The legal services market is facing unprecedented change. New entrants are emerging, offering a wide breadth of services. They are stepping up the level of competition for business from ever-more-demanding clients. Most firms acknowledge that, whilst current business performance remains strong, they need to react to these market forces to safeguard their long-term success.
Legal firms need to exploit all kinds of information and knowledge to the full, if they are to be successful in this challenging environment. IT, therefore, is an area where firms must invest and where they should strive to gain the maximum return on investment.
A new survey by PA Consulting Group, in conjunction with Legal Week, looks at how the major law firms in the UK are using IT as a management and competitive weapon. The survey, targeted at both Managing Partners and IT Directors of the Top 100 law firms in the UK, was carried out during the latter part of 2001.
Law firms claim good value from IT – but are they right?
The survey showed that law firms currently spend between two and ten percent of their turnover on IT each year, the average being 5.5 percent. When benchmarked against other information intensive sectors, some firms are undoubtedly investing too little. And, whilst the overwhelming majority of respondents believe their firm receives good value for money from its IT expenditure, this is not fully supported by measurement. In fact, only just over 50 percent of firms measure the value or the level of the IT service they receive. Without measurement, it must be difficult for firms to be absolutely sure they are getting full value from IT.
Standard infrastructure, non-standard applications and increasing mobility
There is large-scale adoption of standard Microsoft solutions for desktop applications – with 94 percent using Microsoft applications for word processing, 74 percent for databases and 60 percent for messaging and group-ware. Hummingbird and iManage are clear market leaders for document management and HotDocs for document assembly. There is no apparent market leader in other applications – client relationship management, searching, portals, practice and financial management, collaboration.
An increasing number of firms are investing in or considering mobile technologies such as wireless LAN (60 percent) and Bluetooth (25 percent). Almost all firms are integrating hand held computers (the legal sector has one of the highest penetrations of such devices) and Palm and iPaq are clear market leaders. Firms are increasingly supporting home working (78 percent of firms), hot desking (22 percent of firms) and videoconferencing (68 percent of firms). Technology is indeed being implemented to support changing ways of working.
Are firms spending too much in search of perfection?
The survey revealed that client portal and knowledge management (KM) are the two areas of greatest activity in the near future (cited by 27 percent and 30 percent of the survey sample respectively). We will return to KM later, but it is clear from the survey that investment there is not bearing fruit.
In terms of client-facing systems, some clients are already demanding secure Internet-enabled collaborative working areas in order to have real-time access to documents and information. In response many of the leading firms have invested heavily in developing electronic deal rooms and portals for their clients. The survey reveals that such systems have generally been developed in a ‘bespoke’ fashion.
The development of these non-standard systems may become unacceptable to clients who use several firms and are unwilling to use a different systems with each firm. Unless there is some form of standardisation, more clients will develop their own deal rooms, which they will expect their law firm of choice to use. This may render existing law firm systems, and the investment made in them, obsolete.
Furthermore, there are signs that the large players in the software market, such as Microsoft and Lotus, are also promising standard solutions that may provide some of the functionality of these bespoke deal room systems. So once again the investment in bespoke systems may not deliver best value.
When compared with other sectors, legal firms ‘bespoke’ more of their IT solutions in other application areas. This may lead to too much being invested in the search for the 100 percent solution, when an 80 percent one would deliver the benefit with much less risk.
IT investment needs to be better linked to business vision
Crucially, the survey shows that there could be a mismatch between the strategic direction of IT and the business, and many issues suggest that IT investment could be better directed, and made to give a higher return.
Clearly, the full value of IT is only realised when it supports the overall business objectives and where business and IT leaders of the firm have a common view of those objectives. However, the survey revealed that only 65 percent of business leaders think that IT receives a clear direction from the executive and only 45 percent of IT leaders think this direction is clearly stated. Furthermore, whilst 65 percent of business leaders think that IT understands business needs, fully 82 percent of IT leaders think they know what the business wants. These figures should be the same (and higher).
It is, therefore, essential that the firms’ leaders invest more time and effort in engaging with IT leaders to ensure that there is a common view on business direction and objectives. Without this, IT cannot deliver optimum benefit to the firm as a whole.
Business vision itself needs to better communicated
However, the business vision itself is not being clearly communicated throughout law firms. For the firm to operate most effectively, the clear business vision needs to be understood and accepted by all staff. Only when this is done can IT systems be designed and implemented to deliver full benefit. However, whilst 93 percent of firms believe they have a clear business vision, only 60 percent believe that this vision has been clearly communicated to staff.
The survey also showed that firms believe it is important to work as an integrated and consistent whole. 80 percent of firms believe they have a global brand, 60 percent have teams that span geographic boundaries and 55 percent expect global working to grow.
However, further evidence of an absence of in depth communication and understanding of business vision is seen when we look at how this vision is brought to life. Although strategic direction is clear to the leaders of the firm, few firms have driven this through into working practices and there is a lack of cohesive firm-wide processes and technology supporting the business objectives. Currently 73 percent of firms have no firm-wide standard operating procedures and 53 percent have no firm-wide management information system.
Senior management attention needs to be focused on building systems that ensure that all staff can do the right things in the right way. IT systems should serve to embed the right processes in the firm, but without clearly communicated processes and procedures this in unlikely to be successful.
A similar picture emerges when we look at how staff are rewarded and motivated. There is a general awareness of the need to manage staff well and all firms know that they need to attract, retain and reward top quality staff. However, only 60 percent of firms believe that their staff have personal objectives linked to the success of the firm and only 54 percent reward all professional staff based upon their individual contribution to profitability.
Objectives and goals for individuals must be consistent with the overall business objectives. Additionally, aligning individual objectives with those of the whole firm is more likely to generate value to the firm when technology is implemented and used.
Furthermore, the measurement of commercial value or other key indicators of business performance is not carried out constantly. Although almost all respondents monitor value delivered to the client, only 47 percent measure the delivery of each client matter against quality, time and cost metrics. This lack of constant quality checks could result in the client being disappointed in the service provided and little can be done to rectify the situation.
Looking forwards, clients are making increasing commercial demands that in turn make the disciplines of commercial and quality management more important. In the future, 60 percent of firms believe they will be doing more fixed fee work and 80 percent recognise that they must deliver this work at lower cost.
This will require good project and commercial management. However, the survey results suggest that the necessary competencies and approaches are not present in many firms. Just 60 percent manage client matters as a project and the same number see project management as a core competency. Firms need to develop the competencies to monitor and measure key performance metrics all the time.
Make a step change in management techniques, supported by a knowledge framework
Law firms need to make a step change in the way they manage themselves. Whilst the objectives of the firm may be clear to its leaders, the implications of these objectives are not widely understood, nor are they translated into the processes and procedures that IT systems can support.
One explanation for the failure of key strategic initiatives to deliver is that information is fragmented. Although the survey shows that most law firms recognise the fundamental need for some kind of knowledge management initiative to collate and share all the company’s intellectual capital, most firms appear to have difficulty ‘bringing it all together’. Only 31% of business respondents (and only 21% of IT respondents) think that their knowledge management investments are bearing fruit.
Knowledge management works most effectively when linked back to business objectives, using the processes and exploiting the reward mechanisms that are currently absent from many firms. The survey suggests that knowledge management may not be working because of the wide range of IT applications and systems in use in law firms. Information and IT are fragmented and do not easily support a firm-wide knowledge base.
Law firms must manage information, and information technology, within a consistent firm-wide knowledge framework. Such a framework delivers an effective knowledge management design and implementation programme. It shows where the programme is headed and where each element fits into the bigger picture. The programme will inevitably consist of multiple elements – technology, business change and culture – which need to be integrated and delivered over time.
Furthermore, increasing competition suggests that law firms should act now. The competition is becoming smarter and new entrants are using IT to offer increasingly attractive packages to both staff and clients. The technology employed plays a major role in driving towards operational efficiency and being able to offer different business models such as Internet only services, volume transactions at low cost and overseas fulfilment. All firms know that they need to provide innovative services to clients and there may be a role for IT in developing and delivering those services.
Strong and visible leadership is vital
In order for the whole firm to work as a cohesive group, it is necessary to communicate and ensure understanding of fundamental principles that support the firm’s objectives. For IT to be effective, it must be implemented to support these principles directly, so that staff can do the right things, in the right way.
In many firms, the principles are clear to the leaders but, as the survey shows, the processes that bring these principles to life are not. There is an opportunity now to use the IT development process simultaneously to generate the processes themselves, and to automate them, thereby embedding them rapidly into the standard way of working.
A project such as this needs strong personal commitment from the top of the organisation. It is not a technology, operations or HR issue - it will not succeed if top management delegate responsibility to a support group.
These changes are a starting point for senior management – whether in IT or business functions – to work together to deliver value, rather than focusing on total cost or the innovative aspects of the technologies. The results from these and subsequent improvements will lay the foundations for a sustainable change to value-based IT for the firm.
