David Maister Speaks and I'm Listening!

Responding to my Legal KM Economics & Realization Rates post, the professional services consulting guru was kind enough to send me his thoughts on the matter (published below). David will also be including a copy of this exchange under the 'Ask David a Question' feature on his website (highly recommended, btw).

Here is David Maister's response in it's entirely:

"You're not missing anything, but you've been sucked into a very old "short-term impact v. long-term impact" debate. I discussed all of this in the introduction to my book TRUE PROFESSIONALISM.

Look at it this way: is it ever profitable for any firm in any business to find new ways to produce whatever they produce to the same quality with lower cost? Is it ever worth getting more efficient than your competitors? The answer must be yes, surely?

If you can achieve the same quality with lesser cost, you get options: pass some savings on to clients, or keep some for yourself, or at a minimum, convince the client that you are acting professionally, keeping their interests at heart and looking for ways to save them money.

What would it be worth to have clients believe that you were that kind of provider? What does it cost you if they believe you are not looking for ways to be efficient but are looking for ways to maximize the bill, not minimize it.

Now think about your answers to all these questions when you are the buyer. How would you (do you) feel about these things if a consultant like me (or an accountant) was trying to serve you. Could you tell if he or she was looking to save you money, or was looking to get the number of billable hours up. If you could tell, would you care?

Yes, in the short run, it may cost you money to be efficient or give more value for a fixed cost, but come on, people, that's what competition is all about in a free market economy. Everything else is sophistry.

It's got nothing to do with my four key drivers, our methods of pricing or how we do the accounting. You make money if you are becoming more valuable or more efficient. Everything else is burying your head in the sand.

It does no good to remain inefficient until the marketplace forces you to reduce lower prices, and just hope no competitor gives the game away."

David's opinions are overwhelmingly powerful because of this big picture, long term approach. I suspect it's also why his books populate so many senior partner's bookshelves. Thanks David!

Legal KM Economics & Realization Rates (Some Questions...)

I'd like to discuss law firm KM economics for a moment, as I have some issues I'd like help understanding.

If you read Matthew Parsons book, which cites David Maister's 4 drivers for professional service firm profitability (Realization rate, Leverage, Margin, and Utilization), he describes one of the more difficult conundrums for KM - justification & ROI. If we make lawyers more efficient in a time based billing model, we are reducing the firm's billings. It's not that simple, as Matthew points out, but that's the argument we're up against.

One of the best arguments going the other way, towards KM's value, is that by helping the firm to leverage (driver #2) the work down to the most appropriate person, we are helping improve the firm's PPEP (Profit per Equity Partner). The obvious goal here, as Matthew describes, "is to deliver the same quality (or better) legal services with a smaller share of partners time". This is an excellent justification for KM (in my mind), and probably the first one I'll cite when discussing how KM can help in the provision of legal services.

My inquiry today centres around another another of Maister's profit drivers mentioned in Matthew's book, specifically, KM's lack of impact for the firm's Realization rate. The Finance Director he quotes states: "The only way that I can see that knowledge strategy can simultaneously increase PPEP and average realized rate is where there is a shift away from hourly rate billing for particular types of work to fixed fees, and we make investments to make that fixed-price work more efficient".

I'd like to discuss this issue moving beyond the Value-vs-Time based billing debate, and see if we can find a better connection between KM and Realization rates. Why? First of all, I think KM can effect Realization. And secondly, many firms are still holding onto the hourly rate business model, and I have my doubts that it will ever entirely dissapear. Simply put, I think that KM practitioners have to find a better supporting argument, and I think I have one...

Realization is calculated by dividing total billings by the number of hours billed. But what about when time is written off a file? For example, an Associate takes 15 hours to do prepare a contract, where it should have been done in 4 hours. Regardless of how the mark down is handled on the bill, that time simply disappears - a big black hole. A very rough measure of those hours could be found by comparing prebill value -vs- the firm's fees billed or received. Could it not? Obviously there are a number of reasons why time can be written down or off of a file, but what if we were able to reduce that number? Could KM lay any claim to that billing efficiency?

KM (or any other process efficiency) adds value to the firm by reducing those lost hours - especially with Associates who likely suffer the worst reductions. Better training, access to firm knowhow, automation, and quality research support, are among the many factors that should help law firms reduce the number of unbilled hours.

Time is not an unlimited resource in a law firm, and it's likely the most complex factor a firm must manage. People can walk out the door, and they're not cheap to recruit or bring up to speed. Helping Lawyers work more efficiently can make the bottom line better, and create happier employees. I believe this. Now I just need some help proving it.

So here are my questions (any help would be greatly appreciated):

1) Do firms consider this 'lost time' as part of their realization rate? (My firm does, but is this common?)

2) How significant is this gap? Is this a small factor in our evaluation of KM? or an important argument?

3) How can this be measured to get at KM's value? Are gross measures good enough, or must it be done at a matter level?

4) Does this not get back to the 'Leverage' driver? Good training (both formal and KM resource based), and building the skills of Associates, in order to reduce Partner time in delivering legal services.

5) What am I missing?

The VLLB Tagcloud!

Thanks to Knowledge Jolt with Jack for introducing me to tagclouds!

So without further adieu, here is the VLLB tagcloud:

VALL Presentation Notes & Slides

Anyone want a preview of today's VALL lunch talk on Blogs & RSS?

If so, VALL webmaster Andy Froese ( BTW, I still can't believe we ixed 'andyrocks' as a possible members only password!) has pre-posted my speaking notes & presentation slides on the VALL website. I'm only part 3 of the panel, & I already know I've got too much material for 15 minutes, but I figure I'm going to trim along the way ... I could have pulled some slides & created a shorter version, but what the h-e-doublehockeysticks! we're supposed to be helpful, right?

Enjoy! :-)

Northern Voice 2006!

Darren Barefoot has announced Northern Voice 2006 - a Canadian blogging conference here in Vancouver on February 10-11, 2006.

Check out the list of last year's speakers - and that was the first year! I missed out on the first Northern Voice, and I've been kicking myself ever since. The fact that I have to walk a half a block down to UBC Robson Square to hear some of the biggest Web 2.0 authorities doesn't hurt either.

Blog Search Engines

Lots of blogger response to the introduction of Google's new Blog Search. I would have posted something earlier, but by the time I got around to it ... it was everywhere!

I find it interesting that both Technorati and Feedster offered messages of welcome, and referred to Google's entry into their market as 'an embracing of RSS'. While it's a good point, Google's status will (along with Microsoft) bring legitimacy to Blogs & RSS; it will likely cost each of the aforementioned companies millions as an acquisition target. Ouch!

Google's engine is very fast and feedable - overall, a very nice start. One feature I would have liked to see, was making the author's name a default searchable field, and then weighting back those positive results against the relevancy of other posts (that is, don't give them any extra weight in the algorithm, but still include them). Right now, unless you use the advanced search form, it doesn't pull an author's posts by including their name in a general search. IMO, it's really important to know who's posted what with a blog; with the blogger being a critical element of blog searching. Of the big three, Feedster does this and the other two don't (please correct me if you think I'm wrong).

Speaking of 'relevancy' - a little work to do there Google... I know it's completely subjective, but I find the Technorati & Feedster results to be better (so far). Perhaps it's just easier to ignore the splog (aka 'spam blog') results when you're used to the interface...?

The other big factor for blog searching is currency - specifically how much time it takes from blog posting to inclusion in the search results. Jackson Miller has already conducted a test, with Feedster being the first to complete the task.

Google may just blow the other two companies out of the water, but not today. I'd rank the big three this way: 1) Feedster 2) Google & 3) Technorati. If Technorati gets faster (growing pains?), then it's a horse race for No 2. ... at least until Google gets out of beta. :-)

Application Software (DMS's Soon?) & RSS Feeds

Adding fuel to my earlier request of RSS Feeds for DMS Software, Microsoft now looks to be firing up the feeds for their CRM application (See: Microsoft to demo CRM-RSS link).

I'm feeling pretty confident now. It's only a matter of time before the major DMS vendors include this as standard functionality. With Microsoft building RSS into Longhorn/Vista, and now embedding it into their application software, every other vendor selling enterprise applications will have to follow suit.

Secondment as a Legal KM Tool

Ron Friedmann from Prism Legal Consulting, makes a handy suggestion to law firms looking to gain Client insights & linkages into their KM services - Secondment of a KM employee. For firms of larger scale, this is a fantastic idea.

I've currently got my nose stuck in Ross Dawson's book - Developing Knowledge-Based Client Relationships. This would be right up his alley. Not only does it develop better client relationships (& could have a Marketing purpose, as Friedmann states), but it could also help firms move up the Commodity-to-Partner value chain.

Another interesting possibility, and obviously dependent on the closeness of the Client/Firm relationship, would be to create a KM Team which included members of both organizations. And if Client Teams were already in place, another angle would be to include a KM practitioner on those teams. Lots of great ways to partner with Clients and provide opportunities to "co-create value". [see Ch. 10 of Ross's book]

BTW, I also did a quick search, and found out that Ross has a pretty good blog.

Connie Crosby Links!

Hey! I'm not alone. Connie Crosby is now linkblog'n! [Thanks for the kind words Connie. Right back at you ... I'll follow your lead anytime.]

Linkblogs, or 'exchangeable reading lists' as I like to think of them, can help us all. You can't read everything online that relates to your areas of interest, nor should you try. As an initial step(perhaps progressing to the exchange of OPML outlines?), linkblogs are a good way for LIS professionals to team with their colleagues.

We can cover more ground together than apart, and our differences in reading taste will expand our horizons. :-) You can find Connie's Linkblog here, and the feed here.

Who's next? email me!

Another Toy for Rich Techie-Librarians!

Hey Cindy! Good News...

Looks like you can now park a Hummer Laptop next to your Ferrari Laptop. ;-)

(Speaking of 'Rich' & 'Librarian' in the same sentence. Bad joke time: What's the difference between a Librarian & a large pizza? A large pizza can feed a family of four.... ok ok, I said it was bad.)

Conversation with a Blog Spammer - No Link No Juice [NLNJ]

Scott Johnson co-Founder of the blog search engine Feedster, has posted an interesting IM exchange with a blog spammer.

For my colleagues reading this, we can take away a better understanding of the how & why these types of blogs & websites exist - they're being used to manipulate Google's PageRank, and thereby achieve top placement for very profitable (read viagra, texas hold'em poker, etc.) search terms.

Because links are votes with Google, and it's difficult to get links from quality websites when you're promoting this stuff, the spammer will simply manipulate the system by creating websites & interlinking them.

If you read through the exchange, note towards the bottom he says: "(no link; I don't want to give them any juice)". This is a great approach for anyone publishing on the web. If you don't like something, don't link to it. It's that simple. You're only giving them the votes they want for SE rankings.

I think this will be my new approach - type out the url, don't hot link it, and add a [NLNJ] after the web address.

Thanks Scott.