Stuart Cartwright - partner & head of the ‘Lawshare’ referral scheme operated by JMW - comments on the use of legal networks to combat the threats to high street firms and the recession...

The term ‘legal networks’ seems to be very ‘en vogue’ in a lot of publications at present but why are firms looking to join such networks? Well, firstly it depends on what type of network we are talking about. There are some networks that simply provide ‘add ons’ to the member firms’ own services as well as general support. This allows them to compete with bigger entities and so they have a louder voice when it comes to negotiating for their own products or services.

The other option is to join a network where the firm assumes the full branding and practices of a particular model and effectively becomes a franchise branch. Some firms feel that they need to be part of a wider group in order to compete with the big players who are seemingly going to enter and destroy the traditional ‘high street practice’. In anticipation of this ‘doomsday’ scenario some firms feel there is safety in numbers and that joining a ‘brand’ will spare them on the day of reckoning. From speaking to many firms the savvy ones are joining networks to gain the benefits on offer but not resting on their laurels and thinking that joining a network will be the magic wand that will make all their problems vanish.

One tactic I’ve encountered is to make the firm extremely niche and focus on one area of law and culling smaller departments. In these kinds of cases, firms aim is to set themselves aside as ‘specialists’ and not dabbling in all areas ‘unlike their competitors’ and therefore being unique from the new kids on the block.

However, I have spoken to firms that are doing the opposite by recruiting and trying to branch into new areas so that they can give their clients a full service offering. The difficulty with this is that it can be expensive. Firstly, you have to find someone who is available with the relevant expertise and - more importantly – who has the thirst to start a new department. Secondly, launching and marketing a new department is costly and there will be the inevitable initial period, even if things do work well, where there is a lot of investment married with no profit costs.

Being part of a network can be a solution in this regard as firms can offer their clients a full service offering without the expenditure. From my experience, firms in reality are just trying to secure their clients for the next time they require a service they can provide and specialise in.

I have spoken to a number of managing partners who specialise in one or two areas and don’t feel they have enough clients that provide repeat work. As an example; X (a PI firm) acts and does a good job, the client then moves house, but X can’t act so the client goes to Z - a firm that deals with PI work and conveyancing. The client then has another PI claim two years later and forgets about X’s good work and goes to Z.

By making themselves more ‘full service’ by way of recruiting or joining networks (with the relevant safeguards) they think they will be able to generate more repeat clients and consolidate long term client relationships.

Which is the best approach? Only time will tell but one thing is for sure; a poor and struggling law firm will not suddenly become a good one by joining a network.