Know it all: The new KM strategy at Allen & Overy

Knowledge management that goes beyond document standardisation is a tough challenge for most law firms, but Allen & Overy was keen to focus not only on the capture of existing knowledge, but on the creation of innovative content.

By David Jabbari

We launched our new knowledge strategy in 2005 (see figure one), which has two central themes, entitled ‘insight’ and ‘toolkit’:

Insight is about new knowledge creation – producing innovative content aimed at strengthening and deepening client relationships;
Toolkit focuses on knowledge capture – gathering and sharing our core knowledge to ensure lawyers can navigate quickly to key transactional tools.

Why insight?

Much of the traditional debate about knowledge management (KM) in the legal profession portrays knowledge as an inert ‘thing’, which can be captured, edited and distributed. KM is therefore often seen as rather boring, back-office work preoccupied with indexes, IT systems and a ritualised nagging of senior fee earners to contribute more of this ‘thing’ to online systems.

The challenge we set ourselves was to look closely at how knowledge is created, not just at how it is captured. Seeing knowledge as an activity, rather than as inert matter, our interest became the way in which distinctive insights may be created and deployed to deepen client relationships. What matters most to us is the creation of opinion-based, well-researched knowledge, which offers a position on complex questions affecting our clients.

For example, it is not enough for our knowledge staff to follow developments in financial law and regulation, important though that is. These developments need to be analysed in the context of market trends, such as the growth of hedge funds and private equity, or the convergence of securities and loan markets. Finally, if we are to update clients about developments in the law or regulation, we should have, at the very least, made the effort to relate it to their organisation and its business, and this requires detailed research into their areas of trading activity, growth priorities and so on.

We don’t see these issues as outside the proper terrain of KM. We are therefore seeing a much greater convergence of KM, business development and business-research functions, in a joint pursuit of superior business intelligence. This is not to say that the capture issues are unimportant or unchallenging to us – far from it (see ‘toolkits’ below) – but this focus on insight is what we see as a differentiating factor in our approach to KM. What underpins our thinking?

Talent before process

If you pick up any copy of a McKinsey Quarterly or Harvard Business Review, you are likely to find an article engaging with one or other of the following themes:

Globalisation, information technology and shrinking transportation costs mean that labour-intensive production is under pressure in high-wage countries;
Anything that can be standardised or commoditised will be subject to intense competitive pressure on price and eventually moved to a low-wage environment;
Modern complex businesses have a greater need for talented workers, doing things that cannot be automated, to boost their productivity and competitive advantage.

Indeed, issue four of the 2005 McKinsey Quarterly looked specifically at the last point, suggesting a revolution in business staffing, towards so-called ‘complex interactions’. These are jobs that typically require people to deal with ambiguity – there are no rule books to follow – and to exercise high levels of judgement. Such roles require people to draw on deep experience and insight, often called tacit knowledge. While more complex interactions are tacit, more routine roles can be seen as transactional. Most jobs, of course, mix both kinds of activities.

According to McKinsey’s research, during the past six years, the number of US jobs that include tacit interactions as an essential component has been growing two and a half times faster than the number of transactional jobs, and three times faster than employment in the entire US economy.

To put it another way, 70 per cent of all US jobs created since 1998 – 4.5 million, or roughly the combined US workforce of the 56 largest public companies by market capitalisation – require judgement and experience. The balance is tipping towards complexity, in part because companies have been eliminating the least complex jobs by streamlining processes, outsourcing and automating routine tasks.

There is, of course, a message for KM here. If the source of value is increasingly complex interactions, which draw on insight rather than routinised knowledge, the KM function in a law firm must foster a culture in which insight is created. It is quite wrong to think that because insight can only come from senior transactional lawyers – this is generally correct – there is no role for knowledge staff in procuring it (see figure two). The people with the greatest capacity for insight in any firm will be the busiest. Organisations such as McKinsey go to great lengths to facilitate the exploitation of the insights of these busy people through editorial practices, such as presenting them with ghostwritten first drafts of insight pieces.

Stuck in commodity thinking

Present-day KM in law firms tends to be a combination of commodity and experience-based approaches. These terms are taken from management theory on professional-service firms, which organises firms’ capabilities on a spectrum from ‘commodity’ at the left to ‘expertise’ at the right, with ‘experience’ in the middle. The idea is that over time firms will drift to the left because pressure from clients and competitors turns yesterday’s lucrative cutting-edge expertise into today’s experience and tomorrow’s commodity. The theory goes that firms will want to avoid over-dependence on commodity in favour of cutting-edge work because of factors such as fee rates, the productivity levels required to get a decent return, and the risk of de-skilling lawyers.

The theory is over-simplistic because much of what appears to be commodity work is often highly complex or flows directly into cutting-edge work. It also takes no account of the realities of offering a full range of services to large clients in areas such as banking and finance. But the theory is useful as a way of deciding where the KM activity of a law firm should be directed.

For example, the commodity approach encourages improvement in the efficiency of lawyers, through a focus on standard-form agreements, checklists or, more adventurously, automation of drafting and other working practices. The experience approach suits those areas that are less standardised, and focuses on the capture and utilisation of past experience; for example, searchable know-how databases, taxonomies, deal-precedent systems, briefings etc.

A good KM strategy must be flexible enough to provide high levels of support for these different requirements. But there is an increasing awareness that commodity or experience approaches have been too dominant in law-firm KM. The need to foster complex interactions with our clients requires original thinking about the core skills of those involved in KM work in law firms.

Old and new order

Another way of explaining the move to insight is to think in terms of an ‘old order’ and a ‘new order’ in KM. The key features of the old order are that KM is:

Linked closely to the research function and to information categorisation;
Concerned largely with updating (law or standard agreements) and the production of briefings;
Something that ‘belongs’ to professional support lawyers (PSLs);
A support to existing client relationships;
A support to e-business;
Not about the way lawyers actually advise or manage deals;
Tied to IT and search technology (so much so that some see KM as a branch of IT).

Insight-based KM is less about capturing and applying past experience to present problems, and more about how a law firm can differentiate itself through distinctive knowledge. The key features of this new-order approach are that KM is:

An integral part of business development and e-business thinking;
Much less concerned with routine information gathering and briefings;
The joint responsibility of partners, associates and know-how lawyers;
The largest part of what ‘added value to clients’ means;
One of the drivers of innovative e-business products;
A partner with finance in improving the management of deals;
Tied much more to people networks than IT systems.

What’s behind the new order?

1. Client relationships

First, there is a growing awareness that firms can only differentiate themselves by their distinctive expertise and their approach to client relationships, not by strong transaction management experience alone. We articulate this as operating at the pinnacle of practice – doing the most interesting and demanding work for the most interesting and demanding clients. This is not just about differentiation in a marketing sense but about proving premium value to clients and resisting any move to view law-firm services as simple commodities. Demonstrating thought and expertise leadership in core practice areas is vital and an important counter-weight to the idea that the expertise sold by law firms is a commodity. The link between knowledge and relationship levels is demonstrated in figure three, with the high end being trusted-adviser status.

2. No room for generic updating

Second, the bulk of law firms have recognised that much of the routine updating provided internally, and to clients, is becoming a generic commodity that delivers no competitive advantage. Some firms have gone as far as to outsource some of the legal updating that would have been a cherished possession of know-how teams. Again, there is a feeling that we must focus on the content that distinguishes us by reference to our unique expertise and knowledge of our clients’ concerns. This becomes particularly important as legal publishers and other industry groups attempt to aggregate the content of many law-firm publications in single ‘publications portals’.

3. Being at the cutting edge of legal and market developments

Finally, and implied by the above comments, it is a key part of our strategy to maintain thought leadership in our practice areas, both at the execution and strategic end of our clients’ concerns. It is not acceptable to say that PSLs can initiate and manage this activity. Partners and senior associates have to join with senior know-how staff in discussing the forefront of new developments in the law and the market, by being closely involved in consultation processes on new legislation, market practice etc.

This is also part of ensuring that PSLs gravitate to these tasks and see them as equally important to the routine maintenance of experience-based knowledge. Senior know-how staff can play an extremely valuable role in ensuring that a firm is the first to identify the implications of new legal and market developments. Box one demonstrates some of our new thinking on knowledge staff roles. This has been used to design an entirely new career progression for our PSLs, with promotion now dependent on demonstrating higher grade skills.

Allen & Overy’s toolkit

Few in law-firm KM are unfamiliar with Philip Wood’s celebrated ‘Fountain Guides’. Wood, former head of the A&O banking practice and head of know-how, codified large parts of the firm’s transactional work into concise practice manuals. Ever since, A&O has been very serious about the need to distil its core transactional knowledge. The aim is to exploit the competitive gain of being a truly global firm, rather than an alliance, serving our clients in whatever way and wherever they need premium legal services (see box two). The ‘toolkit’ stream of our KM also picks up on two important aims of our general knowledge strategy, which are described below.

1. Profitability: To be an efficient service that increases the profitability of our practice areas

This aim recognises that there is still a valid role for KM in building efficiencies around those parts of our work that have standard elements. The ‘drift to the left’ described earlier means that the cycle towards commodity is a natural one in law firms, particularly in finance work where many standard product lines started their life as highly bespoke types of work. Sometimes it is right to move out when a service becomes very standardised but often it is right to stay in – for example, to maintain the proper relationship with the client as a trusted adviser on the full range of issues in a particular area. KM has a very valuable role to play in making the more commoditised work streams as efficient as possible, for the benefit of clients and the firm.

As well as fairly straightforward things like improving automated document assembly, better time recording for PSLs, access to know-how and expertise through the fee-earner desktop within defined times, this aim also promotes greater integration of KM and finance. KM should work to ensure that standardisation crosses not only documentation but also processes, working practices and product areas. The challenge is to reconcile the need to promote standardisation in certain areas with an overall KM strategy that promotes creativity and insight.

2. Risk: To manage risk in our advice and documentation

A KM strategy must align with the efforts of law-firm compliance professionals to manage risk, given today’s numerous legislative and regulatory interventions, from insider dealing to copyright policies. Insight is also highly relevant here because while being fully cautious of all risk areas, lawyers must continue to advise clients confidently. As I have heard it put: "The requirement is to be creative but also to be right." Risk issues are also extremely high on clients’ agendas and offer great opportunities for law firms to provide insightful thinking.

David Jabbari is global head of know-how at Allen & Overy LLP. He can be contacted at david.jabbari@allenovery.com

Toolkit projects for 2006

Re-design of the fee-earner interface to our online know-how to create improved access and use;
Roll out of our new ‘wiki’ software to provide collaboration spaces where knowledge on new legislation and specialist practice-group content can be shared (this follows successful pilots late last year);
The re-launch of the Fountain Guides in a new format, incorporating e-learning.

What differentiates a great professional support lawyer?

The things that matter now at Allen & Overy

Establishing context: goes beyond routine information gathering and research so that A&O remains at the pinnacle of practice;
Commercial creativity: ability to see patterns in disparate information, identifying underlying issues and opportunities for our clients;
Internal and external client focus: consistently asking the ‘So what?’ question in relation to knowledge material;
Taking initiative: alertness to future possibilities and the drive to act now to keep A&O ahead of the game;
Communicating clearly: ability to organise thoughts and research in a systematic, methodical way;
Developing others: commitmentto a long-term learning and development culture;
Authoritative influence: ability to influence others by personal thought leadership;
Collaboration: ability to work across internal silos to deliver superior services.