August 18, 2014
- Cost Effectiveness
These have not traditionally been the watchwords for law firms. But with the shift in the legal market, clients have done more to take the reins, leading to ever-increasing price pressures for law firms.
Of the items clients have identified as sources of value for them, efficiency is perhaps the area where law firms can do the most to boost their profitability.
The “widget” a law firm sells is its attorneys’ time. Each hour lost to inefficiency is a widget that can never be resold to another client. This is becoming acutely more true as Alternative Fee Arrangements become an ever larger portion of law firm revenues (19% in 2013 according to the Hildebrandt and Citi Client Advisory).
A market study completed by Thomson Reuters a few years ago showed that a junior associate in a large law firm lost an average of 94 hours per year to write-downs simply due to time they spent researching that they could not bill to the client. And it is not unique to younger attorneys. Partners wrote down an average of 98 hours per year.
It is a safe assumption that a lot of this lost research time is time spent “getting up to speed.” I have spoken with countless attorneys over the years who were spending hours trying to find examples of filings to use as a drafting guide or a primer on a particular legal issues.
Law firms can help limit the amount of time lost to this type of background research through effective knowledge management. This article from Nick Milton makes the argument that knowledge is actually divided into two different concepts: “Know-what” and “know-how.” As he defines it: “Know-what is about knowing facts, know-how is about understanding actions and processes – understanding what to do with the facts.”
A firm’s knowledge management strategy has to incorporate both. Know-what comes through the library and online legal research resources. Know-how comes from online sources of exemplar documents and practice guides, and also from a well-maintained repository of internal documents that attorneys can use to help prevent the need to recreate the wheel.
Giving attorneys access to an effective suite of knowledge management solutions will help to limit the amount of time it takes to get up to speed. This results in fewer lost hours, leaving more hours to make money.
Clients are more willing to pay an attorney to draft documents and develop arguments. The faster an attorney can get to that stage, the more opportunity they have to maximize not only revenue, but also profit.