Legal Knowledge Management (KM) gives firms a competitive edge, supporting more efficient and effective operations. With clients demanding greater value, efficiency and quality of services, KM is essential for firms who want to meet client demands and compete.
But how exactly does effective KM improve the bottom line? In this article, we break down three core examples of the benefits of legal Knowledge Management for law firm profitability.
It is often cited that it costs five times more to attract a new customer than to retain an existing one. With legal clients demanding more from firms, it is now more important than ever to focus on building long-lasting relationships with clients to maximise their value.
In an ever-competitive landscape, law firm clients expect lawyers to not just understand their case, but their broader needs and context. Minimising time spent on administrative tasks such as document creation, effective KM enables fee-earning staff to focus on higher level work such as building long-lasting relationships with clients, learning more about their needs and how they can be met through legal services. Research by Frederick Reichheld of Bain & Company reports that increasing customer retention rates by 5% can increase profits by 25% to 95%, so it is clear that investing in client relationships is a key source of profitability firms.
What’s more, with past advice and relevant expertise easily found via the firm’s trusted knowledge bank, fee-earners can provide tailored support and build on customer satisfaction, maximising the client’s Customer Lifetime Value (CLV).
Legal KM improves profitability for the wider firm in terms of processes and workflows, however it can also have a positive impact on a case by case level. Effective KM can be particularly beneficial for fixed fee cases, given that the fixed fee for services remains static no matter the level of fee-earner input required, or the actual hours worked on the case.
By centralising key knowledge assets into a firmwide knowledge bank, you can minimise time spent on due diligence, drafting, administration and other tasks. A powerful knowledge search solution can also reduce time spent on related processes such as searching, validating information and locating experts for support, enabling firms to minimise the amount of fee-earner time required to achieve necessary outcomes. With this, staff could incorporate more fee-earning work into their day, using saved hours to work on more cases, directly improving profits and positively impacting the bottom line.
With the legal industry document-intensive, reduced document production times can have a real impact on firm profitability. Effective KM can support improved operational efficiency by optimising processes, such as information search and precedent retrieval. Such repeated non-billable tasks are essential for creating the contracts and agreements clients need, but these tasks are relatively low-value and in many cases are not an efficient use of fee-earners’ time.
By centralising precedents, you can significantly reduce the time needed for fee-earners to create client documents. Ensuring staff have easy access to approved precedents, models and standard clause assets eliminates time waste, improves efficiency and often reduces response times. With effective knowledge resources at fee-earners’ fingertips, KM supports lawyers to draft new documents with greater consistency and quality, reducing time spent on rectifying errors.
In some cases, effective KM has enabled firms to take this one step further, improving profitability by handing document production over to lower cost lawyers, who can use approved knowledge resources to ensure documents are consistent and of quality. However, firms can also use improved knowledge access to reduce the amount of fee-earner time and energy expended on ‘reinventing the wheel’ freeing up staff to focus on valuable higher level thinking such as innovation projects.
Higher productivity translates to improved profitability. In an economic landscape with increased competition, KM is an affordable approach for reducing time waste and maximising the output of the billable hour. Whether focused on document production, expertise location or the value of relationships, legal Knowledge Management can positively impact the bottom line and provide a sustainable competitive advantage for the future.
Tiger Eye are the leading iManage Partner for Knowledge and Technical Expertise. Contact Tiger Eye to learn more about their knowledge tools for iManage including Tiger Eye Blueprint: the knowledge curation, collation and collaboration solution seamlessly integrated with iManage Work.
To discover how leading law firms have approached Knowledge Management, explore Tiger Eye’s KM Conversations series via their website.
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