Guidance for a healthy marriage

As Simmons & Simmons links up with New York's Fried Frank, Bradford Hildebrandt analyses how to make alliances work.

For those of you in the midst of final alliance negotiations with another firm, this article may be too late. But if you are considering joining or even starting an alliance, think again. Participants in strategic alliances often do not give themselves even a fighting chance of achieving the goals for which the alliance is intended.

Not all alliances fit into this category. Large established organisations such as Lex Mundi, the Capital Cities Law Group and the Commercial Law Affiliates, for example, are co-operative organisations that have introduced lawyers around the world to one another. They have been especially helpful to small and medium-sized firms that do not have the resources or the client demand to justify office locations across the globe.

Similarly, the numerous organised round tables that managing partners attend to discuss operational problems have proven interesting and helpful, although there have been recent problems of participating firms competing with each other in the same locations. In fact, some of the rules that these organisations have adopted seem silly and out-of-date, but that is another topic for another day.

The alliances that cause problems are where smaller groups of firms come together in an attempt to compete with larger firms by offering a “strategic” alternative to clients. Often these firms come from different countries. US-based alliances regularly comprise firms from different major cities and regions, while Canadian alliances tend to constitute firms from different provinces.

While many partners involved in such alliances are eager to tout their success, they are in truth often unsuccessful. In fact, a number of the better publicised alliances have fallen apart in the last few years, especially those between US and UK firms.

Yet joint ventures in other industries are often successful. Drug companies release new products together, and airlines formalise code sharing agreements. These alliances usually succeed because the companies involved spend the necessary time and money to determine whether an alliance will work before they take the plunge. They are also able to demonstrate to the consumer the value added by the alliance.

Why then do so many law firm alliances fail? There are many reasons:

No research is carried out on whether or not the market needs the alliance.

The competition from fully integrated law firms is not accurately estimated.

No serious willingness exists to invest the money necessary to ensure the alliance will work.

There is no commitment to manage the alliance. Some alliances rotate the chairperson position every six months. No wonder nothing ever gets done.

No common alliance name is created, meaning lawyers have to carry numerous business cards. Clients interviewed by this firm consider this problem to be the height of absurdity.

Little or no effort goes into educating clients about this new relationship. When asked about the impact of new alliances, clients often respond with a blank stare and the words: “What alliance?”

No attention is paid to ensuring all involved partners participate in some way in the alliance. As a result, the alliance often causes resentment among the “rank and file” partners.

No objective analysis of the alliance's effectiveness is done once it is up and running because partners involved in its creation are so protective of their established relationships.

Does all this mean that a well-organised, funded and managed alliance cannot work? Quite the contrary. When it comes to alliances, law firms can learn a few lessons from several of the Big Six accounting firms that have done a marvellous job of operating international alliances with little or no economic connection between the country members.

They have succeeded for various reasons. They have managed to market a brand name. They have set minimum standards of performance, and designed specific practice disciplines in the light of the marketplaces they serve. They also bring their partners together on a regular basis.

Lawyers do not sell products – at least not yet. Nor do they sell airplane rides or overnight hotel stays. Instead, they market a complex service that requires high levels of expertise and personal client service. As a result, considerable attention and resources must be dedicated to integrate allied firms, which in turn must demonstrate value to consumers. Law firm alliances rarely have any financial integration and there is little or no incentive to work together.

If you are currently in an alliance or considering joining or even starting one, ask yourself the following questions:

Does the alliance satisfy the goals (assuming you have any) of your firm?

Will your clients be willing to use your alliance partners?

Are you willing to spend substantial amounts of money to make the alliance work in the long term?

Are you willing to mix practice groups, operate under a joint conflicts policy and generally present a seamless organisation to your clients?

Will the alliance prevent you from undertaking other initiatives that might have a better return on investment?

How will your alliance compete with the other firms in the market?

Can you agree standards of quality control?

Are you willing to implement system technology?

If you can address these questions ahead of time, then you will join the handful of law firms and accounting firms that have made integrated alliances work. If you cannot, you are destined to join the increasing ranks of failed alliances.

Bradford W Hildebrandt is the founder and chairman of international legal management consulting firm Hildebrandt, Inc.