Strategy as a nexus in a firm´s partnership.

Considering the rapidity with which this alternation of boom-and-bust cycles occur, it seems advisable to define a strategy for the company in anticipation of each of the phases of the cycle.

June 26, 2024 |

3 min lectura

Professor Ken Andrews defines strategy as the decisions made over time that reflect both the objectives of a law firm and how to achieve them. At Black.Swan we particularly like this definition.

If a law firm does not have clear objectives to achieve, problems will come immediately. In other sectors it is likely that without objectives it would be impossible to start the activity of the company, but legal services have a very curious specialty: in economic boom every strategy is valid, and when the economy is bad every strategy is questioned, as is happening now in the change of economic cycle that Colombia and other regions are going through.

Considering the rapidity with which this alternation of boom-and-bust cycles occur, it seems advisable to define a strategy for the company in anticipation of each of the phases of the cycle.

This semester there has been a tendency to bet on the practice of arbitration and national and international litigation. Firms with national and regional presence have quickly appointed lateral and boilerplate partners in this practice. International firms with areas focused on Latin America, and which intend to have dominance in the region, have not been left behind, as recently happened with the appointment of Jonathan C. Hamilton from White and Case to Paul Hastings, to mention just one example.

Likewise, there has been an increase in the number of partners per number of professionals in the firms, which seeks to reduce the economic pressure of the structures in an economic moment where the instruction “pencils down” in M&A operations is heard more and more every day.

These types of partner moves are interesting, but they must be well configured to work. A firm that covers a very different range of services (on the one hand, services that have been “commoditized” with fast response times and high efficiency, and on the other hand, complex processes and high national or international expertise), may have a disconnect in its compensation model and the leakage of partners in the areas that are taking value could become inevitable.

All possible strategies and positioning in the spectrum of what a law firm can offer are legitimate. In the last decade, and especially in the last few years, we see strategy-related moves across law firms. From the merger between a centralized firm and a regional one, as happened with Serrano Martínez in Bogotá and Correa Merino Agudelo in Medellín, doubling their size, to Pérez-Llorca, who have begun to consolidate their commitment to Latin America with the integration of González Calvillo. On a global level, the great merger of a top British firm in the “magic circle” (the club of the best firms in the United Kingdom), Allen & Overy, and the American firm Shearman & Sterling, creating the global giant A&O Shearman, a merger that took a little over a year to consolidate.

But is it possible for a wide range of strategies to coexist in the same firm?
Is it possible to be a firm that aspires to both commoditized work and higher value-added advice?

It is possible that they are not compatible if they are very different, since the way to generate profit in an “operations” business is very different from the way it is generated through “expertise”. While the former requires higher volume to compensate for lower margins, the latter provides higher margins with lower volume of work. This is compounded by the different professional profiles required by each model, as well as the difficulty in defining a partner compensation system that recognizes the different efforts and with which the entire partnership agrees.

A law firm must consider what kind of law firm it wants to be, what kind of services it wants to provide, to whom it wants to provide them and how. If it does not do so, it will be difficult to overcome the changes in the phase of the economic cycle in which all previously planned strategies are questioned, because the partnership is nothing more than the constant management between individual and collective interests, and if the strategies are very different, the way of managing the work and generating profits will also be very different, with the consequent complication in the management of the partnership.

In this way, a well-configured strategy, attentive to the diversity of the cycle, becomes in turn the very nexus that unites and strengthens a partnership even if it suffers from new and possible divergences.

Antonio Gómez Montoya.

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