Clients are now more active than ever in overseas jurisdictions: property clients venture into emerging markets; due diligence may be required in far-flung corners of the world; sales and manufacturing functions are being relocated; tax strategies involve several jurisdictions; cross-border insolvency and reconstruction is a growth area; and private clients may already hold or be seeking to acquire investments overseas.
This trend has, in my experience, accelerated markedly in the past few years and is no longer restricted to multinational corporates. Businesses of all sizes and private clients with funds to spare are driving the need for international legal support. Such clients often have a close relationship with their lawyers and are usually very loyal. Ensuring that the client’s overseas needs are dealt with is essential: even the best of client relationships may otherwise flounder. In winning new work firms must be able to explain how their overseas legal requirements will be serviced.
In most cases, branch offices are not the answer: they are, by definition, geographically limiting and notoriously expensive and heavy on management time and resources. The use of ‘directories’ and old contacts of the firm’s partners may work on an ad hoc basis but are often inconsistent in geographical coverage and, more importantly, quality of service.
Networks are now playing a leading role in enabling firms to service clients through tried and tested relationships built up over many years. Not all networks are the same: some are, in effect, global or regional law firms with extensive exchanges of financial and other information between member firms, unified IT systems and a ‘top down’ business model often resembling more of a franchise rather than a law firm network. This model is unlikely to be attractive for a firm which values its independence, does not wish to be absorbed into the ‘lead’ firm and wishes to stay actively involved with historical client relationships. Other networks may be focused on particular areas of law such as employment, insolvency or tax and be more loosely organised. Networks are also managed in a number of different ways — some might have a small central secretariat whereas larger networks can have a more substantially staffed central infrastructure. Subscriptions vary greatly and can either be a flat rate or calculated by reference to a particular jurisdiction of the member, by fee earner, partner numbers, the turnover of the firm or be related to referrals; the latter being notoriously difficult to implement.
The most important criteria are:
l the ability of the firm to maintain its independence having regard to professional ethics, quality assurance and client perception, including the freedom to instruct or not instruct another network firm;
- a network which demands active involvement from its members with regular personal contact at partner level;
- a network with a robust attitude to recruitment and service standards;
- a strong identity which both clients and colleagues can recognise rather than being perceived as a ‘club’ of best friends; and
- a comfortable balance between strong central leadership, the independence of each member firm and the needs of each of the networks’ regions and sub-regions.
Conspicuous by its absence from the above list is the generation of inward referrals. While it would be foolish to argue that the likelihood of inward referrals is not a factor in any decision to join a network and in subsequent analysis of the firm’s ‘investment’, the much-used label ‘referral network’ can be somewhat misleading. Some firms no doubt see networks primarily as sources of inward referrals but that approach can be limiting and, arguably, misses the point. New clients are always welcome but, although difficult to measure, the ability to support clients overseas can comprise a substantial financial benefit to the firm in terms of winning new clients, retaining established clients and raising the profile of the firm generally. Some clients may also be prepared to pay fees to a
The international group at Howard Kennedy often contributes to many pitches and beauty parades where the ability to confirm with confidence that a potential client’s overseas needs can be serviced has helped win work for the firm — another very tangible financial benefit. Inward referrals are, by their nature, ad hoc and unpredictable but for many firms the need for overseas support is entirely predictable.
Network membership should not, however, be seen as an end in itself. Ensuring that the network is well managed and imposes stringent standards upon its members is essential in maximising the benefits of membership. Several networks have fallen away, either because they lacked strong leadership, did not require active participation between members and in some cases member firms were eventually found to be ill-equipped for the task. It is no longer good enough to rely upon occasional discussions between member firms’ partners. Professional administrative support, written service standards, sanctions for non-performance and active involvement will all contribute to the success of a network; ‘success’ in this context meaning delivering added value for the client.
The selection and recruitment process of members is where it starts. Gone are the days where a new member is ‘signed up’ as the next pin on the map. Thorough research on the firm and the local market must follow, plus the submission of a detailed written profile of the potential member covering not only the firm’s legal attributes but also a whole range of other issues including IT, insurance, website and practice area analysis. A senior member of the network should always visit the potential member’s offices and references required as part of the application process should always be followed up.
It can also be helpful to analyse the motivation of potential members in their wish to join the network. I would counsel caution if a potential member is also a member of one or other competing networks: it is vital that the entire firm ‘buys in’ to membership of the network rather than, for example, partner A promoting one network and partner B another.
Signing up a new member is just the start of what must be an ongoing management process. To ensure consistency of service across many jurisdictions, in markets that are at different stages of sophistication, the network’s leadership and administration must follow up on all the small details which, after all, clients will fix upon when they are referred to a network member. Is the website up to date? What are the firm’s press releases or newsletters like? Are response times and language skills satisfactory? Can you contact partners out of hours? What is happening in the local market? Are there jurisdictions that need further network coverage in emerging markets? Are there any service issues or complaints within the network? Do members pay their subscriptions on time? These matters need to be addressed regularly and any service or conduct issues confronted.
The most productive factor for a firm considering network membership is a requirement for active participation and regular meetings between member firms at partner level. In the LAW network, as well as compulsory attendance at the annual general meeting in September/October each year (rotated between the three regions), attending at least your own regional meeting earlier in the year is strongly encouraged. LAW meetings themselves focus on business development and updating members on firm developments rather than traditional ‘presentations’ or legal seminars. As vice-chairman, I attend all four LAW meetings each year together with the chairman and the non-lawyer executive director. The LAW executive, which is made up of 12 elected members, meets monthly on a three-hour telephone conference call as well as in person at an annual retreat.
To get the most out of network membership, partner engagement with the network should not diminish when returning to the firm after a network meeting. Briefing your partners and other colleagues about the meeting, about members and developments in the network as well as on local market conditions, has on many occasions assisted a colleague’s client or generated new instructions for the firm. If the network has member firms with an international perspective, the inward referrals will flow in due course.
It is important not to forget why you joined the network in the first place. If it was because your firm needs to support its most important clients overseas, devoting time to your network relationships is no longer an optional extra.
Martin Davies is head of the international department at Howard Kennedy and vice chairman of LAW.LawFirmNetworksMay2008
