Lately I've been thinking about whether law firms value knowledge management and how to measure knowledge management ROI. The underlying concern is that law firms don't know how to measure and value knowledge management activities. (If you ask most law firm knowledge managers if their firms are doing a good job valuing KM, I suspect you'd receive only negative answers.) And, allied with this is the concern that knowledge managers don't know how to assist this effort in a meaningful way. We often just throw up our hands and say that it is impossible to measure the ROI on knowledge management. Or, we bury law firm management in an avalanche of useless statistics regarding our activity rather than demonstrating true productivity. And then, we slink back to our corners and feel sorry for our undervalued selves.
Stepping back from that a little, I wondered whether there was a way to separate some basic human tendencies from the economics of law firm life. For example, is it a basic human tendency for all but the most arrogant of us to feel as if we are not properly valued for all the wonderful contributions we make to our organizations (and the world, the universe, etc.)? After all, how many of us actually ever have our egos stroked sufficiently??? If so, how does this color our assessment of our KM contributions? From the perspective of the organization, does the firm even know what it is spending on knowledge management? Does it know what it ought to expect for that investment? And, does the firm know how the lawyers value the results of that investment?
All of this came into sharp focus when I read a report of a recent airline initiative to charge $15 for the first checked suitcase and $25 for the second. Suddenly, the cost/value of having extra clothing and gear options on a trip became very stark. What if we were to charge $150 (or some other amount appropriate for the purposes of this exercise) for the first use by a lawyer of the KM system and $250 (or some other amount) for each subsequent use? Assuming we priced this correctly, and made these personal charges rather than client billable charges, would we then see what value lawyers placed on the KM system?
As long as KM systems are free to users, will those systems always be taken for granted, undervalued, and criticized? Conversely, if these systems are expensive to the user, will we have a better way of judging their true value in the firm's internal market? Now let's slink off into our corners and ponder those questions rather than feel sorry for our currently undervalued selves.
May 24, 2008
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4 comments:
I think most KM, as well as most legal IT, has a direct negative ROI for lawyers that bill by the hour.
Most systems allow attorneys to produce better work product, more efficiently. If I can find a better precedent so that it only takes 1 hour to produce a document rather than 3 hours, that is 2 less hours of billable work. Add that 2 lost hours to the time it took to save and catalog that precedent and you have a direct negative ROI.
Of course this is a cynical view. Nobody thinks that clients are willing to pay three hours worth of time for a task that should have taken one.
You try to look at write-offs and realization rates, but many other factors could be attributed the reductions.
You can look at client retention, quality of life, better client service, and better attorney retention, but now you are really just guessing.
The analysis changes dramatically when you look at fixed price billing and "alternative" billing arrangements. But those are still fairly rare in big law firms.
Doug -
I understand why the cynical view is hard to resist. However, I do believe that if we could come up with some concrete ways of valuing the work we do, we and our firms would be rather pleasantly surprised. At a minimum, personally billing lawyers each time they take advantage of the KM system would at least remind them that they did find the KM resources helpful. The fact that this billing is notional rather than actual doesn't detract from the usefulness of putting dollar amounts to KM resources.
- Mary
Mary -
My concern about charging is that it would deter people from using the system.
I do not plan to fly American not because of the charge for the bag, but because of the impact of other flyers not checking their bags. I would guess that there will be a dramatic increase in people bringing bags on board instead of checking them. I envision longer boarding times as flyers try to cram all of their luggage into the overhead bins.
I would prefer to reward people for using KM tools and operating more efficiently. The challenge is how to measure that efficiency.
While charging for use of KM systems may seem a little drastic, it isn't much different than charging for use of firm resources for personal purposes. And, lawyers certainly are accustomed to the notion of racking up a bill for using online research services, although those bills get sent to the client not the lawyer.
In each of these cases, the lawyers use the resources despite the charge because it makes sense at the time. In other words, the benefit outweighs the cost. As long as the KM systems are providing a real benefit, lawyers shouldn't be deterred from using them just because there is a price tag attached.
As mentioned earlier, I'd be happy for these KM charges to be notional -- the lawyer is presented with the bill, but is not actually expected to pay. The idea is simply to make concrete for each lawyer the value that lawyer has derived from the KM systems.
You're right when you say that rewards are a more attractive option and that we face a big challenge in measuring the efficiencies resulting from the use of KM systems. Until we conquer this particular hurdle, we are asking our firms to take on faith the idea that KM is beneficial.
- Mary
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