Competition for corporate legal work is keen. Law firms vie with each other for a shrinking segment of outsourced legal work. Corporate legal departments and a growing array of well capitalized, tech and process savvy service providers now account for an almost 50% of legal spend. It’s not surprising, then, that law firms are stepping up investment in marketing and business development activities. Will this narrow the growing delta between rising demand for legal services and declining call for law firms? Short answer: not unless law firms address the myriad of reasons for client dissatisfaction as well as differentiate themselves.
It has been almost forty years since the United States Supreme Court upheld the right of lawyers to advertise. The Bates Court could have scarcely imagined that legal advertising — in the guise of websites, blogs, and a legion of other forms of communication spawned by the Internet — would afford lawyers a global advertising platform. And let’s not forget personal injury lawyers who, as is known by the insomniacs among us, sponsor those late night shows that are hard to remember the next morning and even more difficult to admit to having watched. Legal advertising has a multiplicity of shapes and is a staple from solo practitioners in storefronts to the largest global law firms. And sometimes the content of lawyer advertising — how the firm represents itself to the public — can have significant consequences.
Dentons and The Swiss Verein Structure
Dentons has been in the news a great deal lately. The press usually focuses on its latest acquisition in a relentless expansion across the globe. In the span of a few years, Dentons — now the world’s largest law firm in headcount and number of countries with offices — has channeled the BigFour’s global strategy and has pulled off the legal equivalent of a rollup. It has done so with staggering speed, geographic breadth, and sheer number of deals. Just recently, Dentons announced that it has 21 additional NDA’s in place with new target firms across the globe. How has Dentons pulled this off? Two key elements are its Swiss verein structure and global-minded leadership.
The Swiss verein enables member firms operating under the Dentons brand to maintain their own finances while tapping into the global brand’s robust sales and marketing machine and technology. The structure also facilitates the firm’s rapid entry into new markets, helping it to circumnavigate potential regulatory roadblocks without seemingly breaking stride.
But there are also downsides to the Swiss verein — not just for Dentons but also for the other half-dozen behemoth firms that share the structure. For example, profits cannot be shared between constituent partnerships, a constraint that removes incentives for lawyers in member firms to share clients and work with attorneys in other member participants operating under the global brand. Most law firms operating as vereins combat this challenge by sharing costs in return for work referrals, which allows for the indirect sharing of profit.
The economic autonomy of members also militates against the global brand operating as an integrated firm which is how Dentons and other vereins advertise themselves and which is a big selling point in their efforts to secure client work across the globe as well as vie for lucrative cross-border matters. Inherent in the autonomy of the individual member firms is a resistance to yield to conflicts with other member firms, because there is no financial incentive to do so. While this tension certainly exists at large law firms with a unified P&L, it is far more acute in the verein context where, from an economic perspective, “it’s every member for itself.” [Read more…]