.

Organization – Dedicated knowledge management staff numbers have grown, though there is work to be done in positioning the Knowledge Management organization to work effectively across the firm.

The head of Knowledge Management is most likely to be a Director of Knowledge Management/Chief Knowledge Officer, reporting to either the Executive Director/COO or the Managing Partner.

A little over half of the heads of Knowledge Management are responsible for leading the Knowledge Management organization, despite 87% of firms taking a hybrid or centralized approach to knowledge management. This implies that while the heads of Knowledge Management are charged with the responsibility to lead implementation of knowledge management initiatives across a firm, it may be a challenge to do so.

All firms have dedicated knowledge management organizations, though their size differs significantly across the regions.

A heavy dependence on informal, collaborative relationships with other functions in the firm suggests it is a challenge for Knowledge Management organizations to engage the firm and implement initiatives that touch on other areas of the firm. This is supported by the finding that 62% of responding firms wish to improve their relationship with other functions. More than half the firms do not have a knowledge management committee – suggesting it may be a challenge to engage the broader firm in knowledge management.

Culture – Firms say they have a knowledge management culture, though not enough is done to reward lawyers for contributing to knowledge management, or to demonstrate the value of knowledge management to management.

An overwhelming number of law firms (84%) describe having a culture that supports knowledge management. Despite this, a number of indicators suggest that law firms face several challenges in developing a culture that supports knowledge management. In particular, there appear to be gaps in wide user understanding of the broad scope of knowledge management and in management engagement:

· The time-based billing model is the greatest cultural barrier to knowledge management.
· ROI is measured by just 13% of responding firms.
· Knowledge management is included as a criterion in performance evaluation more than in compensation review, suggesting a gap in recognizing the value of contributing to knowledge management.
· Despite being more likely than not to expect everyone at the firm to contribute to knowledge management, firms are unlikely to give fee relief or billable hour credit to lawyers for contributing to knowledge management.
· Knowledge management is included as a criterion in planning, but not in reporting, suggesting a gap in accountability.

Technology – Law firms have the technology tools to implement state of the art knowledge management systems. The challenge lies in how best to leverage those tools. The typical components of the law firm knowledge management system are the document management system, Intranet, databases, e-mail; and online research services. More than half also include a client relationship management system, enterprise information portal and extranets.

Technology systems storing financial, business and staff information, such as business intelligence systems, financial/practice management systems, and human resources information systems are typically not included in the law firm knowledge management system. This is consistent with the finding that information relating to the business of law is rarely included in the scope of knowledge managed.

Taxonomies have been implemented by less than 2/3 of firms, with significant differences across regions. Firms face many challenges associated with ensuring that the taxonomy meets the present and future needs of a diverse user base.

Clients – The top objective of knowledge management is improved client service delivery, both as an outcome of better knowledge management, and through giving clients access to the firm’s knowledge management “know how”.

Clients expect firms to be active in knowledge management. Clients are focused primarily on the outcome of a firm’s approach to knowledge management as it relates to client service delivery, rather than on directly accessing a firm’s knowledge management systems and processes–with the exception of Australia and New Zealand.

Improving the quality of client service is the main objective. Other top objectives include leveraging expertise, gaining a competitive advantage, and improving the speed of client service delivery. These results suggest that firms see knowledge management as a market differentiator and intrinsic to its delivery of client service.

Despite the above findings, only 61% of responding firms promote their knowledge management efforts to clients.

With the exception of U.S. firms, the responding firms generally do not offer access to their native systems, instead favoring client-specific solutions. 72% of responding firms stated that they generate no revenue from developing client- specific knowledge management solutions.

The Future – In 2006, it’s all about better use of technology. The top initiatives for law firm knowledge management in 2006 focus on technology and in particular, on how best to present knowledge stored in native applications – implementing or developing an enterprise information portal, implementing an enterprise-wide search engine, and developing the intranet.

For more information about the full survey report, visit www.almresearchonline.com which provides subscribers with direct, on-demand access to ALM’s extensive database of surveys, rankings and lists related to law firms and the legal industry. The site also includes the ALM Research Online store where non-subscribers can purchase and download pre-formatted individual law firm reports, selected current-year survey data on an individual basis, and ALM Research reports.