Combining law firms to increase their size makes them better only when the parties have thought through what they want to accomplish and what synergies exist between them — and the recession showed that few merged firms have done so.
Size inevitably seems to create inefficiencies, and firms are slow to eliminate redundancies.
The strategic plan for firm mergers typically envisions economies of scale, the collaboration among organizations for enhanced product quality and even greater revenue. But such plans will fail without effective integration.
It is difficult to combine two organizations without a great deal of attention to the fears and hopes of the people in each organization. It is almost impossible do it “on the run,” the typical merger approach once the top leaders shake hands on their deal.
Formal mergers, however, are not the only way firms can achieve synergies. No law firm needs to remain an island when there are so many alternatives to merging. Firms can combine their strengths in a variety of informal arrangements that support better service to existing and potential clients.
Here are examples of potential approaches:
1. Shared space
- Small-firm or solo practitioners can structure an arrangement in which lawyers share the expense of a reception area, conference rooms, clerical staff and office equipment.
- Another strategy is renting an office in a larger law firm on a monthly basis, with opportunities for the sub-tenant (small firm) and the tenant (large firm) to refer work back and forth.
2. Contract lawyers
- Many small firms hire contract lawyers to provide legal counsel on a specific matter beyond their practice or geographic scope. The contracting firm has oversight of the outsourced legal work and communicates with the client on how the work is applied.
- Participants in a contract agreement should have their own written fee arrangements.
3. Retainer arrangements
- To better serve full-spectrum needs of business clients, firms can establish ongoing mechanisms to call on other allied lawyers as “outside counsel” for help as needed. Such contract arrangements can contribute to work and cost efficiencies if used correctly, particularly if the lawyers involved bill at different rates.
4. Offshoring arrangements
- Firms can use high-speed Internet technology to connect with the growing pool of highly educated talent in developing countries where the use of English is widespread, India being the prime example.
- Such offshore legal service providers can reduce by up to 80 percent the cost of legal functions like research, document review and patent searches, with the work delivered electronically and produced under the firm’s supervision.
5. Virtual alliances
- Although these are still emerging, one such model is a group of lawyer-entrepreneurs called Virtual Law Partners, a firm that employs lawyers who work at home and correspondingly saves on overhead and costs clients less in legal fees.
- The firm and its lawyers are available for contract arrangements, except for litigation (because all work is done at home), and the lawyers keep 85 percent of what they bill. It’s a novel arrangement, but one that, like all of these informal combinations, recognizes the law’s changed business dynamics and client expectations.