The Evolving Benefits of Law Firm Networks

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I’m regularly invited to speak at meetings where various members of law firm affiliate networks have gathered. Sometimes these are regional meetings attended by the member firms’ key relationship partners and the topics are general; other times the attendees are the managing partners of member firms who discuss best practices in firm leadership; others include lead marketers or operations professionals who collaborate with peers at other member firms.  Regardless of the location, the venue, and the participant demographics, eventually one critical question is posed:  is our membership in a law firm network a worthy investment?  Said another way, how can a firm best benefit from its investment in a law firm network?  Many law firm network leaders ask the question in reverse:  how can a network deliver the greatest value to its member firms?

In a challenging economic climate, it’s always sensible to review investments, particularly those with uncertain ROI. The often hefty investment required to join a law firm network requires therefore that firm leaders periodically take a close look and make a go/no go renewal decision, and to identify opportunities for ROI improvement.  Based on the perspectives I’ve gained from my various perches — as a corporate sponsor, law firm member, regular speaker, and advisor to network leadership — I offer the following five suggestions for maximizing the investment in a law firm network:

Expand the reach of the network within the firm.  If we were to randomly poll partners at many firms and ask them to name their firm’s network memberships, many could not. Those who have unaided recall can often name the primary global network, or perhaps a network associated with their own practice, but they would falter naming networks in play with other practices. This suggests that the role of a network isn’t considered strategic or differentiating in the same way that, say, quoting how many lawyers or offices we have is perceived to be.  The reality is that networks can be a very useful resource for networking, education, information sharing, and cross-selling. But the challenge isn’t usually the network, it’s the member firms’ cultures that inhibit success. In much the same way that partners know cross-selling is good for them but they do little about it (“You’re supposed to cross-sell my services before I sell yours!”), many would agree that networks offer significant benefits if only they took the time to learn.  Gaining access to subject matter expertise in new, adjacent or even familiar practices and collaborating with colleagues who aren’t competitors can be fruitful. Sharing best practices in marketing, business development, finance, pricing, project management, knowledge management, technology, and information security can be extraordinarily useful, particularly when the those sharing with you benefit from your improved performance, and vice versa.  When the quality quotient for the entire network improves, all members benefit.  It’s essential therefore to spread the word, ensuring that all members’ partners and senior professionals are aware of the firm’s network affiliations and can recite the key benefits of membership.  It’s even more essential that they participate by attending meetings, following up on leads, and referring business to member firms.

It’s about building relationships. Let’s talk a bit more about cross-selling.  Many network tout the referral opportunities as a critical ROI factor, e.g., “One inbound referral can repay your membership fee many times over.” This is true. But this can also be said of internal law firm cross-selling where the rewards, e.g., improved PPP when the firm generates more top line revenue and earns higher profits, accrue directly to the partners involved.  And still partners operate against their self interest and eschew cross-selling, or at least don’t invest much time in it. The reasons are many and include the psychological, the financial, i.e., a tenuous grasp on the above finance principles, and the practical, including a lack of systems to support the cross-selling effort.  I’ve written elsewhere about the benefits and fundamentals of law firm cross-selling, but summarized it’s about relationships. Partners refer work to colleagues they trust, and trust is earned less by reviewing credentials than it is by becoming familiar with each other. Lawyers tend to believe their decisions are rooted in logic, but the reality is that most of us make emotional decisions to do business with people we enjoy, and we often rationalize these decisions only after the fact. Don’t believe it? If you do nothing more than put unfamiliar colleagues in a room together periodically for bonding and networking time, the frequency of referrals will increase at a rate faster than what you’ll observe from installing an exhaustively-detailed Intranet or Extranet that documents members’ accomplishments and capabilities.  Networks are ideal forums for establishing and nurturing relationships with colleagues in other regions and practices, the net effect of which can be to expand the services each member can offer to its clients.

Track performance.  Relatively few networks have detailed systems in place to track referrals, and the systems that exist often focus on frequency rather than financial impact.  If a prevailing benefit of joining a network is that members do not directly compete (though this is harder to enforce as the world shrinks), then we have everything to gain and little to lose by sharing the financial impact of our inbound and outbound referrals.  Within firms it’s much easier, albeit uncommon, to police the balance of outbound and inbound referrals through compensation incentives, but networks can use financial data and peer pressure to achieve the same outcomes.  Yes, it’s true that one inbound referral will pay back the network investment many times over, but let’s focus on volume of referrals, not size.  If firms that generate multiple outbound referrals to other members are lauded publicly, and the financial impact of these referrals is quantified, it can motivate new behavior. Lest it sound altruistic, it is a demonstrable fact that those who work hard to generate referrals for others create a steady stream of inbound referrals for their own practices. Mathematically, I’d much rather have three dozen advocates spotting minor opportunities for me than wait for one monster opportunity to land in my lap. So require member firms to regularly submit inbound and outbound referrals, track financial performance — some of which may be clear only months or even years after the initial referral — and create some peer pressure by publicly rewarding positive behavior.

Implement common procedures across member firms.  Many networks are challenged to provide demonstrable value by offering unique benefits to members. And so we see education, networking, and buying consortiums as common benefits.  Many offer some version of the marketing tagline, “Our global membership allows our members to service their clients globally across a wide range of industries and practices” but few members believe it, or more to the point, even if they believe it few members embed this belief into their individual firm strategy.  I once counseled a new chairman of a global law firm. We were working on his remarks to his first firm-wide partner meeting and he wanted to reiterate and tout the benefits of the firm. He listed 25 offices and 1,200 lawyers as a key benefit (Note: these figures have been changed to protect the anonymity of the client). I asked him, “So what?”  He repeated the line. I countered that if I was a chief legal officer of a FTSE 100 company, that would be a nice feature, but not a benefit until or unless that global footprint addressed a specific need of mine.

Rather than delve into the difference between features and benefits, suffice it to say that if a network (or a firm) can demonstrate how its expansive coverage is an asset to potential clients, how the many lawyers in many regions in many practices addresses a particular client need, then it’s a benefit.  Otherwise, it’s a feature.  The existence of four-wheel drive on a vehicle is a feature to most; but to the buyer who regularly experiences treacherous snow conditions where increased traction and 4WD means the difference between going to work or taking unpaid vacation, then 4WD is a benefit.  Some networks are beginning to explore the implementation of common service standards, meaning that clients who do business with one member firm can expect a reasonably similar service posture when referred to another member firm.  In today’s global general practice law firm, it’s a misconception to assert that all partners, practices, or offices operate in a similar fashion, and even two partners in the same office in the same practice may have fundamentally different approaches.  (Don’t believe it, ask your firm support professionals in IT, Marketing and Finance who specialize in delivering customized support to every partner!)  This provides an ideal opportunity for a network to address that unmet market need:  Global firms may promise one-stop shopping but the reality is many are silo businesses sharing a logo. A network whose members jointly develop service standards and operational mechanisms can not only compete, but win, against disaggregated bigger firms, particularly when clients seek legal service delivered consistently across multiple jurisdictions.

Consider the network as a differentiator, not a merit badge.  For the reasons above, membership in a network that continually strives to deliver member value can be a differentiating asset.meritbadges  Membership should therefore not be relegated to a logo on the firm’s website, like a Boy Scout merit badge, but the benefits of membership should be broadcast far and wide, and each member firms’ partners should be able to recite why the firm belongs and should himself or herself actively participate in producing, or receiving, the fruits of that membership.  It’s perfectly acceptable to belong to multiple networks, so long as each addresses a different niche the firm deems strategically important.  Some networks are better than others.  Put a scorecard in place to identify the success metrics for membership and periodically measure performance against those metrics. But be as diligent in accepting responsibility for the firm and its partners failing to take proactive action as you are about blaming the network for not delivering value.  Note that occasionally a client survey will acknowledge membership in law firm networks as a factor in the selection of outside counsel, but for the most part these are secondary sources in the selection process.  In other words, a prospective client will create a short list of potential firms through other means, then bounce that list against other secondary factors to help stack rank those on the short list.  In this light, it would be unusual for the client to identify the network as referral source, but that doesn’t mean it’s not essential to the selection process.  If your network consistently fails to meet your expectations, despite your best efforts to improve performance, then find another.  Finding the right fit may take a couple tries, but once a firm finds the right network community, it can generate significant rewards.