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THE INTERNATIONAL ISSUE

 

 Table of Contents

July/August 2008 Issue | Volume 34 Number 5| Page 28
FEATURES

Growing Successful International Offices: 10 Key Steps for Law Firms

There are so many questions to be answered when a firm is expanding internationally: Which markets and what practice mix to go for? Pursue multi-national client targets or local targets only? Buy talent through mergers or grow organically in the new market? Offer services in U.S. law, local law or third-country law? What commitment is called for—big spend and broad team, or modest and sensible? The list of questions goes on, proving that penetrating global markets is a lot to manage. Yet for all its complexity, growing successfully internationally inevitably comes down to abiding by some basic rules and practices.

I’ve often thought a sort of Farmer’s Almanac would be useful to collect all the lessons learned in seeing law firms succeed and fail (and sometimes hover in between for years) with their international expansion efforts. So on the theme of an almanac, imagine that international law firms are like big gardens or farms—with the partners as the farmers. Experienced farmers know to start with the basic questions:

▪ What can we grow most successfully?

▪ Which crops are in greatest demand?

▪ How can we learn to grow more of the crops that are in demand?

▪ Where else can the crops that are most successful for us be cultivated?

▪ What environmental conditions do we need for a plentiful harvest?

▪ What can we realistically take on this season, from cultivation to harvest?

I’m a weekend gardener, like others who may read this, and I’ve learned firsthand that growing successful crops in different places is very tricky. For three years I planted raspberries at our hilltop house in Umbria, Italy, and no matter what I did, for three years the raspberry plants dried up. But the olive and fig trees dwarfing the dead raspberries are laden with fruit. For years I planted tulips on Long Island by the beach, and for years the rabbits ate them for lunch. But the hydrangeas and rhododendrons flourish in my Long Island garden, and the raspberries there will be ready for picking when this article is printed.

Like good gardening, successful international growth for law firms requires information, perseverance, resources, stamina, some luck … and a plan. Done right, the rewards can be great, as we can all see from the client rosters and profits per equity partner of many multioffice international firms. The lessons, strategies and tips in the following “almanac” will guide you. Note this almanac does not address the many reasons why it makes sense for ambitious firms to plant themselves in select international markets. It makes a lot of sense for some firms, and it is not a good idea for others, for reasons that vary widely. The 10 steps here focus on how to make international offices bloom wherever they are planted.

 

1. Make Sure You Have a Plan The need to plan ahead seems so obvious, and leadership may genuinely think the vision and objectives for the new office are crystal clear—but often the opposite is true. Here is a foolproof method for evaluating the future success of a new international office plan:

▪ Ask someone in the firm’s management team to explain the new office “plan” and its reason for being.

▪ If the question is answered clearly in less than two minutes, the operation has a decent chance of success.

▪ Then ask someone else in firm leadership to explain the office “plan” and its reason for being.

▪ If the second person’s answer is similar to the first person’s answer, the chance of the office succeeding is quite good.

▪ If either person’s answer is complicated, meanders or bears little resemblance to the firm’s overall mission, there’s a very good chance the new office will have problems and lackluster performance.

The message: If you want to -successfully expand internationally, you need to know who you are, why you want to expand, where you’re going and how you intend to succeed with the new office.

 

2. Lead with Your Strengths Wherever You Go Any new office capability should be reasonably consistent with the firm’s overall practice and industry expertise. This means focusing on what your firm does best. Buyers of legal services around the world seek expertise and experience more than ever, and studies continually show that this is what will motivate them to try your firm’s lawyers in a new location. Think of this: Did you know McDonald’s has opened a new restaurant in Tallinn? If you’re not a regular McDonald’s customer and you don’t go to Estonia, who cares? Remember: You’re not building outposts; you’re building bridges for your clients to realize their international business objectives. The firm’s strengths are the foundation of those bridges.

Much of the effort (and the payoff) in launching an international office is integrating it effectively with the rest of the firm. You can be assured a very steep climb with business development and recruiting if your firm launches a practice fairly new to the firm in a new office in a new market. To global clients, the new -office must have a viable connection to the firm’s existing value proposition.

 

3. Do Your Homework It’s critical to employ the business disciplines of due diligence and competitive analysis to understand the economics of expanding into a foreign location. A first client or two can help ease growing pains, but it is not due diligence and is rarely a good enough reason to launch. You should look realistically at the hours that can be billed and realized in the first 12 months, and then look deeper and further.

Take, for example, the high operating costs in cities like London and Hong Kong, where the investment is far greater than most American firms would pay to expand within the United States. Consider the enormous challenge and cost of luring local talent in the Gulf, given the explosion of new law firm offices there. The economics over time have to justify the cost, and the economic model is likely different from that of the traditional domestic office. Remember that more than a few U.S. firms have been burned when their vague and wishful “if we open they will come” approach to international offices fell short.

One of the biggest challenges for an international office is scale. How can firms with such a limited presence take business from premier local firms for major transactions in the region? In many cases they cannot, at least in the short- to mid-term. Management of the most successful multioffice firms have removed their rose-colored glasses and thought hard. They possess a well-defined target market and niche expertise to become a formidable competitor in a selected area, and they often have established loyal clients at home who agree to retain them in the new market.

 

4. Focus on the Typical Issues of an International Office Launch Whether in Beijing or Berlin, law firms opening new offices continually struggle with a range of issues. This is not rocket science, but if you are a novice, it is all too easy to get it wrong. You will undoubtedly make mistakes—but to minimize the mistakes, you should focus on the typical areas where firms continually trip up, and take action.

Here are key things you need to do:

▪ Identify which current clients of the firm can benefit from the new office and get introduced to the relevant decision makers. Which of your clients have activities or revenues in the region where you are going, and whom do they currently use for legal advice? Does your firm have a competitive offering? Who is making the law firm hiring decisions (it’s usually not the senior counsel at HQ), and who has a relationship with that person? Answers to these questions are necessary to determine your business development plan.

▪ Interpret local market dynamics correctly and adjust practices and business development approaches to the new market. How do local market leaders go about developing loyal client relationships? Can you adopt those approaches successfully? You need to decide what aspects of your practice growth strategy must change for the new market. Project finance, for example, may require different core competencies. Familiarize yourself with the local nuances before you go out selling business—you usually only get one chance.

▪ Entice local lawyers with a good client base as well as talented associates to join the office, in the short- and mid-term. The firm needs to decide what it is offering, in quantitative and qualitative terms, to laterals and associate hires. That offer should distinguish your firm. Remember, it’s likely that the lawyers you are approaching are being recruited by another half-dozen firms. Clarify what you offer and make sure it is expressed consistently by those conducting interviews.

5. Get Ready for a Major Time Commitment Because of the pressure to grow internationally and keep up with the Jones Dayses, many firms completely overlook the substantial time and attention needed to launch a new office in a new market. But without the right oversight, as you might guess, the new office will find it hard to get the talent or clients it needs to gain momentum, performance will eventually suffer, and institutional assets may begin walking out the door.

Be realistic about the leadership attention and management focus required for an international office launch, and dedicate what it takes. It may require a partner with management skills and experience in the firm to spend at least 50 percent of his or her time focused on growing the business (not clocking billable hours) for at least six months, or more likely 12 to 18 months. Marketing support necessary for an international office launch is often equivalent to one midlevel marketing professional’s time over at least six months as well.

While the initial investment may seem daunting, remember that it takes much more effort and time to reverse a weak, problematic launch. Two or three very expensive lateral hires that don’t make money for 12 months are a big hit on profitability. Conversely, with the right commitment, new international offices can bring huge value to the firm in terms of lawyer retention, lateral hiring, competitive distinction and client development. Success breeds more success. It is difficult to measure, yet in hindsight very apparent. (Think of the super-globals, such as Linklaters, that struggled to build their networks in the mid- to late-’90s.)

 

6. Avoid the Local Potholes Foreign offices of law firms, whether in Abu Dhabi or Amsterdam, must be prepared to understand and address many different and very market-specific issues. Every international firm is wise to have consistent processes and steps for opening overseas offices wherever they may be, so the wheel isn’t reinvented each time. But since every country is different (and often every region of a country varies widely), local adaptation and flexibility are always required.

The issues can range from complex approval processes and bar regulations for the new office, to widely diverse billing and realization standards for international corporate clients, to different traditions and mores for client events. If you want a very exclusive seminar in London, have a breakfast briefing at 7:30 a.m.; only you and the waiter will show up. Events rarely begin before 9 a.m. in London due to long commutes and customary work hours. If you host a forum of corporate counsel in China to develop relationships with Asian businesses, make sure the speakers aren’t all Westerners. If they are, local in-house counsel will likely listen politely and keep their thoughts to themselves. You need to strike an East/West or -local/foreign balance, and consider simultaneous translation.

It’s always best to articulate your objectives to those helping with the expansion, and then ask lots of questions. A wise final question is: “What haven’t I asked that I should be asking?”

 

7. Expect Business Development to Take Longer Foreign offices frequently must manage start-up operations, recruiting and client development with little on-site administrative and marketing support. You need to resource effectively, but simultaneously don’t underestimate the time required for these offices to begin bringing in new business. It takes far more time than in home markets. International business development is different from standard business development in the United States, and too many new offices make the mistake of cutting back support within three or six months of launch.

To generalize, the United States and Canada have a business style that is less formal and less bound by tradition and cultural “rules” than that found in Asia, Europe and Latin America. It is generally more culturally acceptable for an American lawyer to find her way into a U.S. client’s office and fairly quickly ask for business. In other markets, introductions are usually required for even the most discreet forms of client development, and several rounds of acquaintance over six months or more may be necessary before any real sales discussion can begin.

In addition, the function of corporate counsel is still far more clear and prevalent in North America than elsewhere. Such factors make it more difficult to identify your target clients and contact points in foreign markets and more time-consuming to develop relationships with them.

 

8. Demonstrate Confidence in the New Office—Inside and Outside the Firm You have to believe in the road you have taken—or, as the farmer might say, keep tending the crop in bad weather. When an international office has inconsistent oversight from firm leadership on the new office’s vision and expansion strategy, it can be debilitating. Lawyers in “the field” are often hampered in developing new business in new markets because their colleagues in mature offices in the firm’s home country are reluctant to deliver support.

Maintaining confidence in the international office, backed by a clear plan, also helps quiet the inevitable voices of dissent at home. One global truth I’ve seen in law firm expansion is that partners with very comfortable domestic practices usually don’t like the expensive disruption of a new foreign office. This is especially difficult when a firm is highly centralized, profitable on its own turf and unaccustomed to the high front-end costs of international expansion. The negative vibes can be so loud that even clients get wind that the firm’s own lawyers are doubting the new office’s viability. Thus, without head office clarity and confidence, it is very hard over time to gain and maintain partnership support and cooperation, to recruit and keep great lawyers in the new location, and to gain visibility in the new market—much less win clients.

 

9. Mix It Up with the New Office Team Variety is the spice of international life. So just how does that translate for law firms? Easy for me to say, but I’ll say it anyway: You can’t present a truly international face with a bunch of middle-age white male lawyers with American or English accents talking about the firm’s wide-ranging global capabilities. Mirror your audience. Your clients generally have a more diverse profile, and so do their law departments.

Having perspectives from different cultural, ethnic and political backgrounds is an excellent way to obtain the breadth of understanding necessary to excel in a local practice—particularly in emerging markets. For your firm to plan effectively, develop business successfully, and have a realistic view of the opportunities and threats in a specific market, it is important to see things through your eyes, the eyes of locals and the eyes of third-country nationals. That means you need to mix it up, by having a diverse group of people on board along with the firm’s “natives.”

 

10. Adapt Your Communications to Your New Markets Effective business development communication is adapting each message to the circumstances and the language of the targets. In international expansion terms, this means you should consider your messages in light of the local situation: competition, history, economy, political system, regulatory enforcement and so forth. Language and specific wording are crucial parts of local marketing, as is the method of distributing the message. Classic advertising does not tend to be a good use of marketing dollars in most places beyond North America and the United Kingdom. Mistakes are made far too often, and translation is usually not enough. Often the entire proposition must be recrafted and rewritten to be meaningful locally.

Beyond the message itself, effective communication is critical to overcome the fact that your firm may be unknown where you are going. To illustrate, do any of these firm names ring a bell? Kim & Chang; Derman, Düren, Akol Avukatlik Bürosu; Machado, Meyer, Sendacz e Opice; or Lepik & Luhaäär Lawin? They are each local market leaders: in Seoul, Korea; Istanbul, Turkey; São Paulo, Brazil; and Tallinn, Estonia, respectively. Although you may be well-known in your own backyard, law firms growing globally find that their brand awareness has not traveled far. If your firm wants to build awareness of its capabilities, it will have to invest significantly in profile-raising efforts.

So that’s the starter installment of the international law firm office almanac—farmers reaching 10 get a big fat hen (and hopefully one that lays golden eggs). Those who have penetrated new markets successfully know that it’s harder than it sounds. Each new crop and each new garden presents new challenges—you live and learn, and you make new mistakes. If you heed this advice, be it in New Delhi or Doha, you are much more likely to harvest the row you hoe. May you bloom where you’re planted.

About the Author

E. Leigh Dance assists law firms around the world with strategy and business development for international growth and advises global corporate law departments on structuring and managing to achieve better results for their companies. She lives and works between Europe and the United States, with offices in New York, Rome and London.

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