Law firm mergers – it’s not just about getting bigger, it’s about people, policies and processes too
Merger mania is upon us as law firms seek to consolidate to improve their chances of survival. Whilst finding complementary practices may be a challenge in the drive to achieving economies of scale even when a suitable merger partner is found and the IT is deemed compatible the euphoria may be short lived.
A successful merger is not simply one which produces a bigger firm; it is one which improves the services it offers its clients and this needs engagement between people committed to agreeing policies which drive better client engagement and following streamlined processes which remove waste and enable improved risk management.
Size does matter but it is not the only factor
Economies of scale are not to be sniffed at. A larger firm will attract a different potential client base, have more people available to deliver the services and hopefully will produce more turnover with less staff overhead if the newly merged firm is prepared to sacrifice duplicate back-office staff and say goodbye to retiring senior people who needed to have someone else’s capital injected to be able to take their capital out, never mind to have successors to pass their work for clients onto.
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However, just because you double the size of your team offering a particular legal service does not mean that scale will improve on the structure of the team and its efficiency and effectiveness. In fact, the merger will certainly for a short while have the opposite effect as the newly merged practitioners identify what should be the appropriate structure in the team, what systems and processes might work best and decide on the newly merged team’s policies for dealing with every day matters such as opening a file routines.
The danger is that the partners and staff will simply carry on as before and the opportunity to conduct a beneficial review of processes and procedures is lost because it is ‘too difficult’ to ask your merger colleagues to consider changing the way they have always worked. Or worse still, the dominant firm simply assumes its processes and procedures are inevitably the best and the others had better conform to ‘the way things are done around here’ without question. This is not a recipe for success.
Legal practitioners do care about people of course but sometimes retaining good personnel and managing the people in the various teams across a merged firm is not a strength, after all clients need reassurance that the merger will not prevent them getting their lawyer’s full attention and client matters always seem to take priority over management tasks.
The trouble is that closing the door and not addressing all people’s concerns following a merger or at least listening and acting on all people’s ideas is a mistake as this is a once in a generation opportunity to take a good, objective look at people’s strengths and weaknesses and find appropriate positions for then to enhance their own productiveness but also therefore that of the firm.
In addressing sometimes difficult personality clashes or unwelcome behaviour it can help to have tools to take the fire out of any conflicts and see them off before they become inflamed and may even result in unwelcome departures and even de-mergers. Focus should be on preferred behaviours so agreeing not just the new firm’s equality and diversity policy but also the processes and procedures for the work to be undertaken will result for some in having to change the way they work and therefore behave.
Personality tests, such as Myers Briggs ®, are often helpful in identifying the way a person may approach change. The identified types can be useful in discussing how change might be implemented without criticising a particular person but rather looking at how that particular type might prefer to deal with the changes proposed. For more on how understanding the personalities in your team could help you manage this change see the articles by my colleague Ben Evans on the Lawskills’ website.
Equally, as the team leader do you have the skills necessary to motivate people to work together and upon new ways of working and delivering client services rather than simply focusing on your own legal work for clients? In my experience working with different team leaders in law firms our training as lawyers does not usually equip us to be managers of people. Of course, some lawyers have a natural ability but mostly we need to discuss what works and what might be a better way of dealing with things with those who have experience both inside the firm but also as an objective outsider. Coaching and mentoring of team leaders can be useful in a one-to-one but also facilitated discussions with a group in a firm can help leaders in newly merged firms to work together to solve the inevitable management issues arising.
If you manage and motivate your people well together you can achieve almost anything and certainly tackle the trials and tribulations of change in all its forms.
All lawyers prefer to work autonomously. A bold statement I know but in many ways our independent thinking marks this trait out in most of us and therefore managing a firm of lawyers is like herding the proverbial group of cats.
However, when you merge two firms together you are bringing two different cultures together and as we know if you do not recognise difference and appreciate the benefits this brings it will be like two tribes going to war instead of a beautiful place to work.
Agreeing to adhere to a set of policies about how we work together to service our clients is both civilised behaviour but hard to achieve when the very values which underpin any policy may be different to those with which we are familiar or to which we adhere as individuals. For example, one firm may have protocols about how quickly a telephone is answered or e-mail and letters acknowledged and actioned; and the other firm may not, but in fact the culture of that firm is to deal with things quicker that the firm with the protocols.
A merger provides an ideal opportunity to explore the culture of the firm and to set its core values for the future which will inform the making of any new policies and procedures. Sometimes raising things can be tricky when all lawyers see themselves as equal. It can help to have an objective outsider holding up the mirror and facilitating the discussions about the different way each person sees the view in the mirror. The first partnership meeting I attended in the newly merged firm of which I was a partner I asked how we were to tackle a particular issue which I believe most people preferred to ignore. It paid dividends and I was given a budget and scope to address it. It would have been all too easy to leave the ‘elephant in the room’ but speaking out did make a difference.
Once we have the confidence of all the people in a team and a willingness to work towards implementing change within the new merged firm within an agreed policy framework then the ability to create dynamic working parties is possible. A working party made up of the relevant personality types can actively review the processes used by the two member firms to drive out waste and create innovative ways of working instead.
We are competing to-day not just with other law firms but with alternative business structures and the Bar in offering legal services to ‘consumers’ who look much more critically at the way we do things than in the past for the fees we charge.
Taking a good hard look at what work we do is process based and what work is really advisory is critical. It is so easy to say that most of what a firm undertakes is advisory and therefore can be charged for accordingly but in reality much legal work is process driven and should be recognised as such and approached correctly i.e. with the right protocols, staffing levels and IT to support it. This may seem like heresy but it is actually commercial common sense. Just because you have a streamlined process in place which works like clockwork because all engaged in that work follows it does not mean that individual flair and job satisfaction is removed – quite the reverse actually.
If the agreed process is followed and that reflected the relevant management of risk which had been identified then there is less to go wrong and more time available for lawyers to focus on those clients who do indeed need trusted advisers for which they are prepare to pay.
Using a cross section of people from the merged firms to review processes in this way is also an excellent way of building a team from two distinct firms. It sometimes needs a catalyst to help keep the project on target, to document the decisions and prepare the tools agreed but once it has achieved its purpose members of the firm need to take responsibility to keep it under review, evaluate its successes and its weaknesses and continue to make continuous improvements.
Strength and depth in a firm does have the potential to generate a better competitive foundation for the future but simply to be bigger is not a winning strategy. A successful merged firm needs people willing to be flexible and able to understand and appreciate differences; it needs policies which bring people together and not tear them apart and it needs processes which are efficient and effective in raising the profitability of the firm and keep risks in check.
Gill Steel can be contacted by e-mail at Gill.Steel@lawskills.co.uk or call 01962 776442
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