By Ron Friedmann, July 2001
A condensed version of this article was published in AmLaw Tech, September 2001
Forward thinking law firms recognize that investing in knowledge management can improve their competitive position, increase profits, and make law practice more fun. To gain these benefits, some firms hire a Chief Knowledge Officer (“CKO”). The CKO’s mission and work, however, is not always well defined. This article proposes a mission statement for the CKO. To understand the work required to support the mission, the article discusses what knowledge is and what the CKO must do to manage it. The potential pay-off of a successful knowledge management effort is illustrated by some examples. A concluding section makes some suggestions on how a new CKO should get started.
The CKO’s Mission
The CKO helps improve client service and the results achieved for clients, thereby supporting revenue growth and sustaining or improving profitability. More specifically, the CKO improves service and results by creating systems and processes to:
- Facilitate and foster collaboration
- Discover, document, and disseminate the best approaches to the process of law practice
- Identify experts within the firm and help lawyers and clients find these experts
- Capture work product systematically and allow its re-use
- Empower lawyers to manage and analyze information more effectively
- Deliver the law firm’s know-how and advice to clients digitally
- Measure the results of and continuously improve knowledge management efforts
What the CKO Manages — Defining Knowledge
The CKO manages knowledge. But what is knowledge? One type — the one on which most lawyers focus when they consider the question — is written work product. Written work is often called explicit knowledge. Another type of knowledge is typically not committed to writing. For example, lawyers have valuable “process” know-how such as how to run a deal or how to depose a witness. Unwritten know-how is called tacit knowledge. The distinction between the two types and the implications for managing each become clearer by examining how lawyers create the explicit and how they obtain the tacit.
Explicit Knowledge (Written Work Product)
Lawyers create written work product by following a series of steps. The next few paragraphs propose a “mapping” (an explanation or model) of these steps. This map, like most, does not show all details. Moreover, the steps may not be as distinct as suggested. Nonetheless, a simple map helps illustrate how explicit knowledge is created:
- Chart the terrain. Lawyers write documents to solve client problems. To do so, they must start by understanding the context of the problem. This can require background reading on the law or an industry as well as discussions with clients, colleagues, and other parties.
- Find the “ore.” Once they understand the terrain, lawyers look for primary sources and/or examples of work product from related problems. Legal publishers, online news sources, prior deals or term sheets, clients, and many other external and internal sources supply this “ore.” Reading in detail is not the goal; rather, it is identifying potentially useful sources and collections.
- Mine and refine the ore. Lawyers must “mine and refine” the ore for documents, legal arguments, deal terms, persons, dates, or facts relevant to the problem. They winnow a large collection of documents to a small one. In addition to reading, lawyers frequently tap experts in the firm and collaborate with colleagues.
- Process refined ore into finished product. Lawyers further process the refined collection — read, analyze, compare results, and develop arguments or deal terms — to create written end products (e.g., legal research, client memos, court filings, or transaction documents). Processing typically requires collaboration of many individuals, both in and outside of the firm.
- Deliver the end products. Delivering a document typically triggers discussions with a client, negotiations with opposing parties, or arguments before an adjudicator. These discussions may occur throughout the life of a matter. Whether or not oral discussions are directly reflected in the written works, they often form an important part of the end product.
Knowledge management proponents often focus mainly on capturing and re-using written product. To be sure, doing so is valuable. Such a limited focus, however, misses many opportunities to improve the process of creating written works and to capture and re-use other valuable know-how. And that is why understanding tacit know-how is essential
Tacit Knowledge (Unwritten Know-How)
As mentioned, tacit knowledge is unwritten. Lawyers obtain tacit know-how from experience; they synthesize it slowly over time. Tacit knowledge can be discovered, identified, and documented by examining and mapping how lawyers work.
One type of tacit know-how is embedded in creating explicit work product. The steps outlined above are an example of a process mapping. Examining the process can identify steps where tacit knowledge can be captured. For example, “finding the ore” often means searching online legal databases. Seasoned practitioners apply substantive know-how to conduct better searches than do junior lawyers. Junior lawyers have difficulty, however, accessing the tacit know-how of their seniors. It might be possible to save “expert” searches for re-use, along with comments and a rank of usefulness. Similarly, as lawyers “mine and refine,” that is, review and read search results, their comments could be saved digitally and re-used by other lawyers. Today, lawyers’ thoughts about individual documents are often lost, even to the reviewer.
Another type of tacit know-how — one that is probably more valuable — relates only indirectly to the knowledge creation steps outlined above. Rather, it relates to processes that affect client service. For example, it may be possible to identify, map, and document best practices for such processes as acquiring new clients and new matters, managing client relationships, negotiating terms and settlements, running a matter effectively and efficiently (including budgeting), knowing whom to consult to help solve a problem, billing in a way that maximizes the likelihood of collection, training junior lawyers, and counseling clients effectively.
Identifying, mapping, and documenting these processes is not necessarily easy, but there is tremendous potential to capture know-how that can be re-used for the benefit of both the firm and the client.
How the CKO Manages and Delivers Knowledge
This article has so far offered an expansive view of the CKO’s mission and what knowledge is. Commensurate with this broad view, the CKO must aspire to create an environment and infrastructure with several distinct elements:
- Motivation and incentives
- Intellectual and marketing framework
- Organization and staffing
- Appropriate technology and tools
- Feedback systems to measure success and failure
- New business models for delivering know-how directly clients
Note the use of the words “aspire to create” immediately above. Realistically, a CKO can accomplish only so much in a given time and in a given organizational environment. The goal here is not to specify the minimum requirements for success; instead, it is to suggest the broad reach a CKO could achieve over time, supported by small successes along the way.
Motivation and Incentives
Selecting and running appropriate software and systems can be difficult. The bigger challenge, however, is creating motivation and incentives to share and collaborate. Consequently, the CKO needs to be as much a diplomat and evangelist as technology expert.
Absent an environment that encourages and rewards sharing and collaboration, the best technology can lie dormant. One key element of the environment is the active support of leading lawyers in the firm, typically managing partners and practice area heads. A second element is a partner compensation scheme that encourages sharing and collaboration. And a third element is an associate review system that gives real weight to contributing to and using knowledge management systems. The CKO needs diplomacy and persuasion skills to gain lawyer support to create this environment.
Creating the right environment is necessary but not sufficient for success. The CKO also needs to evangelize to encourage sharing and collaboration. This means visiting lawyers regularly to encourage new ways of working. And evangelism does not mean hectoring. The CKO needs to find multiple means — for example, office visits, brown bag lunches, accounting reports that measure sharing behaviors, presentation of favorable “war stories,” and coordination with firm training staff — to engender shifts in how lawyers produce their work.
Intellectual and Marketing Framework
Knowledge management needs a substantive and business framework that is consistent with the goals of the firm. On the substantive side, knowledge must be organized according to how lawyers think of the law generally and how the particular firm thinks about its own practices. The best way to create this framework is to build a “taxonomy,” that is, a hierarchical structure of topics. This structure helps store knowledge and, more importantly, helps lawyers find it when they need it. The CKO needs to oversee development of the taxonomy.
On the business side, the CKO must have a marketing mentality. Marketing here does not mean selling. It means determining what knowledge is most important to the firm based on how the firm holds itself out to clients. In other words, the CKO must apply business sensibility to determine how much to expend to capture and share particular types of know-how. For example, if a firm has a one-time need to research aviation issues, it may not pay to invest much to capture systematically all the know-how gained. In contrast, if health care is a critical practice area, then it may pay to invest quite a bit to capture the work from even relatively small health care matters.
Organization and Staffing
Just as the CKO must work closely with lawyers, he or she must also work closely with staff departments. The CKO needs to work closely with the IT department to make sure the technology elements work. He or she should work with the Library to help in all phases of knowledge management because librarians have unique training in finding and managing information. Working with Finance is important to develop metrics that can help determine the success (or failure) of knowledge management initiatives. And Marketing is important so that successful initiatives can be translated effectively into benefits that help position the firm and win new clients and matters.
The successful CKO probably also needs dedicated staff. Conducting pilot projects may be possible using staff in other departments. But assuming staff in other departments is generally fully utilized, a serious knowledge management program is not likely to succeed without additional headcount. On the technology side, technically trained staff may be necessary to evaluate, select, configure, and run specialized software. On the content side, dedicated librarians may be needed to create and maintain taxonomies. And non-practicing lawyers may be needed to review briefs and transaction documents and to annotate them.
Technology and Tools
Many technologies can help create, capture, and re-use explicit knowledge (written work product). Examples include document management and full-text retrieval for managing work product, software that facilitates collaboration and working remotely (e.g., joint drafting combined with project management), templates that guide legal research and that identify appropriate sources, document assembly systems, and systems that automatically deliver relevant information to lawyers. Increasingly, access to these and other tools is provided via a firm-customized “portal,” that is, an easy-to-use Web page that provides links to content, firm information, and tools.
Working with other departments and/or dedicated staff, the CKO must oversee the evaluation, selection, installation, configuration, and integration of appropriate systems. Sometimes commercial off-the-shelf software is readily available, inexpensive, easy to integrate, and easy to learn. Sometimes, however, creating the right technology tools can require custom software development or extensive integration of multiple vendors’ products.
Once software is installed, it frequently must be “populated” with content. Once it has content, a process needs to be in place to keep it current. Of course, just building systems is not enough — training lawyers to use them is essential. The CKO must oversee the entire process, from selection, through content management, to training.
Separately, the CKO also needs to develop ways to capture and disseminate tacit knowledge. The CKO should identify key business and substantive processes and then analyze, document, and share within the firm the best practices for each one. For example, in most firms, a key process is identifying colleagues who are expert in legal topics, clients, or industries. A CKO can supervise creating a database of substantive expertise (by survey or by using software that automatically scans e-mail messages and infers expertise based on the contents). To identify and manage expertise in clients, a CKO may need to help a firm install a customer relationship management system.
Another example of a key process is managing large matters. Some partners do this well and others do not. Documenting the best practices and sharing them is a challenge, but one with a potentially high pay-off. Anthropology is as important as technology in such efforts. Anthropology uncovers the seemingly hidden process while technology allows capturing, communicating, re-using it. For example, a combination of spreadsheets and project management software could “encode” some processes.
Feedback Loops: Measuring Success
Creating knowledge management systems requires time, effort, and money. To sustain this investment, there must be a pay-off. Thus, the CKO must create a “positive feedback loop” that makes it clear that the effort is worthwhile. To do so, the CKO must develop metrics. The metrics could be based on firm billing data, surveys of the firm’s lawyers, or client feedback. Agreeing on a “measuring stick” at the outset allows both the firm and CKO to assess results and adjust investments as necessary. Initially, developing metrics and evaluating performance may be as much about a structured way of engaging lawyers and ensuring feedback as it is about any absolute achievement of specific goals.
Business Models for Delivering Know-How to Clients
The CKO should also help the firm deliver its services directly to clients. Ultimately, this may be more valuable than an internal focus. Many clients now expect access to work generated for them via an Extranet. Extranets can also deliver alerts and other useful information to clients. But Extranets today are little more than an alternate to e-mail for delivering documents and updates.
Forward-thinking law firms can go beyond today’s Extranets to create self-service systems for clients. These systems can intelligently collect information, provide “first-cut” diagnosis of legal problems, generate finished documents, or actually answer client questions. The CKO needs to help the firm develop not only the software and processes to build such “answer machines,” but also the business models that would support them. As the market evolves, the CKO has the potential to become a profit rather than a cost center. [The author offers a more detailed examination of business models in an article titled “Web Sites that Think Like Lawyers” in the September 25, 2000 issue of the New York Law Journal.]
Examples of the Benefits of Managing Knowledge
Law firms that are considering hiring a CKO or implementing a knowledge management system may wonder what kind of outcome to expect. While positive results are not guaranteed, the experience of early adopters of knowledge management suggests that the benefits can be significant.
Clifford Chance has received significant positive press coverage for developing a suite of online advisory services, including “NextLaw.” The firm also invests in managing knowledge internally and making that know-how available to clients. Paul Greenwood, Director of Knowledge and Information Management, reports that “[a]t Clifford Chance we are increasingly turning our in-house knowledge databases into online client services. By offering them to clients we gain greater leverage and a win/win situation. Clients gain very cost-effective instant access to multi-jurisdictional guidance; Clifford Chance receives revenue and follow-on referrals; our knowledge base is enhanced because we can re-invest the revenue and because these services are visible to clients there is never any problem in getting attorneys to contribute.”
BryanCave recently created an online advisory system for international trade. Its Trade Zone site collects information from clients about the import or export of goods, indicates potential problems, and connects users to Bryan Cave lawyers for further assistance when appropriate. John I. Alber, a partner and the person who oversaw creation of Trade Zone, reports that “[w]hen lawyers talk about knowledge management, they too often limit their focus to existing, tangible work product–memoranda, briefs, forms and the like. The trouble is, knowledge in a fixed form like that may bear only tangentially on a client problem. Very often, to be truly useful to clients, knowledge must be broken apart and repackaged, and that can require a huge commitment. Bryan Cave’s TradeZone (SM) is an example of that. The lawyers who created that used existing work product only as source material. Essentially, they had to catalog all their knowledge in a particular area and then shape it into discrete branches on a decision tree. Only then was it truly useful to clients. That kind of effort is at the heart of knowledge management, and it’s not easy or quick. When you use this approach and create a solution that is on-point for a client, the pay-off is extraordinary, both for the client and the law firm. It is certainly worth the effort.”
Lucent Law Department
In recent years the Lucent law department has created a formal program to capture, share, and re-use know-how across the department. At the PLC Conference on Legal Intranets in London in Feburary 2000, Lucent lawyers W. Preston Granbery and Joost Wiebenga presented a paper reviewing this project. At the time, Mr. Granbery, a senior Corporate Counsel today, served in a role similar to a CKO. One element of Lucent’s program was to create “Communities of Practiceâ€¦ small self-directed teams of lawyersâ€¦ given substantive responsibility within a well-defined subject matter area.” They are charged with discovering and sharing best practices and knowledge within their substantive domain. Lucent found that “if you put lawyers in an environment where their job is to share knowledge within a narrow subject area, they are infected with a culture of knowledge sharing which spreads to everything they do.” Another element of the program is an Electronic Forms Book, “which contains form documents for a large percentage of what the Lucent lawyers do in their day-to-day practice, forms that reflect Lucent’s position and the latest learnings from Lucent’s experiences.” Lucent has invested significantly in these and related initiatives. Lucent found that “[t]he time saved in the use of the electronic forms book alone justifies the costs incurred, and that is not even counting the value to the clients of the increased responsiveness and consistent quality of the legal services they receive.”
A Leading Consultant to Law Firms
Marc Lauritsen, a lawyer and president of Harvard, Mass.-based Capstone Practice Systems, has been building and writing about document assembly, expert systems, and other “legal knowledge systems” for over 15 years. He has seen many firms achieve significant productivity gains by consolidating some of the explicit and tacit knowledge of a practice group into intelligent applications. “Some of our clients have found that processes previously requiring a person-day or two can be accomplished with equal or greater quality in an hour or less. Systematizing the routine aspects of legal work often yields surprising improvements both in efficiency and job satisfaction.” As for the economics, Lauritsen reports that some firms felt market pressure to reduce costs to keep existing clients while others were able to make a good return on investment through fixed fees or other innovative arrangements. But success is not guaranteed. “It’s key to pay attention not only to technical concerns but also to the cultural and organizational issues. Screw up on either side and you will not achieve the benefits.”
A new CKO should start with a few simple steps:
- Develop a list of priorities in consultation with practice heads and other influential lawyers. This is a process of both gathering information and beginning to sell new ideas. This is also a good time to begin the process of developing metrics.
- Establish an initial organizational structure and assess available resources. This requires reviewing the reporting relationships in and staffing of Information Technology, Library, Marketing, Records Management, and other departments that help manage information. The CKO should work with firm management and the Human Resources department to execute changes if necessary. With this assessment in hand, the CKO can begin the process to win approval for additional resources (e.g., staff, software, consulting, or database services).
- Achieve visible successes, particularly the rollout of at least some new Web-based tools. In most firms, there is a fair bit of “low hanging fruit,” that is, new information services that can be quickly executed. Making some short-term changes that are valuable to lawyers is essential to gain institutional credibility and support.
- Simultaneously with the above, develop a mid-range and long-term plan and start gaining support for it from the partnership.