How to Build a Knowledge Management System: Manage Files Right, Right from the Start

Reprinted from:

By Ed Poll

Published 05/01/2005

Major corporations in Canada increasingly demand that their outside counsel have effective Knowledge Management (KM) systems. Knowledge Management refers to the systematic organization of the firm's entire work product, prepared for all of its clients, so that the collective research and advice of all lawyers are available to each lawyer.

Clients no longer want their lawyer to reinvent the wheel. Once you've done the research, or created the template, the client doesn't want to pay for others in the firm or another firm to re-create it. No matter how proprietary lawyers want to be, work product is not the intellectual property of the law firm. As work for hire it is the property of the client, they should receive the full benefit of it.

Cost Efficiency

The KM driver is cost efficiency. Once a large corporation pays for work, it does not want to pay for it again to another lawyer or law firm on another case in another part of the country. Corporate clients live in a world that favors and rewards continuous improvement. Contrary to popular image, the corporate goal is not simply to cut legal costs by a stated percentage. Corporate clients are willing to pay for quality work, but will not pay for inefficiency or waste of time from duplication of effort. Effective KM eliminates that duplication.

Technology

The old KM concept was to look in your file cabinet and pull out the paperwork of your last deal or pleading. Computerized KM systems make the information available faster and more completely. But the process only works when the information is classified and categorized consistently and from the start, by all lawyers in a firm.

Life Cycle

The foundation of KM is the recognition that every record of information in a law firm – every brief, pleading, contract and form prepared for each specific matter – has a life cycle that encompasses five stages:

• Creation, by the individual lawyer
• Distribution, to other lawyers working on the same matter
• Maintenance, of the physical or electronic file that contains the work product during the time that the matter is active
• Retention, by deciding the value of each record in a file and whether it should be kept
• Preservation, in a shared electronic database so that the record can be searched and retrieved.
• Effective KM requires that each of these five steps be approached systematically and universally.

Resistance

That aspect of KM runs contrary to the viewpoint of many lawyers. In small or solo law firms the thought historically has been: "I know where the files are and what's in them; why should I make the process of accessing them unnecessarily complex?"

In larger firms many lawyers believe that managing a file is not billable time, particularly after a transaction or case is completed, and so they either do not do it or do it incompletely. There is also somewhat of a reluctance to use potentially billable time for a task that could give another lawyer a greater bonus than your own.

Both viewpoints are totally at odds with the effective KM system that corporate clients demand. Overcoming them will require most firms to take totally new approaches to the organization of work product, and to the values that attorneys bring to collaboration.

Organization

The first requirement for effective KM is to be organized in a work file right from the start. You cannot create work product haphazardly, wait until a matter is closed, then try to organize the information after the fact.

Best practices require every firm, whether one lawyer or one thousand, to create a standard classification system for each lawyer's work. There should be separate physical and electronic folders for correspondence, memos, forms, briefs, and emails (which have vital information but frequently are forgotten or ignored). Every folder and document gets labeled with the client matter.

At the end of the matter ask the client what they want from the file (and keep records of authorization and dispersal). For all information that the firm retains:

• identify precedent documents that can be used in future matters and ensure that they are both identified and easily accessible
• make it a policy to begin all new matters by reviewing the precedent file
• review and include opposition or third party documents that might have useful precedent forms or information for future use.

Following such processes makes KM a built-in part of every matter. The fact that more firms are using shared document management systems, such as iManage and Docs Open, and shared e-mail files in Outlook makes the effort even more feasible. Systematic organization eliminates haphazard, after-the-fact efforts that fail to make and keep precedent documents accessible.

Values

A tougher barrier to effective KM is the perception on the part of some lawyers that the classification effort is a waste of billable time, or even a threat that lets other firm members use your own hard work to increase their compensation. Such holdouts diminish the value of KM for clients and colleagues alike. Bringing them on board can require three major cultural changes:

• Eliminate the "eat what you kill" mentality. Encouraging lawyers to maximize their individual compensation, and thus to ignore tasks like KM that have an institutional benefit may create a few rainmaking superstars. But a willingness to approach compensation and business development as an institution makes for firm longevity.

• Emphasize value, not billable hours. KM means faster turnaround from engagement to completion. It adds value and provides solutions to clients. The worth of the KM effort, not its cost in billable time, is the key to making the time devoted to KM become meaningful to both lawyer and client.

• Understand that "professional" means "businesslike." A law firm that is run as a business will approach client service more efficiently in a variety of ways that sharing information through KM supports – returning phone calls promptly, creating and adhering to budgets, providing sufficient details on invoices. You can't truly be a professional service business until you practice "The Business of Law."®

Necessity

I believe Knowledge Management will be the future issue that separates the successful law firm from the marginal (and soon to be extinct) one. KM has tremendous potential to serve the client and make our practices more efficient. If we change our mindset and conceptual framework so that KM can work effectively, it creates a commitment to excellence that will make any firm more successful.