by Michael J. Anderson

We are often asked, What do we think is the best way to organize a professional service firm, both in terms of generating the greatest profitability and providing the greatest work satisfaction? Well, the answer can differ from firm to firm because of their client base, their geography, their culture, the individual personalities and/or their compensation system.

Most law firms, for example, are still in the infancy of developing strong practice groups and are just getting the concept of practice groups to a stage where they can see some improved profits and greater job satisfaction among their members. And yes, there are still some law firms who refuse to give up their individual freedoms and work in any kind of group at all. Bless them because more modern firms will be eating their lunch very soon.

Many accounting firms, on the other hand, have gone beyond practice groups and have been using industry groups a great deal more than their legal cousins. Many have created a matrix of both practice groups and industry groups to quickly respond to client initiatives.

What is it that the accountants have figured out that the lawyers are slow to embrace? Quite simply put, they have realized that the best organization is organized along client driven criteria rather than an internally driven criteria. Organizing by industry is client focused while organizing by practice area is firm focused.

Think about that for a second. If you were a client of a professional service firm, would you rather have your contacts with people who know your industry or with people who know only their area of expertise? It should be apparent that, no matter how good a lawyer you are, you are not serving your clients very well if you do not understand what makes them and their industry tick. What are the issues that are keeping them awake at night?

Now, some firms have developed industry teams because the type of work they do for specific clients demanded it and it was relatively easy to establish. Some examples of industry groups already in some law firms, recognized as such or not, are: investment banking, health care, telecommunications and real estate development. Each of these areas draws on different and distinct legal skills that must be able to work together in order to serve the client beyond the level of the single file or assignment. Using real estate development as an example, a client wants and expects their law firm to bring expertise in real estate, financing, tax, environmental and municipal government to the table. They may even have a litigation component to their work. They couldn't care less about what practice group their individual lawyer is in -- they want to know that their lawyer brings a team of people who can deal with all of their concerns.

In today's competitive environment, the most significant client matters involve more than one legal discipline. For example, a corporate client who wishes to buy another company may require expertise in securities, tax, environmental, labour and employment, banking, real property and regulatory practice areas.

At this early stage of law firm industry group development, another good reason for organizing along industry lines is the competitive advantage that this may create. Smaller and/or slower competitors probably can't or haven't organized in this way and that gives larger firms who do set up industry groups a huge marketing benefit when it comes to securing the work in the first place. Aren't we all looking for any competitive advantage we can get? Look at your marketplace and you will probably see that you can get first mover advantage by organizing and marketing in an industry group fashion or, if others are ahead of you, it will become an absolute imperative that you follow suit or you are at great risk to losing some of your best clients.

Did you see Foley & Lardner's ad in the February 26th, 2001 issue of The National Law Journal? The wording was, A 900 Attorney Law Firm That Can Turn On A Dime. How does Foley Lardner remain nimble and aggressive after its recent mergers with Hopkins & Sutter and Freedman Levy Kroll & Simonds? Simple. We employ industry focused solutions that give us a unique depth of experience and heightened responsiveness to meet clients' needs. If a client asks you whether you are organized that way, what will you say?

A list of firms that have already developed strong industry groups would include:

• Brobeck Phleger & Harrison - San Francisco
• Reed Smith Shaw & McClay - Pittsburgh
• Drinker Biddle & Reath - Philadelphia
• Gibbons Del Deo Dolan - Newark
• Bowman and Brooke - Minneapolis
• Nabarro Nathanson - London (UK)
• Graham & Dunn - Seattle
• Foley Lardner - Milwaukee
• Freshfileds - London (UK)
• Stevens & Lee - Reading PA
• McCutchen Doyle - San Francisco
• Klegal (Legal arm of KPMG)
• Eversheds - UK
• Clifford Chance - UK
• Slaughter and May - UK

There is also an internal reason for this style of organization. Being a member of an industry group will probably be invigorating for your professionals. While a practice group may be a necessity in terms of keeping current on developments in an area of expertise, an industry team may well be more fulfilling and challenging because it causes us to think outside of our comfort zone. We must take off our blinders and see a bigger picture, work as a team and deliver an industry wide solution.

When we develop an industry solution (as opposed to a singular solution for a specific problem) for a client, isn't it a lot easier to market that solution to other members of the same industry? We can readily show expertise and success that will have a real impact.

Another internal reason for industry groups is that, while it could happen, we have seldom seen a situation where an industry team packs up and leaves a firm like some practice groups have done in almost every major market.

In our series of interviews, Practice Leaders at Their Best, John Harris, the CEO of Olive LLP, an Indianapolis-based accounting firm, summed it up beautifully when he said, Let me preface this by saying that industry groups are, from an internal perspective, a much healthier way to do business. They bind practitioners and create cohesion. I think you'll find there's less turnover among members of industry groups because they're not all over the map, off in a corner of the office refining some esoteric specialty and doing client business on an ad hoc basis whenever their expertise is required.

Those kinds of people are easy pickings because they have no more reason to be at Olive than anywhere else. Once in a health or manufacturing group, however, they're part of something larger than themselves. In many cases, they'd have to start rebuilding their practices from scratch if they left.

Just to be clear, I am not advocating that firms dump their practice groups in favour of industry groups. The most profitable matrix has both sets of teams with the practice groups being responsible for improving skill sets and industry groups being more marketing driven and client responsive. And, if you want to go to the next level after you have developed an industry knowledge, you can then set up client teams who deal with specific consumers within a particular industry.

There is also a relatively new marketing concept that readily lends itself to industry groups. We are starting to see firms develop internet based practices based on knowledge of specific industries, not just cases. Examples would include:

• Bryan Cave (St. Louis) has a project that consists of two extranets: 1) A client preparing to import or export goods can access the firm's Trade Zone site. On that site, a client answers a series of detailed questions about its trading partner, the goods to be shipped and other relevant information. The site flashes a red light if an answer indicates the deal is likely to run into international trade snags. When that happens a client can link to a Bryan Cave attorney for immediate help. 2) The second site, No Zone, trains workplace supervisors in the thorny arena of harassment law. Supervisors spend an hour or so moving through the site which features discussions of federal law, state law, and the client's internal harassment policies. As they are learning, they receive e-mails asking them to respond to hypothetical situations. If they pass the quiz at the end, they receive a certificate, which is delivered to the human resources department.
• Wright Robinson in Richmond launched 'WorkNett' which will deliver employee compliance training over the Internet. An employee logs on and is led through a 20-minute video and quiz on sexual harassment. The program allows management to spot red flags. The internet training ensures that all employees have training in this sensitive subject.
• Moses & Singer of New York is marketing eHealth law practice to health care industry desperate to comply with HIPAA requirements.
• Kegler Brown Hill & Ritter (Columbus) Developed a Legislative Monitoring Service, which can be accessed with a paid password through the firm's web page, that tracks legislative changes in all fifty states that effect the paging industry. Clients pay for a tracking service and receive weekly or twice weekly notebooks with information about any relevant bill or regulation proposed in any statehouse. The program is profitable on its own but also generates a lot of work. Now that they have done this with the paging industry, they are exploring other options as well.

Then there is the question of geography. Have you noticed that certain areas have industrial clusters? Think about high tech. There are high tech clusters in places like Silicon Valley, Austin, Seattle, The Research Triangle, Las Vegas, Vancouver and other areas.

Some examples of other clusters might include: Wine in the Napa Valley (680 wineries), golf equipment manufacturers in the San Diego area, telemarketing in Omaha, furniture manufacturing in the Carolinas, specialty foods in Baton Rouge, light aircraft manufacturing in Wichita.... What industries have clustered in your areas? Can you serve the members of those industries from A to Z?

If there is a cluster in the area of any of your offices, don't you think those potential clients will want firms that know their industry, not just the law? Have you given any thought to how are you going to market to these clusters if you are not organized to recognize and deal with the issues that are unique to their industries.

We should all know by now that the only constant in the legal business is change. Are you prepared to start creating industry groups as part of your strategic plan? If not, you may be missing the boat.

©2001 Michael J. Anderson

Michael is a partner in the worldwide consulting practice of Edge International and can be reached at anderson@edge.ai