It’s all about the money

Jakob Arffmann takes a look at how in-house lawyers choose their law firms and what knowledge management has to offer when it comes to selection.

A recent report published by the International In-house Counsel Journal (IICJ) sheds light on some very interesting issues when it comes to the background for clients’ choice of law firm. The full report can be downloaded here: www.iicj.net.

Not surprisingly, the clients look at price, and they expect discounts or some sort of fixed fee. It is particularly interesting that clients bargain on a case-by-case basis – and not only because they deliver a vast volume of cases.

Even less surprising is the fact that in-house lawyers will most likely do more legal work in-house – outsourcing only non-commodity tasks to law firms, such as litigation (and some other practice areas).

Further, clients are becoming less loyal and will thus review the market for possible alternatives – especially if the service (or price) is not as good as expected.

Finally, market reputation seems to be a deciding factor when choosing between law firms. Those firms that stand out in the market will have a good chance of attracting assignments, even if they don’t have a global presence.

But, you may ask, what relevance does this report and its conclusions have to knowledge management (KM)? In my opinion, it’s actually rather a lot.

First of all, I argue that KM should be seen in a broad context, linked to both training and business development as is the case in a number of law firms. KM should be recognised as the function that ensures a flow of information on internal, external, legal and non-legal issues, rather than merely a group of people responsible for managing documents. By non-legal issues, I mean information about the client(s) and the market. In the perfect KM system, learning that a client is about to enter into a new line of business should lead to initiatives being taken to ensure that:

The lawyers are up-to-date on this new business area; and,
The client is aware of this, too.

Second, the fact that the traditional pricing structures have come under pressure clearly demonstrates the value of effective knowledge sharing – simply because most clients are not willing to pay for their lawyers reinventing the wheel. To stay ahead (or keep our heads just above water), it is necessary to have processes in place for the effective sharing of both explicit knowledge (extracted into templates and precedents) and tacit knowledge, which can often be transformed into more tangible knowledge via live interaction, meetings, training sessions and so on.

Finally, it seems likely that KM will become a criteria that clients will look for when choosing a law firm – due to the obvious link between price and efficiency. Accordingly, KM must be at the forefront of every serious law firm. Nevertheless, if you browse through the websites of most of the big law firms, you can easily find a junior associate in Kuala Lumpur, but you will have difficulty locating the firm’s KM department.

So what should law firms do? The firms that already have knowledge sharing structures in place should review them to ensure that they support the overall business objective of that particular firm – and perhaps go through the statistics to see how (or even if) the fee earners use the system.

The law firms that have not yet implemented formal knowledge sharing structures may very well have informal structures in place – and if so, it could just be a question of formalising the efforts already being made. In other words, we are not necessarily talking about investing in complex IT solutions.

It could be as simple as saying that the law firm has an open door policy – meaning that fee earners are welcome to drop by to discuss the legal conundrums to which the clients expect quick and cheap(er) answers.

Whether or not law firms have complex knowledge sharing structures in place, they should definitely consider if they could make KM more visible. Who knows, in a few years the tagline might be ‘We share our knowledge’ instead of – or in combination with – ‘We care about the environment’.

Jakob Arffmann is an attorney and knowledge manager at Norrbom Vinding. He can be contacted at jakobarffmann@norrbomvinding