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FEATURE |
Knowledge Management for Small Law Firms — Myth or Reality?
The article explains why knowledge management is essential for law firms with a particular focus on the small and medium firms.
It is often said that knowledge — and how that knowledge is leveraged — is a critical element to an organisation’s success. Consequently, many try to find ways to leverage knowledge as part of their business processes. Yet few succeed initially as they either have no inclination of how it is to work or think it is only for the large complicated organisations and so do not get started at all, or are overly ambitious and so invest excessively, or simply adopt the wrong methodologies and then become discouraged. This malaise is more acute in the law firm environment and even more so in a small law firm. But should the effort to garner knowledge nevertheless be made? This writer believes so and has seen organisations, small firms included, increase profitability as a direct consequence of implementing knowledge management.
This article introduces the concept of knowledge management, examines a typical law firm and why knowledge management can work, introduces a basic discussion of the technical requirements for managing knowledge and how it can be effectively leveraged in a small law firm. It stresses that management support or decision and the appointment or nomination of an appropriate person to act as knowledge manager is critical to the success of any knowledge management strategy. Translating this to a small firm setting, it may be said that unless the principal partner is desirous of introducing knowledge management within his firm or practice, any effort made by anyone else will only be a waste in costs and time.
It must be stressed that the article is brief and only provides quick insights into key issues on knowledge management.
Small Law Firm Defined
For the purposes of this article and as a reflection of practice generally, small law firm may be said to be one which has five lawyers or less. As at 31 March 2004, there were 3481 practitioners working in a total of 799 local law firms. The distribution of lawyers in these firms were as follows:
1–5 lawyers: 701 firms
6–30 lawyers: 83 firms
>31 lawyers: 15 firms
Evidently, small law firms form a significant 88% of the total number of law firms in Singapore. Whilst this article will focus on knowledge management for the small firms, it is hoped that lawyers in medium and large firms will find the article useful as well, as the principles broadly are the same.
What is Knowledge and Knowledge Management?
Knowledge
To understand what knowledge management is, it is necessary to understand what constitutes knowledge. Note though that knowledge is not mere information or raw data. While information is easily organised and stored away for subsequent retrieval by librarians or clerical staff, knowledge is cultivated information — that is information that is combined with the experience of the user for specific purposes within a particular framework. Information aids in putting knowledge together.
The concept of knowledge can be sub-categorised as tacit knowledge and explicit knowledge. Explicit knowledge is that which we find in books, memoranda, diagrams, presentations, videos and online databases. It is knowledge we know. What is perhaps more relevant — and not always so easy to capture and transmit — is tacit knowledge. Tacit knowledge is knowledge that resides in the minds of individuals, the insights of an individual in making a particular decision or taking a particular course of action and is therefore subjective. Tacit knowledge is not easily captured and stored away, as there is little means of categorising and codifying it for subsequent retrieval.
In a business or organisation, knowledge that is made accessible is reusable and is improved upon as each employee uses it and adds value to it. In this sense, therefore, knowledge is dynamic. Once used, knowledge should be stored away and once stored, it represents information. This information will once again be translated into knowledge when it is needed again and further value is added to the information. Knowledge management helps to ensure that work previously done can be leveraged upon to enhance the competitive advantage of a particular organisation. Without knowledge management, what often happens is that this information creation is duplicated over and over again. This results in inefficiencies and, eventually, reduced profits.
Knowledge management
Knowledge management defined with reference to its function effectively refers to connecting people to people and people to information, with the intent of creating a competitive advantage for the organisation. In a world where access to information has become very easy, speedier connectivity to appropriately processed information leads to greater efficiency that in turn can translate into profitability. As the wheel has already been invented, knowledge management seeks to ensure that time is not spent in reinventing it.
Knowledge management thrives on the premise that it is the collective organisational knowledge, rather than that of any one individual, that matters. The objective of knowledge management is to ensure that as workers join or leave the organisation, this intellectual capital stays where it belongs: within the organisation for its ongoing benefit. If the capturing and retention of intellectual capital is successfully managed, then the organisation obtains a competitive advantage in the form of potentially new revenue and time savings.
What knowledge management is not
To a large extent, knowledge management is systems driven. Hence, it is frequently mistaken as a technologist’s task. However, it is important to recognise that knowledge management goes beyond mere systems. It involves human intervention to ensure that the raw information is processed in a manner that adds value to its user. Further, systems simply cannot capture the tacit knowledge that resides within people.
Knowledge management should also not be confused with document management. Whilst document management is an integral part of knowledge management, it is basically that — a subset of knowledge management and not a synonym for it. Document management is a tool to assist with the filing and retrieval of documents and is devoid of context. Document management is good for the short-term in helping workers find documents that have been stored away. However, to have any real benefit, value must be added to the document.
The Small Law Firm
Typically
Reading the preceding section would lead many to proclaim without a second thought that knowledge management is not for the small firm. Indeed the typical retort this writer gets from her small firm counterparts when they are asked whether they would be interested in embracing knowledge management, is a cynical ‘Is that the name of a new corporate client?’ And this response is not meant to be a slight on the practitioner. Indeed, look at it any way one likes, one cannot run away from the fact that law firms are after all a business entity and the goal of every business entity, big or small, is to generate profits. With practices becoming ever more competitive, it would be unwise for any law firm not to have its bottom line constantly on the radar screen.
For the small firm, this focus is even more acute. The small firms have to compete with large firms and an increasing array of international firms on an almost identical level playing field. Yet the small firm is not currently placed to meet with the demands of an increasingly sophisticated client arena and at the same time manage risk within the firm. Many small firms are also unlikely to have retainer clients precisely because of the increased sophistication of the client in their demands. Indeed, anecdotal evidence suggests that a majority of the small firm practitioners will not be able to tell you with certainty where the next piece of work is going to come from.
Even in the conveyancing arena, which was traditionally a clear source of work for the small firm, the rules of the game have been modified. The Central Provident Fund Board’s (‘CPF Board’) latest guidelines stipulate that a law firm needs to have at least eight lawyers before it can apply to be on its panel of lawyers. This effectively excludes 90% of the law firms in Singapore.1
Compound this with further anecdotal evidence that loyalty amongst the clients who do regularly give small law firms work is an exception rather than the norm, it is not difficult to appreciate why the small firm practitioner is more concerned with fighting the battles of today than being worried about the wars of tomorrow.
But the ironic thing is that the advancement of technology is in fact of greater benefit to the small firms than the larger firms. Consider this for instance — 15 years ago, one would hardly see many small firms stocking up on the complete Statutes of Singapore Laws. Price and space would have been the two prohibitive factors. Additionally, given that laws change, there was the cost involved in trying to keep the statutes updated. Thus, when the small firm practitioner had to advice his client on a particular statute, he would have had to either rely on the generosity of the larger firms or make a run to the libraries of the Subordinate or High Courts, or in some instances, to the Law School library.
Today, however, one is a click away from free access to the updated statutes maintained at the Attorney-General Chambers website, and one only needs the corners of one’s monitor screen to store them away.
The myth
The writer believes that the resistance from the small firm practitioner to embrace knowledge management is four-fold:
• firstly, the belief that this is something only for the larger firms and would not be beneficial to the smaller practice;
• secondly, the belief that the cost of setting up a system is prohibitive;
• thirdly, the view that all the knowledge that the small firm practitioner needs to know is contained within his own head; and
• fourthly, the small firm practitioner may not know where to start.
The reality
Knowledge management is really for everyone and the reason why small firms are hesitant to look at this seriously is rooted broadly in their mindset of taking each day as it comes. Given the reality that most small firms will be around for a long time to come, there must be a cultural shift in recognising that with knowledge management, it is they who will reap the benefits of implementing the right knowledge management strategy in the long run. There must also be realisation that whilst there will be costs associated with implementation, the costs need not be prohibitive and the firm can adopt a strategy which meets its objectives whilst not burning a hole in their pockets. The final hurdle is a practical consideration and this article hopes to at least get the practitioner thinking of where to start.
But why knowledge management in a small law firm?
It is evident that the rules and regulations upon which we base our practice is changing so fast that it is difficult to grapple with all at one go, if one is also trying to keep up with file work and marketing. A proper knowledge management system aids in reducing errors and enhancing a lawyer’s ability to keep up with new developments.
To this end, the Law Society of Singapore’s website and free weekly e-alert ‘E-Jus News’ is a means of knowledge management that small law firms can leverage off. The weekly e-alerts act as a good source of updates on key practice news that lawyers must be aware of. Another example, but a paid for service, is the collaboration by the Law Society of Singapore with LexisNexis to make the LexisNexis database available to small practices at a very affordable costs through Legal Armor. Yet another example is the Singapore Academy of Law’s endeavours in improving its case law database search systems with cross-links to legislation, opinions and articles written by various law firms is also a system that small firms should be leveraging off, albeit in this instance too, there is a fee to be paid.
Quite apart from the extrinsic information, many small firm lawyers do think that the only organisational knowledge they need to content themselves with is what is in their head. This is a misnomer that needs correcting. The other lawyers (even if it is just one other) and the staff (heightened in the case of sole-proprietors) in a small firm have valuable information that a lawyer can utilise. Unless this information is distilled and stored away, it will disappear when the other lawyers or staff leave the law firm. Of course, it can be built up again; but time and energy must be expended to do so. As a reality check, just think very carefully about how many lawyers rely extensively on their secretaries for much mundane but important information that saves them considerable time in their practice and one gains an understanding of the importance of knowledge management in the small firm. Now, if only the information that the efficient secretary has is properly stored away in an easy-to-retrieve manner?
Implementing a Knowledge Management Strategy
Assuming that the small firm is somewhat convinced about the benefits of knowledge management, how does one then introduce it into the practice? There is no single method to be employed in implementing a knowledge management strategy. Any strategy needs to be tailored to the firm’s needs and circumstances and should be, where possible, built on existing resources and initiatives. The chosen method of implementation must also constantly bear in mind the users, the firm’s culture, the nature of the content and the technology involved.
The approach
It is important to take a pragmatic approach to creating a knowledge management strategy and its corresponding architecture coupled with relevant technology. The five key elements to establishing a knowledge management system are management, the knowledge, technology, process, and users.
Management
Unless the senior partners or principal partner of the firm,2 regardless of size, decide that they want to push ahead with a strategy to manage knowledge, the process will not work.
Knowledge to be managed
In a law firm context, typically the following (non-exhaustive) qualify as knowledge or at least information to be transformed into knowledge:3
• The Law:
(i) case law, including commentary and submissions;
(ii) legislation, including interpretive commentary, hansard etc;
(iii) precedents, including standard court documents, corporate documentation, property forms, corporate resolutions etc; and
(iv) prior opinions and best practices.
• Third Party Experts:
(i) other lawyers, including foreign lawyers; and
(ii) specialists experts, including engineers, handwriting experts, investigators etc.
• Your Law Practice:
(i) financials, including profitability figures, cashflow, work-in- progress, staff payroll etc;
(ii) business strategy;
(iii) clientele and target markets; and
(iv) market positioning.
Each information or knowledge item here listed is more frequently than otherwise used repetitively. To fail to have an organised manner of reusing the information and knowledge results in unnecessarily wasted time, which translates into increased cost. The trick is to manage the above sources of information so as to improve a firm’s comparative advantage.
To a large extent, a substantial amount of the work has been done as electronic information sources are available. For example, e-mail systems, intranets, online research databases,4 and (in the context of Singapore) the push by the courts and the various registries of electronic filing systems, have seen an influx of systems introduced within law firms. Such systems include:
• the use of e-mail for all correspondence, whether with clients or with opposing counsel;
• Electronic Filing System, including a scanner; and
• Legal Workbench for small law firms.
Some law firms would also additionally have the following tools to aid with their work:
• automated accounting system;
• client database; and
• systems containing nuts and bolts information relating to staff payroll data, staff databases and billing and target rates.
Each of these systems can in fact be leveraged upon as well as consolidated together to aid the law firm to work more efficiently.
Technology
In implementing the knowledge management strategy, the appropriate infrastructure must be provided for. But a careful study will show that this can largely be leveraged off existing tools, thereby preventing unnecessary costs from being incurred. In this regard, many firms do already have technology systems in place. At the very least, many firms operate with the basic Microsoft Office tools. Whilst these are not effective knowledge management tools, they can be structured in such a way to facilitate effective knowledge management.
A simple example starts with opening a file for a new client. The client information can be keyed into a simple Excel or Access database (let’s call this a Client Contact Database or CCD) if minimal costs are to be incurred. The CCD can be very easily programmed through macros to allow for auto input of the client name and contact details each time a document or letter is created for that particular client. This ensures accuracy of information — how many lawyers have frequently encountered errors in names and address typed by staff because of manual input each time a new document or letter is created.
The CCD can be used as an effective means of keeping in touch with clients through birthdays and other important events as well.
A CCD can also be improved upon tremendously to allow for other party names to be included into the system. What this then enables you to do is manage your conflict better. It is a myth that only the large law firms experience conflict problems. Many a small firm encounters such issues, even in as fairly straightforward a practice as family law.
Many small firms also have accounting systems to enable them to track expenses incurred on behalf of particular clients, work done for those clients, billing status as well as whether the bill has been paid. Such an accounting tool, if tied into the CCD requires the client information to have been input only once, but more importantly allows the law firm to study which of its clients provide the most work, are better paymasters etc. Such information can aid the firm in strategising better. The immediate retort that many small firms would make to this suggestion is that they are aware of such specific information but do not need tools to aid them. Here, consider how much more time will be needed to monitor, inter alia, expenses incurred and bills issued if this had to be done manually. A simple accounting system would cost about $500, but the benefits clearly outweigh the costs especially given the requirement to do monthly reconciliation of accounts.
Another example pertains to online collaboration tools, which have traditionally been thought to be something that only the large law firms could use. But costs have come down considerably and such systems are available at almost negligible costs. Essentially, what is involved is using intranets, apart from enabling content sharing and providing general legal services, for work collaboration with clients and counter-parties. Until recently, where a large deal was being negotiated, the various parties involved (including the banks, the agents, the lawyers, the customers) would have had to meet face-to-face to negotiate details and work through numerous drafts of contracts. These numerous drafts would then have to be copied and made available to the parties involved. The multiple drafts in circulation were themselves a potential problem — it was easy for individuals to lose track of which was the latest version, for instance.
Now, the numerous drafts involved can very easily be posted onto a secure website accessible only by the relevant parties through passwords. Tracked chronologically, the system will always ensure that the latest draft is clearly marked out. Only one copy of the document needs to be posted onto the site and this will be accessible by all the parties involved. There is a proper cataloguing and library archiving system also in place. The secured website can be customised to allow appropriate news reports to be fed to the parties as well. To a limited extent, negotiations can also be conducted electronically. It is only a matter of time before the entire negotiation and drafting takes place electronically, saving the client a substantial amount of money in travel and other disbursements.
Process
It is great to have the right technology as enablers, but if there are no proper processes in place, the strategy will fail. Whilst file opening and data entry of client information is easy, there must be a process put in place where lawyers feed the various types of knowledge identified in the section on ‘Knowledge to Be Managed’ into the central pool. Any process built must be appropriate to that particular firm. And here more so than anywhere else does the phrase there is no ‘one size fits all’ approach stand in full force.
As a start to ascertaining the right process, the firm must first prioritise what they want to organise and how they want to go about achieving this. The diagram below provides some guidance on how to prioritise.
Users
In putting any system together, the users must always be borne in mind and the tools kept simple to use so that traditional work methods are not disrupted. It is a truism that senior lawyers and senior staff alike do not like to be asked to change their methods of working even if it means a move to a more efficient working environment.
The people to aid implementation and culture
The key to successfully implementing any knowledge management strategy is getting the right team together. The knowledge management team should be made up of suitably qualified knowledge managers and supported by a well-equipped technology team — if you are a medium to large firm. If you are a small firm, the job can be effectively handled by designating a suitably qualified person (or at least someone who has the interest and right acumen) to handle the job. Of course this is a task that would have to be handled over and above billable work.
At the very worst, the task can be outsourced at a very small cost when starting up. But ensure that the knowledge manager the work is outsourced to is someone who is suitably qualified in that particular profession in which their expertise is required, has sufficient business acumen, has had a number of years of practice experience behind them and is self-motivated, mature and independent.
In a small firm, support translates into clear buy-in from the key partners and other lawyers of the firm, as well as staff of the firm. There must be a willingness to modify prior practice approaches and a willingness to share.
In short, implementing a knowledge management strategy calls for nothing less than an organisational paradigm shift. Employees will need to be retrained a little to make use of the refined methods of knowledge sharing and leave many of their traditional workplace processes behind — this is no small task. These are cultural issues that management must grapple with if they are serious about implementing a knowledge management strategy.
To encourage this cultural shift, it maybe is necessary to modify the incentive structure within the organisation. Incentives must be provided to reward the transfer of knowledge between employees. Incentives are essential simply because it is a truism that getting people to participate is the hardest part of knowledge management. Providing incentives will work in the long term to gradually change the culture of the people as well. Providing incentives does not always equal the provision of monetary rewards. It could take intangible forms such as credits which go towards performance based assessments for bonuses and promotions.
Conclusion
In today’s competitive business environment, many organisations are struggling to meet or keep up with the demands put upon them by their customers, competitors, investors and regulators. With the globalisation of business, no firm is immune to this pressure. Also, firms will never stop learning and creating new knowledge. Firms that excel at leveraging their know-how in a systematic and intelligent way will create and sustain a competitive advantage that will exceed the current and future demands placed upon them. This is especially no less true for the small law firm.
A final word of caution: there is no one knowledge management strategy that will suit every law firm. Likewise, within a firm, different solutions may be needed to address a multitude of issues and multiple users and their needs. Hence, before any solution is embarked on, appropriate studies must be conducted. A considered decision should be taken before embarking on any knowledge solution.
Finally, in the words of one small firm lawyer, ‘technology is indeed a great leveller of the playing field and the sooner the small firms realise this the better’.
Kala Anandarajah*
Rajah & Tann
E-mail: kala.ananadarajah@rajahtann.com
Knowledge Most Essential to Law Firm
• What:
- Precedent documents
- Client, industry and project information
- Skills and expertise
- Policies and procedures
• How:
- Easily accessible
- Searchable by categories and full text
- Strictly updated
Knowledge Essential to Law Firm
• What:
- Best practice documents - Prior opinions and research
- Case law and legislation - Regularly used information
• How:
- Easily accessible
- Regularly maintained
- Searchable by categories and full text
Generally Available Information
• What:
- Free to access legislation on AGC website
- Free to access case law from various jurisdictions
- Ministry websites etc - Client / industry information
• How:
- Easily accessible - Regularly maintained
- Searchable by categories and full text
Endnotes:
1 Whilst there is a legitimate risk management issue here, perhaps introducing knowledge management can over time convince such authorities that even a firm of less than eight lawyers is well equipped to handle matters for and on behalf of the CPF Board effectively.
2 Some take the view that knowledge management should be a bottoms up approach. This writer’s view is that such an approach will not work.
3 See further figure 1 below.
4 But care must be exercised when merely using online search databases which have not been verified by relevant authorities.
* The views in this article represent the writer’s personal views.