This document summarizes a case study on the impact of knowledge management practices on the financial performance of a large multinational law firm. The study found that implementing KM practices improved the firm's financial performance. Specifically, the study identified that the key drivers for increased fee income were the value perception of KM among lawyers and the ease of using knowledge systems. Additionally, providing personal services from the KM team was found to be the most important factor in improving lawyers' value perception of KM. The results supported the law firm's assumption that investing in KM can positively impact the income of professional service firms.

1. KM Foundation K6201
Team member:
1.Elvin Yeo Wee Kiat
2.Dorothy Ngai Yuk Lan
3.Fransiscus Dipuro
Knowledge pays: evidence from a law firm
(Ingo Forstenlechner, Fiona Lettice and Mike Bourne)

2. Introduction
Objective: empirical case study to:
analyze the impact of the introduction of knowledge
management practices on the financial performance of
a multinational law firm; and
to refine the KM Balanced scorecard being used by the
organization.
Law firms chosen because they are good example of
knowledge-intensive service organizations, where it is
predicted that KM practices will impact
organizational performance

3. The case study firm
Law firm in case study is one of three largest law firms in
the world
High ratio of KM staff to lawyers: for every ten lawyers
there is one dedicated KM professional (compared to the
industry average 25:1)
General investment in KM also above industry average
The firm form practice groups with a specific legal focus
(e.g. tax or labor law) in order to allow a higher degree of
specialization – with the right experience, specialist can
easily recognize patterns and apply familiar tools so that
they do not need to reinvent the wheel

4. The approach to KM
2 Levels – Firm and Practice-group
Firm level
 Firm-wide KM lead by CKO
 4 services functions (change management, technology projects,
provision of information services and taxonomies) headed by
non-fee earning lawyers and information professionals
 KM methodologies are created at the firm level
 Sets the direction for knowledge management and provides
an infrastructure to facilitate KM among practice groups
 Manages Core KM functions (library, legal research,
professional development)

5. Approach to KM (2)
Practice-group level
Lead by fee-earning partners
Adapt Firm KM strategies to local practice
groups
Knowledge Management Lawyers: lawyers
by profession and members of the practice
groups
Review and maintain internal know-how
collection and dissemination

6. Approach to Performance Mgt
Balanced scorecard used to manage and measure the
knowledge management function (in an effort to
determine ROI of the KM function)

7. Success map built from the scorecard: the basis of
knowing what to measure and why, defining cause
and effect within the KM function
It’s theoretical and untested -> this empirical
research to test causal links within the success map

8. Research Methodology
Success map is the starting point of this study
Indicators in the success map had been measured
over a year and entered into the live performance
management system
Origin of data:
Usage data for various KM systems
User surveys on KM services, tools and practices
Data from HR function
Organisation financial data
Data was then analysed using statistical tool

9. Stepwise Regression Analysis
Goal: To predict the most important indicators on the success map
First: Choose
which indicator you
want to measure

10. Stepwise Regression Analysis
Significant
predictor? Drop the predictor
Enter the model
A list of predictors
that may influence
productivity:
1. Incentives
2. Training
3. Office layout
4. Innovation
5. Processes
6. …….
Yes
No
For each
predictor
For each
predictor
A list of significant
predictors for
productivity:
1. Incentives
2. Training
3. Office layout
4. Innovation
5. Processes
6. …….
A list of significant
predictors for
productivity:
1. Incentives
2. Training
3. Office layout
4. Innovation
5. Processes
6. …….

11. Ultimate aim of all KM work – improve financial
performance
Start with the most important perspective – Financial
Want to know – Does KM improve Productivity?
Analysis of the Success Map

12. Analysis of the Success Map
Aim – To find out whether the arrows can be proven
At this stage, the arrows are theoretical

13. For regression to work
Need real data (predictor) to represent Productivity and all other
objectives
Use existing measures from Balance Scorecard
Fee Income
Availability and Quality of reusable know-how
Ease of Use of know-how systems
Analysis of the Success Map

14. Analysis of Success Map
For example Productivity is represented by “Fee Income”
figure
Quality is represented by
The ease of use of know-how systems
Availability and quality of reusable know-how
In total 48 predictors to represent the 12 objectives

15. Analysis of Success Map
Want to find out what influences “Fee Income”
All 48 predictors thrown into the regression model
A*predictor1 + B*predictor2 + ….+ Constant = ‘Fee Income’
Question for Data Mining students
Should linear regression or logistic regression be used?

16. Regression Result
The following 5 measures have significant association with ‘Fee
Income’
Checked with Prof Lee & Prof Khoo – R and R2
is cumulative
so most important is ‘Value perception of KM among lawyers’

17. Interpretation of Result
Counsel & legal opinions
Ease of use of know-how systems
Personal know-how
exchange with peers
News and current affairs Value perception of KM
Fee Income
Most Important !

18. Regression on Value Perception
We know that Value Perception is most important,
but what can improve Value Perception?
Repeat regression, this time ‘Value Perception’ as
dependent variable
Most important to improve ‘Value Perception’ is
Personal service from the KM Team!

19. Important Drivers for Fee
Income
Combine 2 results, we have
most important drivers for
improving ‘fee income’

20. Revised Success Map
Repeat regression on all objectives
Outcome: Revised Success Map that is proven to a certain
extent
Does it mean ‘innovative thinking’ and ‘standardization’
does not help?

21. Feedback on Revised Map
Managers interviewed gave positive feedback on the revised
map:
identify key measures that are collated into a single mgt dashboard;
assist in enabling measurement and help to provide more effective
KM services to lawyers;
improve the ability to measure and report on cost and resource
allocation;
improve the ability to efficiently track the changing value perception
of KM and KM initiatives;
improve responsiveness to financial and organizational issues as they
arise;
facilitate improved communication with partners
about KM and the service the KM team provides; and
assist in the process of determining ROI for KM
applications and services.

22. Conclusion
This research is a step towards measuring the
value of an intangible resource - knowledge
Value perception is key driver for fee income
Personal service from KM team is key driver for
value perception
Infer that KM remains a discipline highly
dependent on Human Interaction

23. Conclusion
‘News and current affairs’, ‘counsel and legal
opinion’ important
Infer that in time of information overload,
important to identify which narrowly-defined
know-how really adds value
Is KM Useful?
Assumption that KM have positive impact on
income of professional service firms is
supported by this research

24. Thank You!