KNOWLEDGE MANAGEMENT IS CRUCIAL TO CURRENT AND FUTURE BUSINESS STRATEGIES

Although very well known and largely adopted by big companies, Knowledge Management is not widespread in most of the national market. The challenging economical scenario that we currently have, more and more places the Brazilian companies away from the practical implementation of an appropriate organizational model, which is a failure that brings about a very big loss in terms of competitiveness.

“Every company must find its critical points in the production and in several other areas in order to optimize them in every way possible, making it more competitive, not only in the current market, but also in the future one. Thereunto, it is essential to get to know its own innards. Knowledge Management is the way to supply all those needs. Get to know the own operation, in a full way, allows a closer to the ideal decision making”. points out José Paulo Graciotti, Knowledge Management consultant and partner at Graciotti Assessoria Empresarial.

In the following interview, he approaches the beginning and the evolution of  this concept, talks about the methodology in order to put it into practice and emphasizes the reasons that make Knowledge Management a so necessary measure to the companies that intend to conquer a good position in the market of today and in the years to come.

O Papel – How did the concept of knowledge management appear and when did the companies indeed realize the need to create models that were able to manage information in a strategic way?

José Paulo Graciotti, Knowledge Management consultant and partner at Graciotti Assessoria Empresarial – Knowledge Management started in a very shy way, as a means to list knowledge in a more organized way, including the indexing of documents and contracts, but eventually evolved and changed a lot in the last two decades. Using a practical example, considering that a law firm spends ten hours in order to compose a document for the first time and that the service budget is based on the worked hours, the client would pay an amount of money related to those ten hours of execution. If, some time later, another client needs a document that is similar to that one, the firm would start from that first version, whose production lasted ten hours, would make the appropriate adjustments to the needs of the second client and would create the document in less time. In the early stage of the practical application of Knowledge Management, the service provider would charge the same price for the second client, in order to get more profitability. When the crisis of 2008 arrived, though, the use of this concept changed its focus. With a more competitive and demanding market, amid several companies adopting the same techniques, instead of charging the same amount of money to get more profitability, the focus was changed to the discovery of more attractive values to the clients, something closer to the hours that were effectively spent in the performance of the service. So, Knowledge Management started to be used as a way to better understand its costs, become more competitive and ensure the loyalty of the clients. This was one of the great evolutions of the concept of Knowledge Management that was eventually taking shape, mainly when the North American firms started to use it in order to optimize their proposals of services, besides being a tool to their own organization.

O Papel – What are the more current methods of Knowledge Management?

Graciotti – There are two great lines inside the current model of Knowledge Management. The first one is related to the use of accurate knowledge in order to leverage the productivity, the profitability and the efficiency of the company. This line has a totally operational bias and every organization adopts its own means in order to put it into practice. The second line, from a more strategic bias, starts from the purpose of getting to know its own information, including the operational, the financial and the registry ones, so that, based on them, it may be able to design the strategies of the company. The correct cataloguing of all subjects and the proper perpetuation of this information are crucial in order to define the strategic plans. For example, by making an analysis of the standard profile of a client, and checking in which departments they are found, which services they are used to demanding, which is the billing percentage in every department and every service provided, it is then possible to get a picture of the business and outline the growth strategies, the sales strategies, the hiring strategies and so on. More recently, this line of knowledge management started to approach several areas, hitherto basically focused to the financial department. Few years ago, Business Intelligence (BI) was treated as a totally independent theme from Knowledge Management, but nowadays these two subjects are becoming closer. The use of BI can be made in order to understand the billing and other financial numbers of the company. All this represents the methods to get to know the characteristics of the company based on the data it has available and to use them in a way as to make the company more competitive in the market.

O Papel – How to build the basic infrastructure of knowledge storage so that, in the future, this contend can be managed?

Graciotti – There are as many professions who are specially dedicated to knowledge storage as companies specialized in developing organizational methods, listing and other tools. Anyway, there are basically five kinds of companies that should be engaged in order to extract the necessary knowledge and to organize it so that other people may use it. The first one is the Human Resources or Talent Management, according to the definition set by the company. Under the people management focus, the objective aims at motivating the employees and creating ways to enable them to make connections to each other and to exchange knowledge. The effective participation of the people management area is therefore responsible for promoting the knowledge exchange. The participation of the productive sector is equally important. The production team of a pulp & paper plant holds strategic knowledge. Those are the professionals involved in the operational routine that should indicate to the company the strategic information that need to be made perennial and catalogued. The third one is technology, which must be equipped for the purpose of information storage. In spite of the fact that the specific knowledge for cataloguing documents is something very peculiar to each company, the TM team participation is very important. Those people are not only responsible for the generation of systems that are focused on obtaining and absorbing the knowledge in a safe place, but also responsible for the transformation of all that in a usable manner with an intelligent search system, of easy access to those ones who will look for those information in the future. The fourth participation involves the senior management of the company. One ought to work really hard with respect to the motivation and, for such, it should count on the total assistance of the managers, directors and CEOs. The senior management ideological sponsorship is essential to overcome the natural barriers of the implementation process. And to conclude, the fifth participation encompasses the professionals who are hired to make the cataloguing of all the company’s information, which includes several registries. Those professionals are essential in order to keep the quality of the information and its homogenization, generating reliable strategic data. It is the work and the engagement of those five areas that will enable the company to accomplish the target of extracting reliable information and to use them positively, both under the operational strategic viewpoint and practicing knowledge management in favor of its competitiveness.

O Papel – May those requirements change depending on the segment of the company’s performance? Is Knowledge Management more challenging in industrial segments, such as the pulp & paper one, which, in addition to the office routine, has also operational ones, which are very characteristic to the plants?

Graciotti – The difference among the companies of the industrial segments and those ones only made up by offices is in the fact that, in the first case, there is a wider range of cataloguing, indexing and organization of the explicit knowledge. The most difficult aspect of knowledge management inside an industry, however, consists in listing the tacit knowledge. Let us imagine that a professional in a pulp & paper plant develops a whitening process that is much more efficient and less expensive, it is necessary that this process is fully documented and transformed into an standard pattern, in order to avoid that the knowledge gets lost in case of the person or other members of the team leave the company. The initiative may have started with one or several professionals from the productive team, but the acquired knowledge becomes a property of the company. Therefore I would say that one of the fundamental aspects of the industry knowledge management is to create methods to list the tacit knowledge coming from the experience of the professionals, in order to avoid that a shutdown compromises the advances that were already acquired inside the company.

O Papel – How do the Brazilian companies situate themselves in this present reality, including the demands imposed by internet?

Graciotti – Knowledge management is still unknown in the Brazilian market. Except for some market leaders and multinationals, that are a little more advanced in the practice of this concept, I believe that the Brazilian companies are still “crawling” in this subject. The great majority of the professionals do not know the term. This shows that no one has given the due importance to knowledge management, including to survive in this period of crisis as the one we have been experiencing nowadays. The crisis tends to last for some years yet, since certain measures which are being taken now will be inevitably incorporated to the reality in the next years. It is necessary, on an ongoing basis, to get adapted to a more competitive market among the companies and much more demanding among the clients themselves. One of the great merits of knowledge management consists in the capacity of defining the survival of the companies in the future. The companies that make a correct use of knowledge will have, during a great amount of time, a competitive advantage and a better position in the market.

O Papel – What are the tendencies related to the practice of knowledge management? What do you foresee for the next years?

Graciotti – The new trends must go through the field of technology. The technological improvements have been occurring in an absolute fast way. Nowadays, one refers to cognitive intelligence, for example, something that was purely fiction five years ago. Technology will be an essential part of this maturing process of knowledge management in a very near future. But we have to step up that the companies must be watchful to the technological evolution and also to the intellectual capital. These are two essential points to the competitiveness of the years to come.

José Paulo Graciotti, is consultant and founding Partner of GRACIOTTI ASSESSORIA EMPRESARIAL, engeneer by Escola Politécnica Universidade de São Paulo, with Financial MBA at FGV and specialized in Knowledge Mnagement by FGV. ILTA Member since 1998 (International Legal Technology Association) and ALA (Association of Legal Administrators), with more than 27 years managing Law Firms in Brazil – www.graciotti.com.br

Partners compensation and the Institution Management

Law Firms are generally formed by some lawyers that have certain features in common such as technical quality in specific areas of Law, entrepreneurial  spirit  and good relationship,  and that decide to get together (early in their careers or by “split” ), on account of the mutual use of each one of their skills.

This technical complementation creates a more comprehensive entrepreneurship and the personal affinity (character, ethics, companionship and trust) creates the most important aspect of all, that is its continuity.

The same “glue” that approximates and binds these lawyers is the responsible for all the entrepreneurial philosophy that the experts call “vision, mission and values” and that will (or should) guide all the decisions and attitudes to be taken as long as the office exists.

As I have always stated, the management of a Law Firm occurs on a metaphorical chessboard, where there is an intricate interdependence among all  the engaged elements. The remuneration for the partners is one of the most important pieces of this chessboard and its definition or change (position or movement on the chessboard) practically defines the strategy of all the other elements.

In an office there are two entities that should walk side by side, mutually feeding themselves in a virtuous symbiosis, which are: the institution and the partners. The decisions of those latter ones directly and intensively interfere in the institution but, as for every action there is a reaction of the same intensity and in an opposite direction, the institution reacts at its discretion, in a positive or negative manner to those attitudes. The virtue or merit lies in the correct choice of the decisions in a way as to transform this process into a virtuous cycle of relationship between those two entities.

Once the entrepreneurial philosophy is defined, the cycle in the “institution” entity goes through the strategic planning, which, in turn, defines objectives and targets. The mid and the long-term objectives define the career plan of the attorneys and partners and the short-term ones define the evaluation criteria of the professionals. Those two elements should feedback the strategic planning for eventful course correction.

As for the “partners” entity, the cycle goes through their behavior in compliance with the philosophy and the consequent definition of the talent attraction and retention criteria.  Those criteria make up the career plan of the professionals and define the evaluation criteria of the attorneys and partners (that is it! the partners must also have evaluation criteria). Finally, the definition of the remuneration method for the partners must be fully integrated with the entrepreneurial philosophy and all this together will then make up a single cycle of virtuous feedback, which will be vital for the long lasting of the institution and the financial happiness and professional achievement of the partners!

The support by an outsourced and experienced consultancy firm which is also exempt from internal political interactions may help a lot to find the solution of this challenge, as well as to define the management model and future strategy.

José Paulo Graciotti, is consultant and founding Partner of GRACIOTTI ASSESSORIA EMPRESARIAL, engeneer by Escola Politécnica Universidade de São Paulo, with Financial MBA at FGV and specialized in Knowledge Mnagement by FGV. ILTA Member since 1998 (International Legal Technology Association) and ALA (Association of Legal Administrators), with more than 27 years managing Law Firms in Brazil – www.graciotti.com.br