United States: Industry Practice Groups
The Twenty-First Century Law Firm

With mergers, consolidation, globalization and bankruptcy at historic levels, law firms are facing a steadily shrinking pool of available clients. Most are struggling to retain and increase business with their surviving clients while striving for new ones. Their structure condemns many of their efforts to failure.

Substantially all law firms of any appreciable size have subdivided into practice groups. Typically, these groups are comprised of lawyers whose practice involves the area of law that gives the group its name, such as the tax group, litigation group, trusts and estates group, etc. This concentrates those lawyers with similar experience. This concentration allows for ease of idea interchange, continuing specialized education and a feel for the personnel depth available for pending cases. But this structure is lawyer focused, when it should be client focused. A more client appealing and thus more productive and profitable alternative is to establish industry practice groups or if the size of client business warrants it, individual client groups.

Clients look to law firms when faced with a present or imminent need for specific work. And when a lawyer with an appropriate specialty is retained to take care of the situation, the primary relationship growing out of the arrangement is between that lawyer and the client. For example, if a company were contemplating a merger it would typically settle on a lawyer from a mergers and acquisitions practice group or if the problem involved trademarks, an intellectual property group lawyer would be used. The fact that the retained lawyers belong to such practice groups is irrelevant to the client as long as it knows the lawyer has the skills and experience the client needs.

How the choice of lawyers is made is significant. If a company had prior favorable experience with a lawyer, this would be the most likely choice for routine matters. If there is no relevant past experience, the next most telling selection factors are references from a trusted source or the generally accepted reputation of the lawyer, firm, or practice group. Size or importance of the deal dramatically impacts the weight of these factors. As the significance of the deal increases so does the importance of reputation in the selection process. This is a result of having to gain the approval of the Chief Executive Officer or, if the deal is significant enough, the Board of Directors, if they weren’t involved in the selection process at the outset. It also stems from the practical need to obtain the implicit approval of the stockholders for management’s decisions, especially if things don’t turn out positively for the company. As neither the Board nor the stockholders are likely to have first hand knowledge of law firms or their lawyers, their reaction to any choice will be based on reputation. Power of reputation can be so strong that law firms that provide better and cheaper service frequently lose out to other firms that enjoy a positive and widespread notoriety (the nobody gets fired for hiring IBM syndrome).

For law firms this importance of reputation in a client’s decision making process for the most prized engagements is unfortunate. Individual lawyers, with rare exception, do not have widely heralded reputations. Firms with highly reputed specialties are almost as rare. This accounts for the dominance of those law firm that have established a specialty "brand" in obtaining high profile cases. Even when a firm without such a brand manages to land a high profile case, the client is likely to be uneasy. The lack of a brand means the lack of an implied certification that a correct choice has been made in selecting that firm. The comfort and security that a brand provides is not there. Additionally, with the relationship that results from one principal lawyer and the client, there is no long-term security for the firm. Today lawyers move from firm to firm with great regularity and if a client relationship is with a moving lawyer, the client will likely move with the lawyer. It is much better for a firm if a client becomes "institutionalized" or truly becomes a firm client and not a client of a firm’s lawyer. When a client works on a regular basis with many lawyers in a firm, institutionalization results. Multiple ties remove the risk of losing a client just because one of the firm’s lawyers decides to make a move.

Individual lawyer based client relationships also increase the difficulties of getting a client to purchase services, other than the original used services; a practice known as cross- selling. Every firm would like to broaden its work with clients to include several specialties. Not only does this help institutionalize the client, but it makes for an increased and more regular revenue stream. Cross-selling is usually regarded as the method to accomplish these goals. Cross-selling usually requires the assistance of the lawyer that has the existing principal relationship to make introductions and smooth the process. That assistance may be less than freely given if the lawyer wishes to retain an egocentric position with the client to build his or her "book of business". Not an unheard of practice when a lawyer’s book of business typically dictates compensation levels and the ease with which a lawyer can switch firms. Providing that the lawyer is a team player and is theoretically willing to downplay his or her influence with the client for the good of the firm, there can still be problems. All too often, a lack of personal knowledge of other skills possessed by lawyers in the firm may bar the cross-selling effort. Or frequently a lack of confidence in the skills of particular firm members may make the relationship lawyer reluctant to risk the existing relationship by exposing the client to bad experiences. And even if all these hurdles are cleared, it is almost unheard of for a firm to have a sterling reputation in more than one practice area. So, an appealing brand, a principal motivational force for switching to some additional firm specialty to handle a significant problem is lacking. This is especially true if other available firms have notable brands in the specialties attempting to be cross-sold. Consequently, cross-selling is more talked about than accomplished.

Restructuring to industry practice groups eliminates these problems and converts some negatives to positives. Industry practice groups consist of lawyers that specialize in each of the areas that make up a significant amount of the legal work performed in that industry. These groups do not just do the traditional and concentrate on the legal developments that occur in their respective areas of expertise. They become experts in their chosen industry. All lawyers within a group keep abreast of the structures, players, priorities, trends and problems of their industry through regular and frequent meetings with clients in the industry, reading trade publications and attending trade shows.

With this business expertise, industry practice groups can craft specific need driven brands that reflects the unique strength of a firm while appealing to their industry. This puts a powerful and effective marketing tool at their disposal that strengthens existing client relationships and attracts new ones. It also avoids the vagueness and monothematic approach that corrupt most law firm branding attempts where one brand strives and fails to be the alter ego of a diverse firm and, to compound the failure, fits any firm equally well. Using their business knowledge of the industry, each practice group can target the media and events that will most effectively present their brand and its underlying services as well as set the stage for direct mail programs, seminars, workshops and client invited retreats. All of these can then be targeted to any of a range of actual client needs and aspirations rather than just a segment of the law. Such knowledge empowers a firm to know rather than guess which potential clients would be open to and benefit most from each of their services.

With industry practice groups, clients take on and get to know a team of lawyers that can handle any of their most serious problems. As a result, relationships that develop are between a team of lawyers and the client. Gone is the problem of the moving attorney and his or her client going with them. Also gone are the problems associated with cross-selling. There is no need to cross-sell as the industry practice group provides the spectrum of talent needed by the client for any situation. And, if properly branded, an industry group provides the comfort of a well-established reputation to arrest any client desire to look for additional legal help when faced with new problems.

From the client’s perspective, it will make a branded group of experts available for the array of problems requiring outside legal help; experts that are thoroughly familiar with the industry. In effect, one stop shopping which reduces the cost and time spent in the selection process and reduces the need for future selections. It also eliminates the learning curve that has to be undergone before the lawyers can function in a meaningful way on the client’s problems. Because industry groups are already knowledgeable about their chosen line of business, their lawyers only need to get familiar with the idiosyncrasies of individual companies and even these are more easily assimilated when the overall context of the business is known by those lawyers and regarded as critical.

Law firms like to promote themselves as providing service to their client. Many have adapted tag lines in their advertising and other promotional materials that suggest that client service is their highest priority. However, an examination of their structure informs clients that, regardless of their intentions, this is hype not reality. But it is a correctable situation. By adopting an industry practice group structure, law firms can become valued service providers to business and can be welcomed as partners instead of necessary evils. Simultaneously, law firms adopting this change and building on its inherent marketing advantages will break away from their competition and increase their bottom line in a tough competitive environment.