I think the acquisition of consumers might be on the verge of being mapped. The battlefield is going to be retention and lifetime value.
Growth through acquisition — individuals, groups or full-blown mergers — has become a norm within the legal profession.
Doesn’t the record suggest it is time we ask whether the normal approach to the process does justice to the parties involved, and serves the industry well?
At the outset we should stipulate that there are two important things to understand when considering the relative effectiveness of growth-by-acquisition:
— First, good or bad, this path to growth is here to stay; and,
— Second, at its best, it has been a hit-and-miss proposition.
So, this post is not about whether growth-by-acquisition is sound. Rather, what might be done to cause the strategy to be more successful?
There are two keys to successful acquisitions. And, while conceptually simple, they are (clearly) difficult to execute.
- Improving the quality of the acquisition process (the topic of this post)
- Improving the integration of those acquired (the subject of next week’s post)
Improving The Process
Three things will improve the quality of the acquisition process:
- Begin with Strategic Targeting
- Test to ensure Cultural Alignment; and,
- Quality Due diligence.
In its simplest terms, a strategic hire is one that fills a need previously identified. A need identified as important to the firm achieving long-term aspirations. An unfortunate number of lateral hires were never previously targeted but were justified by the non-strategy of “being opportunistic.”
By contrast, strategic hires which significantly increase the probability of being successful will meet one or more of the following criteria:
- Fulfill an expressed client need in terms of technical capability or geographic presence.
- Meet diversification objectives previously identified for a practice and or geographic area.
- Add depth and expertise in an area that the firm has identified to further strengthen itself
Lack of cultural fit is high on the list of reasons for lateral hiring shortcomings and failures. Presuming all involved in the hiring process have a solid understanding of the firm’s culture and values, discussions should be specifically designed to identify the candidate’s relevant make-up.
During the interview and courting process, it is important that a candidate be exposed to a diverse sampling of the firm. For multi-office or practice firms, exposure to those outside of the office and/or practice group in which the candidate will reside provides an independent and important perspective.
So often, there are practice and professional surprises associated with the newly added partner or group. Disciplined and in-depth due diligence that goes beyond the desire to add an individual or group to the headcount will minimize surprises. Consider the following as steps in an effective due diligence process:
- Review statistics from existing/predecessor firms for a minimum of 3 years of performance history;
- Investigate the history of actual or threatened malpractice claims;
- Obtain assurance of client intent to transfer work;
- Analyze exposure to “unfinished business” claims;
- Confirm employment history;
- Check references (it is surprising how often this step is skipped);
- Confirm bar association standing.
Testing of cultural fit, conducting appropriate due diligence and hiring strategically will dramatically improve the odds of a successful hire. Now, to further improve the odds of long-term success we turn our focus to integration. Next week’s post will focus on integration.
What would you add to the above list?