Friday, 2 October 2009

KM in law firms - the impact of new billing structures

Drive Thru LAWYER !
Originally uploaded by brookenovak
Mary Abraham's, in her excellent Legal KM blog, has just delivered a series of posts on new billing structures, and how they will impact the work of the lawyers (see here, here and here).

She concludes, in a report on ILTA’s "Using Technology to Manage Costs, Increase Profitability and Support Billable Hour Alternatives" session, that "bare discounts are going to have a negative effect on a law firm’s profitability unless that firm significantly trims its costs of delivering legal services"

The session, with it's focus on technology, went on to list various technologies which they feel can help cost reduction, including search, blogs, wikis etc.

Now internal cost reduction has been a KM focus for years and years, for very many industries - automotive, oil and gas, manufacturing. Ford, with it's $1.25 billion cost reduction through BPR, BP with it's $260 m in a single year, Chevron with its $2 billion in 7 years, Texas Instruments with its "free fabrication plant"; all focused on internal cost reduction.

KM methods to address these costs have not been purely technological. Simple processes such as After Action reviews, Peer Assists, Quality Circles, communities of practice, Lean manufacturing and the like have been very effective in reducing internal production costs. Shell's Technical Limit process regularly reduces drilling costs by 40%, for example. In each case, technology goes hand in hand with process, with accountability, and with governance - the complete holistic KM model.

Perhaps now is the time to rethink KM in legal firms, focusing not just on technology, but also on process and on roles and accountabilities; focusing not just on improving content to clients, but on radically reducing the cost of the internal workings of the firm as well. This is a time of huge opportunity for the first legal firm that can revolutionise internal process using KM, in the same way that other sectors did a decade ago. It won't be easy - it certainly won't be as simple as buying a better search engine or setting up a wiki - but there is enough history from successful KM implementations that it should be possible to get it right.

The prize will be to become the first legal firm to offer big discounts to its clients, without hurting the profits for its partners.

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