Profit from knowledge, says Penningtons Manches director in New Law Journal feature

Posted: 20/11/2015

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The second in a series of articles prepared for New Law Journal by Penningtons Manches director of knowledge management Mark Collins focuses on process, productivity and profit.

In a world where clients are demanding “more for less”, law firms must learn to:

• Analyse how much it costs to produce each piece of work;
• Produce and deliver the work in the most cost effective way; and
• Know what their client values in this type of work.

My finance director tells me it is all very simple; income minus expense equals profit. “Record more time, bill more fees, collect more money – keep the costs down, and we are laughing.” When I worked in-house, our General Counsel was always under pressure to either employ less headcount or reduce external legal spend – or both. So the client wants more for less, but the law firm wants ever increasing profits. How can we square this circle? How can we compete for quality work whilst still being profitable? And what part does KM play in this challenge?

Know how much it costs to deliver

Whatever your practice area, it is crucial to know how much your work costs to deliver. In a world of “Big Data”, law firms are notoriously bad at collecting even relatively small scale data. Practice management systems are improving. Reporting tools are becoming more flexible and agile, but still lawyers do not collect quality data. Would it not be useful to categorise every matter with a clear unambiguous work type? Would it not be useful to record time in standard phases, breaking down a matter into key stages and activities? And to apply a resource cost (usually an hourly rate) to that activity? But how many teams in how many firms do this consistently? 

Our Knowledge Lawyers (others call them PSLs) are expert ex-practitioners and they are the ideal people to help. They know the typical progress of a matter - whether it is a commercial property development or injunctive proceedings. They know the stages of each matter type. They can list the usual activities comprised in each stage, and, potentially, the level of expertise required to complete each activity. 

Working with our finance team, they can ensure that matters are set up to capture the key data. Working with their fee-earners, they can test, agree and facilitate best use of these work types, stages and activities, so that it becomes easy for fee-earners to record and report on these data. Over time, it becomes clearer how much it has cost and how much you could save in the future.

Discover the most cost effective way to deliver

You may be thinking that a Knowledge Lawyer is not cut out to do this sort of work. Well, I am afraid (although it may sound harsh) the days of the Luddite, academic PSL working unsupervised in the back-office are gone. A Knowledge Lawyer needs to be a first class practitioner, facilitator, business analyst and super-user of technology (no mean feat!). We have been asking our Knowledge Lawyers to open up our finance system and look into the matter types used by their team, to unpick not only the most profitable matters but also the cases with most time written off. They lookthrough time records and document files to see how the work is done and by whom. With our Business Improvement Team, using Lean Methodology, they map the processes, and help to recognise wastage and inefficiencies. Then we make suggestions how to redesign the process and improve profitability. Where historically knowledge of the law was paramount, now knowledge of the business of law is crucial. 

Our Knowledge Lawyers have helped even more here. They are working to automate our most frequently used precedents, so that lawyers save time and reduce risk. But what is more, we are aiming to make our knowhow available, not in an abstract searchable library, but in context, integrated at the right stage of the matter, and applied with minimum hassle. 

Know what your client wants

It is easy to say, but there is a lot to be gained by asking clients how they work, what they value most, what their pressure points are. One way into the client’s world is through business process. How can we  deliver legal advice so that it fits with the client’s internal business? In an ideal world, we aim to intertwine and map the journey from beginning to end. We have done this most successfully to deliver collaborative extranets for clients, their customers and counterparts, giving access to automated document delivery, alerts and workflow, so that not only do we save our own time, but we save our clients’ time too.

This is a great example of KM as part of improved delivery. KM should not be a mere adjunct to the business, but it should be integral, so that both the firm and its clients profit from knowledge. 

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