The Minefield of Consolidating Paralegal Services in a Post-Merger Environment
written by Catherine D\'Aversa, President, Legal Resource Consulting
With the current wave of law firm mergers taking place in North America, including a significant number of cross-border mergers, the resulting international “behemoths” will be firms with thousands of lawyers. The number of law firms with revenue of $2billion is expected to double by 2013, according to rankings reported in the American Lawyer Magazine. Law firms are merging in order to create an offering to clients, both in terms of expertise and geographic coverage. Law firms are taking a “strategic review” to look to the future and determine where the firm needs to be over the next several decades in answer to the needs of their clients, who are increasingly going global.
Integration of systems and infrastructure is not only vitally important in this climate, but incredibly complex and sometimes requires the consolidation of several different types of technology, systems and processes. The human resources aspect is also fraught with pitfalls, particularly with regard to the merging of paralegal services post-merger that undoubtedly will cause some job losses.
How can law firms tackle these issues, make the best decisions and come out with a fully integrated paralegal service under the circumstances?
International expansions often target countries such as the UK, Asia, US, Canada and Africa. Some of the time, this geographical spread may be necessary to be able to service local markets, with language, currency and legislation emerging as primary reasons for a global model. As a result, the law firm offices involved in the merger may be located in the same and different jurisdictions.
A review of paralegal services, technology and systems in each office location must be reviewed to determine whether it is cost effect to maintain, consolidate or eliminate in each of these offices.
Post-merger, an analysis of the productivity of each paralegal department is necessary to identify redundancies, as is the establishment of benchmarks against which to measure each group. Creating a paralegal assessment tool based on the substantive legal, performance and professional competencies required to meet the post-merger firm’s needs is a good starting point.
In the current highly competitive human resources environment, paralegal managers may find it pays to subscribe to Pareto’s principle that 20% of the best staff performs 80% of the work. This could result in a push for the top-performing paralegals and managers to deliver more, and trimming of the fat by getting rid of the mediocre performers. This not only delivers economies of scale but reduces overheads, staffing costs and the duplication of infrastructure for departmental accommodation.
And of course, changes to paralegal staffing levels will also affect management, so this analysis will help to drive management layoffs and restructuring. The analysis process therefore also needs to:
- Determine the cost (both economically and perceptually) of terminating resources
- Identify gaps in the structure or the skill set of the remaining paralegals and managers, and
- Implement a sound change management program to soften the impact on those who are retained.
A critical area in creating efficiencies is technology. It is also an area of frequent discord between merged law firms and can be a deal-breaker. Ideally, a technological review should happen during due diligence ahead of the merger to identify whether integration of the systems and software in use is possible, and more pertinently, whether it makes economic sense to do so.
Some of the questions that need to be answered include:
- What technologies are being used in the various practice areas and locations?
- How do they compare in terms of compatibility and functionality for the tasks involved and adaptability for future changes?
- What are the costs to combine functionalities and/or convert data to one system?
The answers to these questions will help to identify which technologies should be retained and which are likely to become obsolete.
Systems & Processes
The combining of systems and processes requires a similar comprehensive review, to determine the functionality, cost and capabilities of each modus operandi currently in use, in each of the law firm locations. Pre-merger, each office will have its own policies and service standards addressing the preparation and delivery of paralegal work. How does the post-merger firm deal with these policies and service standards? Will these processes be consolidated? How will the various offices interact and consolidate the various processes? Office systems such as telephone, copying facilities, document management, accounting and HR are often highly individualized to each location, particularly when cultural differences and national legislation come into play. Management or hiring practices that work in North America may verge on the taboo in the Far East, for example; the established policies of a British firm may be too conservative for American counterparts, and staff training may take on a different connotation entirely in an Asian or African environment.
Law firm precedents hold an important place. Law firm mergers with more than one office in a particular jurisdiction, will experience conflicting significances around the various precedents among the merging firms. The question that will need to be answered is whether each pre-merger firm should maintain individual precedents, or whether the precedents should be consolidated. In the latter instance, a review process will be necessary to determine which precedents have greater value, and the results may be controversial.
In any event, whether the merger is within one jurisdiction or multiple jurisdictions, it may be important to develop a uniform look in the law firm documentation and communication. The best resolution will be to create a review committee comprising of lawyers from various offices and jurisdictions. This group will review all precedents and make recommendations on the final choice and the process for achieving it.
Some law firms are hiring paralegal consultants to carry out the post-merger review and implementation of recommendations. This type of across-the-board review and analysis requires significant, qualified resources if it is to be achieved in a timely and cost-effective manner. As a fixed-term project, outsourcing to a qualified consultant in the capacity of project manager offers a number of benefits such as:
- An external resource is unencumbered by personal loyalties and is able to conduct the review and analysis objectively, without prejudice of prior relationships or assumptions to colour the analysis or recommendations.
- A qualified professional with expertise in developing and implementing programs, policies, systems and procedures is able to promote consistent paralegal practices for the merged law firm.
- An experienced project manager understands the complexities of the numerous and sometimes sensitive issues of merging groups, particularly across different cultures and jurisdictions.
- A qualified professional with expertise in assessing and restructuring paralegals, support staff and work flow to meet needs of lawyers and clients post-merger.
In conclusion, the merging of paralegal services in a post-merger environment requires an expertise not commonly found internally in law firms. With the recent trend towards building firms based on mergers, an expert project manager is essential to achieve optimum results in the shortest possible time frame.