What does it take to make an integration process of two law firms really “sing”? Why are many mergers so challenged at realizing synergies, building a unitary operating model and culture, and acting upon a single set of external priorities?
In fairness, all firms have problems with these issues: fulfilling their commitment to autonomy tends to trump their efforts to have everyone rowing in the same direction toward shared goals.
A few table-setting observations can be made about law-firm combinations:
- This stuff is hard
- Results have been “choppy”
- As between “human beings” and “operating systems & processes,” I’ll put my money any day on human beings to drive improved performance and integration in any flat, professional-services environment (e.g., law firms). Query: How do we activate those human beings?
- Integration teams of business, IT, and operations analysts are impressively professionalized nowadays. Internal teams do a pretty good job of bolting two firms together – functions and operational processes are rationalized and key-cost inefficiencies are wrung out. Nonetheless, these areas are not the powerful, revenue-driving growth levers that should be the poster children of a high-performing combination.
The truth is, integration can be a head-scratcher. Law firms deliver system/process/product-enabled “artistry” rather than “artistry”-enabled systems/processes/products (i.e., the “human being” query above). People are your revenue; people are your products; people are your assets. While integration tends to focus on “process,” if your integration plan gets the “people” equation right, you’re accomplishing a lot.
Core “people-related” key-performance indicators (KPIs) for integration might focus on these goals:
- Retaining your best people
- Helping your best people perform better and contribute even more in the future
- Hiring both proven and high-potential contributors from other firms
How can we support the above three KPIs? One way to look at the “people issue” is through the lens of that legal industry sage . . . human psychologist Abe Maslow!
Maslow’s Hierarchy of Needs
Maslow defined a hierarchy of needs that explained each person’s path to fulfillment and happiness – i.e., self-actualization. He came up with three general levels of motivation:
- Basic – physiological (food, water, safety)
- Psychological – belongingness, relationships, esteem & accomplishment
- Self-fulfillment – self-actualization (achieving full potential)
He concluded that all humans have higher-level, less mercenary, less self-oriented paths to fulfillment that become important once the most basic and self-centered individual needs are met. Our needs become different in kind, not just in degree. Moreover, meeting our higher-order, self-actualized needs is more fulfilling than meeting our first-level, most basic needs.
“Level 1 needs” represent the most self-focused, and can be closely tied to more individual – dare I say hedonistic – desires. For our analytical purposes with law firms, Level 1 needs point us in a single direction: $. Already well-compensated “over contributors” generally support combinations because leadership will make sure to do everything it can to retain these “people assets” – they are simply too critical to the combined firm’s success to treat differently. But what about the other highly valued, high-potential partners who today place only a modest imprint on firm revenue? These latter partners are a flight risk because they likely won’t be happy with their new compensation. Firms don’t want to lose these people.
An Optimal Approach
Question: What should firms do to retain these valuable partners? Answer: Focus on Level 2 and Level 3 needs!
Translating Maslow’s hierarchy into practical integration strategies can help a combined firm create a differentiated, non-mercenary, culturally cohesive professional platform to which highly valued assets (human beings) can commit over an entire career.
At Edge, we help integrating firms put together a potent portfolio of adaptable teams to achieve important “one-firm” integration priorities. By borrowing from the really great work of organizational behaviorist Aaron Dignan as well as from Maslow, your integrating teams should be able to support certain concepts and have good answers to the questions implied in these bullets:
- Inclusion – Can I choose to support the integration process by collaborating with my peers through a teaming structure with which I can engage voluntarily?
- Purpose – Is my team’s mission objectively important to the health of the firm?
- Alignment – Will I benefit individually from what I’m building through my team?
- Self-Determination – Is my involvement elective, and is our team’s mission something we crafted from the ground up, rather than succeeded at from the top down?
- Contribution/Impact – Will our team’s impact, if achieved, be valued by firm leadership (for example, generating near- and mid-term revenue)?
- Agency – Do I have the freedom to determine how and when I will spend time with my team, and to experiment with new approaches that will help fulfill me and/or enhance the health of our firm?
- Creativity – Can our team create new objectives, and new means of meeting those new objectives, if in good faith we feel we can support our overarching mission?
- Transparency – Do I have ready access to all the information I’ll need to help our team be informed and be more effective?
- Contextual – Will the teaming structure and mission be mindful of my core responsibilities, which I need to support outside of my contribution to the integration effort?
- Support – Does my firm provide our team with the tools we believe will help us be successful?
- Service Scaling: Conferring Collective Benefit – I want to see my team’s impact radiate across the firm and benefit many others. Is my team capable of helping many people, and are those benefits perceptible to my team members?
- Recognition/Validation – I want to be validated and experience recognition through my team experience. Will the firm celebrate our successes?
I don’t mean to suggest that integration efforts activated through adaptable small teams are rudderless, “Woodstockian,” feel-good exercises. Participating partners and team members will need to benefit from the strategic vision and goals of leadership, and know about the priorities being acted upon by firm leadership in a more structured way.
Note: Team goals can be informed by objectives associated with increasing revenue and acquiring more clients, and they can also be informed by the “inputs” that lead to those objectives – e.g., “If our team establishes a relationship with two executive recruiting firms, our bankruptcy group could become the law firm of choice for the ‘change agent’ CFOs they place during a search engagement.”
Once the table is set properly and larger goals and related inputs are understood, get out of the way and let your teams run!
Bonus Bullets on Merger Integration and “Teaming”
- Partnerships! Partnerships!: High-performing business-services companies put in place a dizzying array of external partnerships with other complementary firms and product companies: venture partners (to enter new markets); product partners (to extend offering capabilities); revenue partners; innovation partners (to create whole new capabilities); technology partners; etc.
- Focus Teams on “Hybridization”: Law firms whose offerings bleed into other disciplines gain differentiation, gain relevance, and gain standing to have more diagnostic discussions with prospects. Examples are law-firm M&A shops that get their hands very dirty with post-acquisition business-integration issues (normally the province of Big Four firms, IT consultants, internal business analysts, etc.), or law-firm commercial litigators who sit down with risk-management consultants (think Marsh, Aon) and the client CFO to map out risk-mitigation strategies during an enterprise risk-assessment process.
- Insinuate Your Firm into Thought Leadership Discussions: Assign one of your teams to hang out with McKinsey, Bain, BCG or other disruptive-innovation consultants like Innosight. These consulting firms will tell you what innovation is taking place and how it will create new revenue categories. These new growth categories create new legal needs, and – more importantly for today – give law firms great content to serve as conversation-starting subject-matter currency.
Edge Principal Mike White, an expert in the field of law-firm growth, works with firms and practice groups in two primary areas: client experience innovation & differentiation, and strategic planning for growth. He also advises firms on business-development skills training/planning/coaching, law-firm succession planning, lateral-partner integration, and partner-compensation restructuring.