Speaker's Corner: Era of mega mergers offers challenges for smaller law firms

When I became the first director of marketing for McCarthy Tétrault LLP almost 25 years ago, there was an established order in the profession: We knew who the main players were; lawyers articled, returned later on, and became partners in six or seven years at the firm of their mutual attraction; and firms, if they expanded, did so slowly through internal growth.

Clients were loyal, never questioned fees, and were accustomed to a role in which the power rested with their legal advisers.

Those were the days when only large firms were starting to speak the M word quietly. Marketing was not really a polite word yet in most firms. A few innovative large firms had marketing directors, but their role was limited. It certainly did not include strategy and those folks did not have a place at the decision tables. Small- and mid-sized firms were content with their roles and did not perceive themselves as businesses needing to compete. Marketing was an alien concept to these firms.

Jump ahead to the change in the millennium and we see a different picture. Partnership may take 10 years, mergers occur almost monthly, and partner and even whole department defects are no longer news. And most recently, the rise of the mega firm specifically engineered by offshore entities has shifted the landscape significantly. The Norton Rose Group absorbed Ogilvy Renault LLP and Macleod Dixon LLP and in turn is about to join with Fulbright & Jaworski LLP. Fraser Milner Casgrain LLP combined with SNR Denton and French firm Salans to operate under the Dentons brand.

It is not my intention to opine on when we will see more international relationships, but I have no doubt they will happen. The growth of mergers is not over.

But what this reality means to small- and mid-sized firms should be the burning question for the vast majority of lawyers in Canada who practise at them.

Let me be clear why small- and mid-sized firms cannot ignore the challenge of the mega-merger activity. The largest firms are, of course, competing for the same shrinking pool of world business players. But that will not feed these hungry beasts. They are forming marketing plans to pick off your best clients. Managing partners at small- and mid-sized practices ignore these real threats at the risk of steering their firms into oblivion. Where can they find the direction they need to respond correctly to a marketplace they never thought would exist?

Can Freecell, a card game loaded onto virtually every personal computer, teach us anything about the right attitude when it comes to addressing the changing marketplace? This is a simple game in which the goal is to rank cards by colour in descending numerical order to accumulate all of the suits lined in ascending order.

The obvious moves often lead the player to a dead end. Focusing on the obvious and ignoring the whole hand likely means the player will miss less apparent tactics. Rushing to match up colours in descending order without being aware of potential risks and options usually leaves the player stumped. Failure to have a plan B and see potential moves inevitably stops players in their tracks. It is all about analysis and preparation and forgoing a quick success for the ultimate goal of winning.

Managing partners and executive committees at small firms can benefit from understanding this simple game. Recognizing and accepting the market challenges, they must take a deep breath.

Law firms grumbled through the recession but few made substantial operational changes. However, the merger culture brings new challenges that are more dramatic than what the recession wrought. As long as law firms fail to recognize that they are businesses subject to the marketplace, they will fail to take similar actions to survive and prosper. But those firms that really understand the issues will consider and adopt appropriate strategic responses to secure their financial health and grow.

Most of us are familiar with the David and Goliath story about the young untrained shepherd who defeated the well-respected warrior. David did that by not restricting himself to classic and accepted norms of warfare. He won using the real skills he had and playing the game the way he understood it. He did not ignore the real threat; instead, he chose to address it in a fresh way with positive results.

This kind of independent thinking is exactly what small- and mid-sized firms need. In a precedent-driven business, firm management must set aside its limited and learned thinking to examine strengths, acknowledge weaknesses, accept differentiation, and stop worrying about what the others are doing. And management must radically redefine what it considers to be risk. The real risks facing small- and mid-sized firms in the mega-merger environment are doing nothing and continually being reactive. The less risky proposition is to the break out of the mould and have the courage to be who you really are.

So in this marketplace, here are the four most important actions managing partners of small- and mid-sized law firms must consider for survival and prosperity:

•    Open your mind: Stop worrying about yesterday and imagining a future filled with less. Shift your thinking to be free from what is and let yourself imagine what could be.

•    Do an inventory: Know your strengths and weaknesses; tally up your tools and make plans to improve them. Most plans have little financial cost but do require effort and commitment. Embrace those that help to build and expand the right relationships.

•    Make a plan: If you don’t know where you are going, how will you get there? Get rid of high-maintenance, low return clients; have a clear identity and value proposition; target industries and prospects; add or delete talent; implement a service plan; develop a marketing budget and responsibilities.

•    Review the plan: Formally review the plan and responsibilities and tweak it regularly. Throw out what is not working. Create new offerings as market conditions and feedback suggest.  Keep your plan and activities dynamic.

How managing partners respond to mega mergers is highly dependent on the practice mix.

To do nothing is not an option if survival and prosperity are the goals.

Brian Cope was the first director of marketing at McCarthy Tétrault LLP and is a senior marketing consultant for law firms in Canada. For more, see bhclawfirmmarketing.com.

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