This is the first in a series of four posts that consider the future of professional services networks, with particular reference to their strategic value for law firms.
These observations of my colleagues in Walker Clark LLC and I arise from our experience over the past three decades advising law firms on the value of membership in professional services networks, as well as advising some of the networks themselves on strategic and operational issues. During that time we have seen dramatic and fundamental changes in legal markets worldwide. Those changes have been replicated, and in some respects propelled in part, by similar evolutions in professional services networks. We expect those trends to continue at an ever-increasing pace.
We will suggest three perspectives from which the future of networks should be considered, and from which law firms that are members and prospective members of those networks should engage in an ongoing evaluation of whether participation in a network is likely to continue to produce a reasonable return on investment.
external, internal, and strategic value
We cannot expect to present, in the confines of four blog posts, a comprehensive treatise on professional services networks as strategic structures for law firms. However, we can offer three analytical contexts in which law firms can begin their own, firm-specific considerations of whether network membership is right for them and, if so, which type of network could produce the best return on their investment.
Those three perspectives are:
- external value: Will membership in a professional services network produce tangible, sustainable external value for a law firm?
- internal value: How can networks deliver value to a firm's internal operations and profitability?
- strategic value: Is network membership the best strategic alternative?
These posts are not just for law firms.
The importance of these three perspectives extends beyond the decision making process of law firms and other similar professional services firms. They also describe, we believe, three diagnostic indicators of the probable future of networks. Professional services networks exist to serve their members. However, one of the toughest challenges for each professional services network, both today and tomorrow, is to develop and internalize a detailed, comprehensive, and reliable understanding of the value that it delivers to its members, as viewed from the point of view of the members themselves.
value as a decisive factor
As we will explore in greater detail in the final article in this series, a professional services network is only one of a number of strategic options for law firms that want to improve their market visibility and expand their practice. The competitive environment for professional services networks will be increasingly challenging over the next five to ten years. Perhaps the one factor that will determine, more than any other, which networks survive and which fade away in irrelevancy will be the extent to which a network delivers measurable value to its members.
In other words, what is the tangible return on investment -- measured in terms of external value, internal value, and strategic value -- that a firm receives from membership in a network? Many networks have great difficulty answering that question credibly. All of them promise compelling benefits from membership, but few actually deliver on those promises. Why is that?
Actual delivery of value -- not reputation or branding -- will the the factor that decides that future of professional services networks.
the starting point: understanding the investment
Our firm recommends that our law firm clients evaluate the total value of network membership in terms the of return on investment. Leaders of professional services networks likewise should base much of their planning on ensuring that the network actually delivers a return on investment to each member, and -- equally importantly -- that each member can measure that return. Glowing promises might attract members, but actual delivery of known value is what keeps them.
For there to be a return on investment, there must, of course, be an investment.
The required investment for a successful participation in a professional services network is more than just paying dues and going to conferences (and spending more money).
The largest portion of the investment usually is the value of partner or shareholder time. In our experience advising law firms on network participation, we have observed a clear and direct correlation between the value of partner time invested and the total tangible value that the firm receives from network membership.
Network membership should be the collateral duty of every partner, not just the designated point of contact. Some firms tend to overlook or undervalue this investment of time, but it is the most important part of the calculation. Under-investment of partner time and attention is one of the most frequent reasons for disappointing results from network membership.
In other words, if your law firm is going to assign substantially all the responsibility for participation in a network to only one partner or shareholder, why bother at all?
The other investment that needs to be made is a collective investment to fund the network at a level that enables it to deliver the services that are needed to produce real synergy throughout the organization. Many networks are woefully underfunded and understaffed. As a result, they face special handicaps in delivering external value and, perhaps even more importantly, often cannot take advantage of opportunities to deliver differentiating internal value to their members. In some instances, even the simplest innovation is impractical because there is nobody to do the work. (Not surprisingly, the members who constantly demand more services from the network are often the ones who howl the loudest when a dues increase is proposed.)
looking ahead to Part 2
In the next post in this series, we will consider the concept of external value as part of the potential return on investment in network membership. How should law firms -- and the networks to which they belong -- prioritize and measure the benefits that membership produces? What are some of the factors in the behavior of networks that can seriously weaken that external value and drive members away?
In short, how can professional services networks answer the same question that law firm partners always ask when one of their colleagues (or a Walker Clark consultant) suggests that they join a network: What will we get out of it?