Creating a Law Firm Alliance

Published on: 
01/27/2014
The need to deal with increasing complexities in the law and in client needs, and the drive to achieve cost efficiencies from economies of scale, are paramount and seemingly contradictory concerns for most firms.

Often a merger or significant lateral hire is seen as the only solution. But small firm and solo lawyers can meet such needs with far greater flexibility by pursuing a variety of alliance strategies, from simple to complex, with their peer practitioners.

The simplest level of alliance is shared space. Some small firm or solo practitioners like being in a diverse professional environment, sharing space with accountants, brokers and other non-lawyers.

Another strategy is renting an office in a larger law firm on a month-to-month basis. The larger firm reduces its cost of operation this way, and, depending on the practice areas of both the sub-tenant (small firm) and the tenant (large firm), there may be an opportunity to refer work back and forth.

Many small firms hire contract lawyers to provide legal counsel on a specific matter beyond their practice or geographic scope. In such a situation the contracting firm should contribute oversight of the outsourced legal work and communicate with the client on how the work is applied.

The lawyer who initiates the contract arrangement becomes responsible – in a malpractice sense – for any errors committed even in a seemingly simple case. Clearly, the client must know of and approve the contract arrangement, and the contracting lawyer retains final responsibility for the client relationship.

The next level beyond a one-time alliance is a continuing one, which can be a tremendous advantage in supporting retainer client relationships. An ongoing alliance with an individual lawyer, or another small firm, gives the firm that establishes the arrangement a tremendous advantage.

From a cost perspective, the expenses involved in direct hiring are eliminated. The allied lawyer is not an out-of-pocket expense for billing purposes and the firm can bill the client at an amount greater than the cost for the allied lawyer's time, again provided that the client knows of the arrangement.

Technology allows for the creation of virtual alliances. An offshore alliance may seek to connect firms with the pool of highly educated talent in other countries where the use of English is widespread – India being the prime example – to conduct legal functions like research, document review and patent searches.

In the domestic version, lawyer-entrepreneurs work individually from home and provide work product electronically, saving on overhead and costing clients less in legal fees. The individual lawyer would then keep a certain percentage of fees billed as compensation.

The common thread of these strategies with all the alliance options discussed here is that, whatever they contribute in terms of cost saving and capability expansion, the value is determined by the client, not the law firm. Clients look for performance in the firms they hire, no matter what the size of the firm.

Small and solo firms that can use alliances to enhance performance stand an excellent chance to meet and exceed ever-higher client expectations.

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