Are you ready for a CICO?

By Friedrich Blase, principal, Edge International

Law firms continuously attempt to ‘become more like the corporate world’. That is dangerous. My colleagues and I came to call it the trap of innovating the firm into history. Law firms have a record of adopting practices and ideas from corporate role models, which the latter are abandoning. Some examples: blown-up central marketing functions – going; colourful mission statements – going; complicated matrix structures – gone. And in law firms? Some are still seeking those solutions and often do so by hiring managers from the corporate world to show them how.

Here is an alternative idea. What law firms need, I would argue, is a good chief intellectual-capital officer (CICO – sometimes pronounced ‘psycho’). These individuals would, effectively, be in charge of the firm’s future. And you can not find them in the corporate world, yet.

Like any business, a firm’s future is largely based upon its ability to realise profits from its assets. In 1980, the total assets on the balance sheets of all Standard & Poors 500 companies equated to 80 per cent of their total share value. In late 2002 – after the internet bubble burst – they made up less than 30 per cent. The rest are intangibles, also referred to as intellectual capital. Accountants and managers of the corporate behemoths are struggling to make this value visible and, more importantly, manageable.

Law firms tend to manage their intellectual capital poorly. Not because they don’t invest in its growth (they do, massively), but because they have not understood the principles of management required to see it grow effectively. Here are the cornerstones:

1. Intellectual capital breaks down into three categories:

Relational capital – the firm’s clients, its network connections, its brand – usually addressed by the firm’s business-development efforts;
Human capital – the legal advisory and management abilities of all its professionals. Usually addressed by the firm’s professional- development efforts;
Structural capital – the solutions, tools and processes that the firm offers its professionals to do their jobs. Usually addressed at least in part by the firm’s know-how development efforts.

2. These three areas are interdependent and, therefore, are all needed to develop the firm’s future earnings potential jointly – not separately. To segregate marketing from training and knowledge simply wastes resources and leaves potential in professionals untapped.

3. Overseeing the firm’s future development efforts is a role assigned to either the managing partner (in small firms) or the CICO. The mandate is to develop the firm’s intellectual capital through better client relations – being served by better professionals and with better solutions and processes.

4. When push comes to shove, the development work in marketing, training and know-how cannot be undertaken merely with the input from the professionals themselves. Therefore, the CICO and their team must concentrate on working with the professionals individually, as well as in the groups in which they are organised.

5. The CICO’s team are former professional support lawyers, internal trainers and marketing staff who work together to assist the professionals and complement each other with their legal or market expertise.

Now, I understand that the role of CICO may not be likely at most firms. But would it not be a nice if law firms innovated something, which the corporate world could then copy?