Last year's Legal IT survey, Benchmarking Technology in the Global Economy, carried out by PA Consulting Group in conjunction with Legal IT, revealed a technology 'value' gap. Technology departments felt they were providing the firm with the right solutions at the right price, ensuring that the firm managed its business effectively while keeping costs low. Many partners, however, failed to see or understand these technology solutions and the value for money they offered.
At the forthcoming Legal IT forum at Gleneagles, PA's John Kay will present the findings from this year's survey - revealing the legal sector's views on IT and the value companies perceive from their current IT investments. In this article PA takes a look at some of the initial findings - and gives its view on the challenges that law firms continue to face.
Generally, clients continue to experience relentless and fundamental change, and law firms must now face the very same issues if they are to survive. Firms need to achieve excellence in three key areas:
- Managing the delivery of client value
- Managing its people
- Managing the firm itself.
The only way to tackle these interrelated areas successfully is through an integrated, firm-wide approach. Equally important is total commitment from those at the top of the firm, to ensure that change is long lasting and that the required return on IT investments is achieved.
Managing the delivery of client value
A key starting point here lies in a clear understanding of the end-to-end value that the firm brings to clients - and the ability of all in the firm to articulate that value. Only then can the firm be in control of the end-to-end value that every client returns to the firm. This can be built up through vigilant management of each relationship from contact to cash, supported by a firm-wide information system capable of providing the necessary transparency on client value.
The firm can then focus on its high-value clients - an essential part of increasing profitability. Rigorous management of the client relationship will also enable the firm to ensure its working practices reflect clients' needs. This must be backed up by management of client satisfaction.
Our preliminary findings indicate that still less than half of firms manage and measure the successful delivery of each client matter and less than half have a structured approach to collecting formal feedback on the work performed.
Managing people
A key factor in managing people is having a clear link between an individual's performance, their contribution to the success of the firm and the resulting level of reward. This should apply across all personnel - from the post-room to the boardroom - to ensure that all are doing the right things in the right way and creating value for the firm in the process. The result can be a 'virtuous circle' in which the reward structure encourages better performance, which in turn enhances the profitability and prestige of the firm, which feeds back into higher rewards for individuals.
Our preliminary findings indicate only half of firms responding to the 2002 survey believe their staff have personal objectives linked to the success of the firm, and still only around half reward their professional staff on the basis of contribution to profitability. All respondents believed attracting and retaining high-calibre people was a key priority, yet a third of those also believed that issues around career development were the main reason for employees leaving the firm - indicating that investment in training and development could improve recruitment and retention, as well as more directly improving performance.
Managing the firm
One of the key issues in managing the firm is to make its commercial management truly transparent, so senior management are constantly aware of who is working on what engagement, their rate and profit margin. This information can be used to focus on profitable activities. This becomes increasingly important as clients demand more clear evidence of value-for-money and the proportion of fixed-price or capped work increases. Indeed, three quarters of respondents expected to have to do more fixed-price work in the next three years. Project management thus becomes a core competency of highly performing law firms.
A robust set of project management principles need to be defined and supported through well-understood, firm-wide processes. Finally, committed investment in technology is required to automate internal processes and client interactions. This enables the production of accurate and up-to-date management information, and provides a means by which the firm's lifeblood - knowledge, experience and insights - can be codified, enhanced and communicated as best practice throughout the organisation.
A key finding from last year's study was that most firms recognised the fundamental need for some kind of knowledge management (KM) to collate and share all the company's intellectual capital. Disappointingly, this year's survey repeats last year's - all firms believe effective management and use of knowledge is important to the firm and over three quarters reported they have made a significant investment in it. Yet less than half still believe they have been successful in managing their firm's knowledge or delivering it to those who need it.
Managing the integrated approach
Far from being separate entities with distinct interests, clients, the firm and its people are inextricably interrelated - and a change in the approach to one will inevitably have an impact on the others. So any actions taken must be integrated and aligned across all three areas, on a firm-wide basis. The change needs to be driven by top management, which has to be completely committed to it. Every initiative must be focused on what the firm is trying to achieve and everyone in the firm needs to have a common view of this.
If an organisation succeeds in making these changes, then the firm, its clients and its people will see the difference. Each will benefit from greater expertise, delivered by highly committed and well-rewarded people who add real value to their clients' business and can charge a suitable premium for doing so.
The implications for IT
As the results of consultant Paul Strassman's research over many years indicated, appropriate investment in IT is an amplifier of management ability. This helps to explain why exploiting IT fully is so difficult. IT can only work effectively where there is a clear, seamless link through vision to process and automation. Yet still just over half of firms believe the business vision is clearly communicated to all staff and only half have global standard operating procedures.
Firms may be making a major investment in IT, but do they have the management structures to exploit it fully? This suggests why many are still finding KM difficult to implement - the need for a clear and visible link back to shared business objectives and the need to use the common processes and leverage the reward mechanisms that are absent from many firms. The situation is compounded by the range of fragmented IT applications and systems in use in law firms.
Staying the same is no longer an option. Change is the only certainty and firms need to make that change before it is too late. To do this they need to invest in common objectives and processes, longer-term reward mechanisms and greater standardisation of IT across the firm and they need to look very hard at their management styles and abilities.
