Masterclass: Capitalising on the upside of the downturn

Heather Robinson explores the use of knowledge management techniques in a recession.

In the UK, the legal press catalogues the list of redundancies and jobs under threat, The Times tells us “There are no green shoots as recession bites”1 and the Daily Mail reports that “Hundreds of jobs are axed as UK’s leading firms battle recession”2. The global economic downturn is a reality. This might seem like a bad time to be talking-up the benefits of knowledge management (KM), but this change of fortunes presents opportunities as well as dangers to both the firm and the knowledge manager.

The impact of a recession on law firms
Fifteen years ago recession caused law firms to experience depressed profits, widespread redundancies and withdrawal from unprofitable practice areas. The combined result was a loss of trust, skills and markets. Recovery took time and the damaging effects were still being felt by some organisations many years later. The positive outcome was that partnerships recognised that well-managed businesses not only survived, but were better positioned to take advantage of new opportunities that had arisen. They also benefited quickly from the recovery. What firms needed was the foresight to identify new growth combined with the ability to adjust quickly so that they could capitalise on that growth. Firms began to take management practice and business planning seriously, and it is no coincidence that KM began to take off in many law firms around this time.

Strategy and business planning
A recent YouGov Centaur survey of almost 2,000 legal professionals reports that only 35 per cent of partners and 15 per cent of associates feel secure in their jobs. While many individuals are worried about redundancy, retaining the firm’s best talent can also become a challenge in a recession. Good partners and staff will look for a firm with a clear direction and a strong presence in its markets. A firm that fails to present a clear and effective strategy may find its best staff migrating to their competitors.
Those responsible for KM need to understand the firm’s strategic objectives as these dictate which initiatives will be supported. They also need the skills and opportunities to influence the firm’s decision makers. Strong links should be made with HR, finance and business development, with whom the KM team needs to work in order to develop an effective KM strategy. There are a number of potential issues that require forward planning on the part of the firm and to which KM can contribute. These may include:

Identifying who does the work if partners or associates leave. Supporting the training of more junior staff and helping to manage the cost and time taken to retrain staff;
Ensuring that inductions, processes and tools are in place to maximise efficiency and maintain quality, enabling the firm to improve flexibility through the use of temporary staff;
Developing best-practice tools and technology to support commoditisation or improve leverage. Helping practice areas to maximise productivity, especially where resources are restricted or redundancies have taken place;
Providing research and current awareness services to support market analysis and identify new trends;
Understanding which knowledge resources are required to enable client-facing lawyers to capitalise on new opportunities, then working to make these available;
Providing access to the information that will enable the firm’s leaders to make decisions quickly and effectively.

Roles
Support work and client-facing activities are usually incompatible. However, a slowing market can give an organisation time to innovate and to recognise the different strengths and talents of its people. While there may need to be redundancies to manage costs and preserve profitability, many firms recognise that they need to retain skilled personnel if they are to take advantage of any growth or recovery. These staff need to remain busy, challenged and motivated, and involvement in a KM project is one way to achieve this. There are a number of roles that can be adopted.

The KM contributor
Contributing to KM is an added responsibility for the majority of staff. Methods of coaxing, rewarding and supporting staff involved in knowledge creation and sharing need to be considered.
Credit the contribution made to KM by acknowledging the author. This identifies individuals internally as experts and, by giving them ownership, encourages them to maintain and update their contribution.

Client-facing support lawyers
A temporary change in job description for selected client-facing lawyers will enable them time to manage and develop know-how for their practice group. This approach is valuable in difficult markets, when client-facing work slows as it helps with building the firm’s intellectual assets ready for the upturn in work.

Know-how holidays and secondment
Provide an opportunity for client-facing staff to take time out to review and extract the know-how from files at the end of transactions or other critical points.

Training and mentoring
With cost management at the top of the agenda training budgets will be under review. This is a good time to explore more innovative routes to personal development. Establishing a coaching and mentoring scheme, and encouraging collaborative learning ensures that lawyers are trained, but also gives the coaches and mentors experience of directing and developing another professional, which are useful skills for the supervisors and leaders of the future.

Client services and business development
It is always important to stay close to your client, more so in a downturn when they are likely to become more mobile and less loyal in the search for a better, cheaper deal. A client’s need for legal services will not go away, but they are likely to spend only on services they deem essential so it is important that the firm is seen to be making a relevant contribution to that client’s business. One positive change is that there is more time to ask the client what they want, and therefore an opening to provide a more bespoke service. The KM team, junior lawyers and business managers have the opportunity to get involved with the client to provide more training, review the content of newsletters, or offer additional advisory services, such as creating a knowledge bank.

Career development
Developing the firm’s know-how is an important part of business development. Anyone serious about promotion should be able to demonstrate their technical ability and commitment to the firm through relevant know-how contribution. Client-facing lawyers who find their workloads lightened have the benefit of developing their skills and knowledge in core time and with the support of their supervisors.

Cultural barriers and constraints
In a downturn, KM is aiming to redeploy under-utilised lawyers to improve operational efficiency. The challenge is to get decision makers in the firm to agree the level of buy-in required and to get individuals to see this as a valuable use of their time. It is an often-repeated truism that as a knowledge-based professional-service organisation, dependent on people and their skills, a law firm can only benefit from KM so its culture should be conducive to KM practices. In reality KM initiatives often face a number of cultural barriers which can prevent their successful implementation. In a recession it is important that relevant information is immediately available so that the board can make decisions and act quickly. It becomes more imperative that obstacles to this are acknowledged and removed. Recognising the values, behaviours and expectations of client-facing lawyers will help in identifying potential barriers; clarity about which barriers exist will enable the KM team to develop a workable plan for overcoming them.
Many cultural barriers are common to law firms and they are created in part by the time-based billing model combined with personal compensation models, which reduce the benefits of increased efficiency and reward the individual, not the firm. Under these models, client-facing lawyers are encouraged to focus on the profitability of their own practice area and are less inclined to spend time growing the profits of the wider firm. Individual offices and even practice groups are likely to operate as independent business units, within a common infrastructure. The business model perpetuates selfish behaviours as it provides limited incentives for individuals willing to invest in non-billable activities, share their knowledge or their clients or to find more efficient ways to work. This means that common reasons for not responding to KM opportunities include:

Too busy;
There are no ‘brownie points’ for non-chargeable work;
I am the expert and my knowledge is power;
This work is unique and of no value to others;
I am afraid of negative peer reviews;
Not invented here, we have our own way of doing this;
Short-term deadlines are more pressing than long-term goals.

Professionals are driven by the needs of their clients, the needs of their organisations and their own personal needs, which can be summarised in the phrase ‘what’s in it for me?’. The rules that previously defined ‘business as usual’ have changed and there is a need to challenge and manage expectations to ensure that the firm aligns with its markets. Success in achieving behavioural change will depend on agreeing an outcome that is mutually beneficial even though the steps to reaching it may not be ones all practitioners wish to take.
Different organisations will find their own ways of achieving this, but it is always important to identify and promote the benefits. The risks and costs must also be addressed and an honest appraisal of these will make KM’s arguments more credible. Start with projects that appeal to decision makers. These are likely to be activities that can be seen to directly improve commerciality or productivity – for example, identifying and pursuing new sources of revenue or developing information systems to support the firm’s bids or tenders process.
Motivation and rewards must also be given thought. If salary is dependant on revenue generated and revenue generated on hours billed, then there is a message that time invested in KM is time wasted. For the individuals involved there should be alternative, acceptable goals and incentives agreed. These will be important in appraising or promoting staff and in negotiating rewards and bonuses. ‘Naming and faming’ helps junior team members to develop their professional reputation, while active involvement in KM helps to develop personal knowledge and skills and can be used to progress a solicitor’s personal development plan when resources for training and other forms of development may be limited.

Benefits
Less work gives people time to think and to innovate. Innovation can be used to give an organisation a competitive advantage, but there are two sides to the argument as to whether it is wise to invest time and resources on new products and services in recessionary times. In the short term firms will prioritise activities that generate immediate payback, but it is also vital that they plan for the longer-term. If resources are unavailable it is still possible to generate small, incremental improvements that will provide benefits into the future.

Performance measures
Measuring the performance of your new knowledge-management output is vital to ensure ongoing support and buy-in. It is often difficult to isolate KM’s impact, but if you don’t measure it, you cannot value it. In a difficult market it is important that KM and the firm agree what success looks like so that you know when you have achieved it. Establish the criteria against which the system and the individual will be measured. These may include:

Knowledge outcomes – for example, a specific set of precedent clauses;
Financial measures;
Feedback from the group benefitting – for example partners, solicitors or clients.

Measuring can also be used to break down cultural resistance to KM – for example by justifying investment, demonstrating value for money, raising the profile and status of KM projects and people, gauging satisfaction and building trust. Use specific indicators, such as feedback, usage or web logs and competitor benchmarking to measure success and encourage temporary knowledge workers to provide evidence of value by keeping a record of positive comments, sharing success stories and regularly reviewing their work with end users.

Forward planning
PwC’s ‘The law firms’ survey 2008’ informs us that: “Management teams are now facing the most challenging economic environment for a generation. … The focus now will be on protecting firms’ relative positions, to be able to come out of the downturn in a position to exploit what, will undoubtedly be, a very different landscape for law firms…”.
The imperative is for each firm to forward plan and manage its business in order to emerge from the recession stronger and ready to capitalise on the recovery. This means retaining its ‘known for’ status in core practice areas, maintaining its profitability, and creating growth in the geographic, industry or practice areas that offer it the best chance of success. The role of the KM team is to support this by remaining aware of both the challenges and opportunities that are being presented to the firm so that they can help to develop the resources and skills which will enable the firm to achieve its goals.

References and further reading

http:\\business.timesonline.co.uk/tol/business/economics/article/5447297.ece
http:\\dailymail.co.uk/news/article-1087744/hundreds-jobs-axed-UKs-leading-firms-battle-recession.html
Price Waterhouse Coopers The law firms’ survey 2008, PWC 2008
P Zeughuser Does your law firm have what it takes to be recession resistant, American Lawyer Online 2007
R Epling How law firms can stay afloat when recession strikes, American Lawyer Online 2005
B Nussbaum 10 worst innovation mistakes in a recession Business week Online, 2008
T Davenport Recession the next big thing, Harvard Business Press Online, 2007
T Davenport The year ahead: make better decisions, Harvard Business Press Online, 2008
S Hoare Chill wind blows as two-thirds of law firm partners admit job security fears, The Lawyer 2008
L Dillon KM in a Changing World TFPL Connect, 2008

Heather Robinson is head of information services at Bevan Brittan LLP. She can be contacted at heather.robinson@bhevanbrittan.com