Link Between KM and Profitability – Profits for Partners, 31 August 2010

2010-01-08T00:00:00

Colin Cameron, President of Profit for Partners, shares his thoughts on this important concept and refers to the KM experts Virtual Intelligence VQ.

Below are some extracts from Colin Cameron's article "The Link Between Knowledge Management and Profitability". You can find the full article here.

"Did you know there is a direct link between Knowledge Management (KM) and Profitability for law firms? In addition, did you know that this link exists right at the top of the profit pyramid, where the impact on profitability is the greatest?

KM systems organize the information that lawyers need to develop and maintain their specialty practice areas. KM systems also allow lawyers to innovate the way they provide legal services to clients. Finally, KM systems add value to legal services delivered to clients. See here for further information from KM experts such as Ann Björk of Virtual Intelligence VQ in an article ["A strategic imperative"] from KIM Legal magazine.

KM provides clients with exactly what they want - lower overall legal costs - while allowing law firms to increase effective rates on the legal products and services they are providing to clients. KM allows law firms to turn legal knowledge databases into products that can reused over and over. This allows law firms to invest for the future like other businesses, and not just build fiefdoms of partners who are only in the enterprise for their own gain. This is where most KM initiatives usually fail, as many partners can't get past the short-term impact to their numbers by compensation systems which are driven by short-term results at many law firms. It takes some work to convince partners that the KM initiative will truly benefit them in the long run. Forward-thinking Managing Partners and Compensation Committees will take into account these long-term investments of legal knowledge by partners who contribute to the development of great KM systems. Firms can start small and simply bonus partners who provide significant contributions to the KM initiative. See the article from KIM Legal article magazine noted above ["A strategic imperative" by Ann Björk of Virtual Intelligence] for further ideas on how to approach the KM contribution/compensation issue.

KM contributes significantly to greatly increased profitability in law firms by driving and supporting higher Rates, which is the factor that has the biggest impact on law firm profits.  I believe that once law firms truly understand this, you'll see many law firms revisiting the KM concept.  In combination with the drive for alternative billing models which clients are clamoring for today, law firms should be able to utilize KM to help clients reduce their overall legal costs while driving their own profits higher.  In this way KM really can be the "the missing link" you've been searching for to dramatically increase law firm profits."

Colin Cameron is the founder of Profits for Partners, Management Consulting Inc. Colin has been advising professional service firms for more than 25 years and led a law firm to become one of the most profitable firms in British Columbia. For more information about Colin Cameron and Profits for Partners, please see here.

All news