The Importance of Convergence and Legal Partnering: The New Business Model
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The convergence revolution is well underway in many American corporate boardrooms. Companies and their preferred law firms have begun to embrace “partnering” arrangements as the great panacea to their ailing business relationships. Partnering and convergence practices in recent years have done to the legal business landscape what Viagra has done to the geriatric community.

The Importance of Convergence and Legal Partnering:

The New Business Model

By: Richard Brzakala

 

 

Changing Legal Landscape

The convergence revolution is well underway in many American corporate boardrooms. Companies and their preferred law firms  have begun to  embrace  “partnering” arrangements as the great panacea to their ailing business relationships. Partnering[1] and convergence practices[2] in recent years  have done to the legal business landscape  what Viagra has done to the geriatric community. It has quite simply reawakened clients and partners in the legal and business communities  and given them a new found vigour  and excitement in a stale sometimes lifeless relationship. Yet despite  all of its importance and benefits to both sides of the partnering equation one wonders why  there continues to be so many firms still reluctant to accept and embrace this new business model?

 

Perhaps the easiest explanation to resistance  rest’s with understanding  human nature. Lawyers, despite what many dissatisfied clients may have to say, are people and people traditionally are reluctant to embrace or accept change. Lawyers by their very nature are predisposed to being  sceptics and most, if not all, try to be  logical and conform to a traditional modus operandi. It is then easy  to understand  the anxiety and apprehension that many lawyers  face when confronted with a new, untraditional, “business” concept that risks taking them  beyond their comfort zones.

 

 

Many traditionalists (i.e. those firms reluctant to change) insist on holding onto outdated business  practices. These  are the same firms who find themselves in a constant and uncertain struggle of having to maintain a profile and presence in a clients corporate boardroom. One can only guess at how much time, resources and money  is exhausted by lawyers competing against one another for want of  staying on a clients radar in the hopes of landing another deal.

 

 

In fact, the corporate legal marketplace in recent years has become  notorious for the constant and sometimes questionable courting and wooing of business clients. But as many corporate practices have become increasingly scrutinized by suspicious regulators, corporate governing bodies and their functional  legal groups have had to reacquaint themselves with a number of long lost business principles namely ethics, honesty and professionalism. Shareholders have demanded fairer business practices while also insisting on higher profits. Fine tuning a business to meet those challenges for many internal law departments has been a challenge as the smart ones have turned to convergence and partnering to help them achieve this goal. Consequently, the smart business firms these companies end up partnering with find that their established relationships and shared business goals speak volumes over unnecessarily having to repeatedly go through a courting ritual half a dozen times a year.

 

 

Partnering Panacea

 

 

One advantage to partnering arrangements, and perhaps not seen in some time by law firms, has been the creation of  a  level playing field where the network of  legal partners are all treated  as equals and measured fairly. Standardized processes, formalized engagement agreements,  disbursement guidelines, compliance and performance audits are all  examples of how  all firms have started to be measured and evaluated in the same way.

 

 

Firms that have been successfully selected to be part of partnering arrangements are the same firms who understand the changes that have taken place in corporate America. More importantly they are the same firms who understand that convergence and partnering strategies are a direct and necessary reaction to the realities in today's market place.

 

 

Advocates of this new business model understand that partnering is not a flavour of the month business philosophy. It is not a business placebo like many sceptics would argue. Instead, it is the panacea that, if executed correctly, and through a mutual commitment,  promises to enrich and create greater value to the delivery of legal services and business relationships in the legal world. One may question a companies motives for doing it, but it shouldn't’t underestimate its acceptance in today's corporate environment where most General Counsels are looking to best practices and greater effectiveness in order to minimize risk and do their part in maximizing shareholder value. Most General Counsels have turned to convergence and partnering strategies as the vehicles that will deliver their goals.

 

 

Successful partnering firms understand all of this and  have begun to reinvent the way they practice, deliver and communicate their services  to better suit the changes that have taken place in the business world. A large part of their success has to do with their understanding of their client base and how their clients do business. If the two are not in sync, then the relationship is in danger of faltering.

 

 

Firms wanting to capitalize on the partnering business model need to reinvent the way they interact, communicate and deliver their legal services to the business community. Ultimately both parties to the arrangement must be satisfied and benefit. Partnering as many sceptics are quick to point out does not work if only one party is calling all of the shots. Those firms fortunate enough to be in true partnering arrangements not only  appreciate the  sharing of ideas and risks but also the rewards that it brings.

 

 

Many firms involved in partnering arrangements have had to do some internal house keeping in order to accommodate clients needs and a closer partnering relationship.

 

 

Internal changes usually have ranged from reorganizing priorities and responsibilities to creating new roles or investing in new or more resources. It is not uncommon to find that many firms now have finance and accounting people, business and relationship managers,  information specialists and knowledge managers. Some of these responsibilities and professionals  are  a by-product of  the technological changes in the legal industry, but all of them in the long run bring tremendous value to the partnering relationship.

 

 

No firm ever wants to spend money on lofty ideas, but as most successful partnering firms have found their initial investments in technical or professional resources has netted them a greater marketability with other clients on their  roster.

 

 

Success Stories: Dupont and Others

 

 

Companies like Dupont[3] , UPS[4],  and FMC[5], forerunners in convergence practices, may have been financially motivated  early on in their partnering strategies, but the success of their models has come to mean that they now are looked upon as the bench marks in legal partnering and convergence. Many companies around the world have used the Dupont model in implementing their own strategies. Both companies discovered early on  that there was much more to just paring down their lists of service providers and imposing fixed fee arrangements on the lucky few who made their lists.

 

 

Over time both companies have successfully managed to take the convergence-partnering model to an new level, a partnering nirvana that has come to be the benchmark for many corporate law departments in today's highly competitive industry. So successful has this model become that even sceptics freely admit that in its truest form  it offers the potential to demonstrate a commitment to relationship building, trust and quality of legal services, among other things,  all before cost savings are even mentioned.

 

 

 

 

 

What’s In It For Me?

 

As Dupont and other successful partnering companies have demonstrated, companies and their legal partners, in the long run not only have saved money and time, but also managed to create strategic alliances with legal experts who understand their companies business strategies and  their value systems. 

 

If executed correctly  both parties in the partnership arrangement come to  share  risks as they both set out to achieve common  goals. To achieve those goals some firms may be required to make sacrifices, be it time, capital or legal work. Strategic initiatives like standardizing processes, formalizing engagement arrangements, exploring alternative fee arrangements, leveraging on technology and knowledge management tools all take an investment of time and resources, but in the end all have proven themselves in varying degrees to be mutually beneficial as greater efficiencies and effectiveness are attained in the delivery of legal services and the business relationship.

 

 

Firms unwilling to appreciate the urgency of understanding and accepting this business model risk being left behind as those smart enough to accept change have already started to win a sizeable portion of market share from the traditionally minded firms.

 

 

Not For Everyone

 

 

However, as great a business model as it may be, not all partnering arrangements may be suitable to all firms. One  reason which may explain why some firms have opted to forgo partnering arrangements is that quite simply it does not fit into their organizational culture, mindset or the way they do business.

 

 

Firms, of all types of matter specialties and scales of size, continue to advocate a traditional approach to practising law which at the very least is not dependent on other firms for their success.

 

 

Other firms, despite assurances and engagement agreements,  remain sceptical of the ‘fair playing field’ a partnership arrangement promises. Some feel that  not all firms can be treated as equals and because  some relationships between clients may be deeper and perhaps more political then a business client may want to admit, they perceive  partnering as really nothing more  then a smoke screen for  backroom reciprocity deals where one hand washes the other.

 

 

Still some firms have shied away from partnering arrangements simply because they don’t understand them or trust them thinking that they are nothing more then a cleverly disguised reaction to budget constraints and fiscal prudence. Sceptical firms see convergence and partnering as adversarial tactics of the worst kind in a marketplace where large corporate clients are unmercilesslously exerting their clout by tightening their  purse strings.

 

 

Still others see partnering as something that is  not  palatable or runs contradictory to a firms business principles and culture  i.e. we’re in the business of  selling our time and not a competitor’s strength’s  over ours. This me first  attitude is unfortunately part of a cultural mindset that is stuck in the here and now and  exactly what separates those willing to commit to working in a pluralistic alliance from those unwilling or apathetic to a few sacrifices for longer term gains.

 

 

Size Does NOT Matter

 

 

Some may argue that in a smaller or medium sized market there is no need to create alliances of collaboration as large business clients, or even newer companies,  have always opted to select the historical darlings of the legal marketplace. For a smaller or newer firm this may mean that there is little chance for them to land a big deal. On the contrary,  nothing could be farther from the truth.

 

 

Smart companies who have employed partnering strategies realize that neither size nor a firms market share  matters. What does matter to astute financially minded business clients is the firms service level commitments, the quality of a firms work and  it’s communication skills. Successful partnering arrangements share the same value system and constantly look for improvements and raising the performance bar. Consequently, companies look to their legal partners for value added services and not just transactional legal work. Law firms on a preferred list are conscious of the need to add value to the relationship regardless of size.

 

 

Not surprisingly then,  smaller law firms have proven themselves on many occasions to  be powerhouses of  leading edge technology and  best practices  and perhaps in some cases been the catalysts for  much larger traditionally minded firms wanting to change in order to protect market share.

 

 

Best Practices

 

 

As stated earlier firms wanting to guarantee their success  for years to come, must go beyond the transactional day to day work flow and begin to understand their clients needs.

 

Best practice companies  look to their law firms to collaborate and share information and best practices with each other for the benefit of their institutions. They want firms that can honestly act in the best interest of their business and client groups by leveraging on one another's experiences to ultimately reduce duplication of services and deliver the best possible advice from a tremendous legal knowledgebase and experience while  safeguarding the institutions interests now, as well as in the future. Perhaps this last point more then any other underscores the potential knowledge powerbase  a partnering arrangement or network of firms has over that of any one firm in today's marketplace.

Wal Mart is another example of a company that has customized the partnering model and taken a somewhat different approach to interacting and communicating with its external lawyers. Their approach requires lawyers from their preferred list to work for a brief time in their stores to better understand their people and business clients. What better way to get to know your clients and their needs and challenges they face then by learning what their business is about  from right on the shop floor.

 

Unfortunately there are still many firms, large and small, who  have yet to understand these key business traits and as a consequence have started to suffer the tell-tail signs of  disintegration or imploding. Working within an alliance or network of law firms requires a special mindset that perhaps not all firms possess or want to have. It requires an understanding that no one firm has swallowed all of the legal expertise and knowledge that exists. Working effectively within a partnership alliance may require conceding work to another firm, or the ultimate ego breaker - working with a competitor for the common good of the business client.

 

Most companies  who practice partnering are savvy enough to have a very wide compliment of legal expertise on their preferred or designated counsel lists. True, partnering at its zenith expects that one firm will concede to another on the list for the greater good of the client and ultimately the alliance and  if that firm is unwilling to forgo their ego’s and appreciate this fundamental sacrifice of business, they soon find themselves on the outside looking for new clients.

 

Corporate clients at the end of the day have a responsibility to protect share holder value and run their businesses as legally and profitably as they can. The last thing they want to see is their firms wasting valuable time and money in reinventing the wheel or worse yet pretending to be something they are not.  

 

 

Firms who assume that the status quo will remain unchanged because they have political connections unfortunately are short sighted and naïve. The business community has become so unpredictable and changing that if a firm continues to grasp to such outdated concepts it should  not come as a surprise to when they suddenly find themselves under a new marquee …or worse yet with fewer clients.

 

 

Most companies, if they are truly honest will tell you that they initially embraced the legal partnering concept out of necessity to be fiscally prudent. There is nothing wrong with that. The ancillary benefits in time far outweigh any immediate cost savings as true partnering arrangements promise to deliver on reciprocity, relationship building, client referrals (i.e. future business), networking and technological advancements for both the client and the law firm. Firms willing to go it alone in many larger legal markets face an uphill battle against those within a network.

 

 

Firms who have opted for a collaborative network share a common mindset for success and are prepared to not only move forward and accept challenges, but strive to be the pace setter in the legal market place. They understand that apathy, indifference and  resistance to change are the biggest impediments and threats to a firms existence. The legal landscape is littered with countless firms who have failed to realize this, firms that have resisted market forces,  business and tech changes and have either imploded or become appetizers for larger (not necessarily better) roaming legal behemoths.

 

 

It is undeniable that many firms have been put in a precarious position of having to be all things to all clients while also dealing with internal and external economic pressures.

 

 

Changes to the legal landscape in terms of technology, service delivery and convergence over the past 10 years have been both dramatic and fast paced. Those fortunate enough to have recognized those changes have kept pace by looking outside the legal profession for assistance and hired such professionals as consultants, bankers, business managers and information and knowledge managers. But unfortunately  for many more firms the pace at which this change has come has left them on the side lines winded and feeling the effects of motion sickness.

 

 

Firms must ask themselves, what are we doing now to better position ourselves in the legal marketplace. What is our client going to want in the future. It is not enough to  ask lawyers to begin thinking outside of the box. Business  models, technology  and  service delivery vehicles have undergone such dramatic changes since the early 90’s that to ask law firms to think outside of the box is passé. Many firms have leveraged technology and business skills to better position themselves to anticipate what their clients need today and in the future. In short they have gone beyond traditional thinking and open their minds to being three dimensional in their thinking…in short all things to all clients.

 

 

Focus on The Future

 

 

In conclusion many firms have traditionally been guilty of focusing  too much on immediate returns and existing relationships in the here and now and have been negligent of ignoring the future and what their clients may need.

 

The benefits a firm receives  from partnering in time spill over  into other relations with other clients on a firms roaster as experiences and knowledge learned from partnering arrangements invariably are passed on to others in both the legal and business community.

Many firms have dismissed partnering and convergence initiatives as nothing more then disguised  unilateral cost cutting measures aimed at benefiting only the business client. Their scepticism is perhaps not totally unfounded as there probably have been a fair share of miscalculated strategies which have  fallen short of their mark and  never got past a reduced list of  ‘legal service providers’ stage. Undeniably there is a responsibility for both parties on the partnering spectrum to understand this new business model. Both parties must understand their arrangement, rules of engagement and be committed to the success of  what can become a truly symbiotic relationship. Both partners must look beyond traditional thinking and embrace a more strategic business model for the delivery of  legal services…one that is based more on business principles and less on the traditional legal thinking..   

 

Firms who have been successful  in understanding  market pressures, business trends and their clients and  who have  proactively embraced new technology  with a three dimensional mindset  will undeniably be the leaders in partnering arrangements and ahead of the pack . These are the same  firms which large corporate clients will want in their boardrooms i.e. firms that not only have the best experts with proven legal skills, but firms with lawyers that are open minded and relationship focused.