A Dialog about Clients Paying for KM
I previously posted about an upcoming Legal Tech session that will examine whether clients should pay for aspects of KM. This topic led to an interesting e-mail exchange with Guy Borda, an Associate on the Defense Systems Team at Booz Allen Hamiltion who works on KM issues.
I started the exchange by raising the idea of clients paying as an agenda item for a local KM meeting. Guy asked a question in turn, which led to several rounds of messages. Reproduced here, with editing limited to correcting typos, is our exchange:
Ron: If the [upcoming KM meeting group] will indulge me, I’d like to take a few minutes to discuss the idea that clients should pay for some portion of KM. At Legal Tech in NYC on Jan 31, I will moderate a session with Jeff Rovner (KM at Clifford Chance) and Christian Liipfert (senior lawyer, BP) on this topic. Would love to get feedback from group on some of the topics I plan to raise then.
Guy: Can you elaborate on what you mean by clients paying for the KM?
Ron: The best example is at the close of a matter, it would often make economic sense, I think, for lawyers to collect key documents and lessons learned and catalog them systematically, including providing meta-data descriptions and taxonomical categorization. That rarely happens now and it’s not even clear it would happen were it a billable activity. The client would benefit by having a set of high value documents, meta-data, and possibly “lessons learned” summary. The law firm would also get to re-use the material. The reason law firms are looking primarily at automated KM approaches (e.g., Recommind) is that there is no motivation to identify documents for re-use or to describe what a matter was about (independent of the underlying documents that were produced for it).
Guy: It does. And, I couldn’t agree with you more. Although, if I compare what you just wrote to the previous email… are you saying clients should pay for the lawyer’s inability to conduct KM?
In our space, IT and strategic consulting, we reuse as much as we can for our benefit (e.g., responding to RFPs, RFQs, RFIs, marketing, outreach, and more), and for the benefit of our clients (e.g., design, requirements, development, operations, analysis, and on and on). Reusability of our materials, documentation, methodologies, and software is key to our success.
Our big problem is that we don’t change our own culture, no amount of automation will resolve the underlying KM issues… people’s willingness to share data, catalog data, expand beyond their existing social/professional networks, use web-based KM methods are still barriers to entry.
Ron: I would not argue that “clients should pay for the lawyer’s inability to conduct KM”. My argument is more that the “inability” is really an economics issue, specifically that in a time-based billing world, lawyers have no incentive to spend time on KM when they could be billing other clients. If they could bill for their time at the close of a matter to assemble, catalog, and describe key elements of the work, then they would more likely do it. There are issues of course, as some of the benefit of that work accrues to the firm as well as to the client. But a lot of the work a lawyer does for one client ultimately accrues to the benefit of other clients, so it’s not obvious an after-matter KM task is all that different.
Of course, the real problem may not be economics. In corporate law departments – and for that matter, consulting firms – which do not typically operate on a purely hourly billing model, the economics ought to be cleaner. That is, if investing in KM really had a return, it should just happen. So that leaves several possibilities:
1. KM does not have a good economic return and individuals are making correct and rational decisions about how they spend their time
2. KM does have a good return, but individuals are simply irrational
3. KM does have a good return to the enterprise, but from an individual perspective, the returns are not adequate and institutions have not figured out how to deal with this externality problem
If, as you suggest, non-hourly organizations cannot figure out how to motivate individuals to engage in KM that benefits the institution, then I have little hope for hourly billing law firms. This is one of the points I want to make at Legal Tech – if law departments can’t do KM because of cultural barriers, why do they expect their outside counsel to do so?
PS – It would be interesting to see if clients in fact did allow lawyers to bill for some KM if those lawyers would actually do the KM work.
Guy: Interesting. I like points one and two. I think depending on the organization and business, either or both could apply. One of the ways we’ve kicked around trying to shake-up this lack of KM culture is by revamping our competency assessment process. Our current process is extremely detailed and we evaluate our consultants (yearly) based on a number of criteria related to their performance. However, we do not currently rate them with regards to their ability to share knowledge, conduct knowledge management, or even implement knowledge management measures or methods.
We have about six levels in our firm before someone becomes partner. And, for each of those levels we’ve discussed assigning KM metrics related to performance (e.g., someone posted 99% of their documentation into the firm’s enterprise KM portal, or someone assigned metadata to each document they develop over the last six months). This would be one way of slowly trying to change the culture. The extreme (which we are not yet pursuing) resembled an “up or out” model, except for KM it was going to be a “publish or perish” model… meaning get your content/documentation published to the KM portal if you want to be considered for advancement.
Ron: In general, I think it’s fair to say that people do what they are compensated for or what they find fun (and the latter is, by economists, considered psychic compensation). Unless KM is somehow “baked in” to other processes that workers must do and remains an extra step, we have to be concerned with motivating them to do it. I don’t see how to bake it in, so that leaves KM as an extra step. If we want it done, we must compensate/evaluate for it. My recollection is that McKinsey has a good KM system and seriously considers KM activities in performance evaluations. That, to me, is the answer.
As a consultant at Bain & Co I worked with one client that wanted to change the product mix sold to increase margins. We did lots of analysis and had grand plans for how the mix would change. They told sales people what the mix should be but were unwilling to change sales compensation. Not surprisingly, the mix did not change. Sales people sold what maximized their commissions, not company profit. The moral is you get what you compensate for.
The alternative to changing behaviors and compensation is to try to substitute technology for human action, which is the direction most large law firms are moving. That, or hiring a few people whose job is KM but who are not actual practitioners.
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