Page 46 - The Handbook - Law Firm Networks 2018
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The Handbook: Law Firm Networks
collective productivity, however, groups concern themselves with identity maintenance
where recognition, fear of shame, and peer pressure play a role. (Author’s Note: This is
very different from hierarchical arrangements because the members have their own self-
identities.)
Governance strategy must assure communications, be consistent with long-term
objectives, and offer collective solutions for global problems. Consensus building is a key
part. Shared control in network organizations leads to more consensus management
which tends to increase “buy-in” among employees affected by new decisions.
Participatory involvement of committees and line management in the process of setting
strategy increases group member acceptance of and responsibility for final
recommendations.225 The upside is higher levels of commitment to the network. Sharing
control almost always involves investment inefficiencies.226
As the network evolves into business with both formal and informal internal structures, it will adopt and
modify governance structures. The success of the structure and management will determine the success of
the network. They will effectively set the natural limits for growth and development.
Governance – Applications to Professional Services Network. The significance of governance issues will
vary by the level of network and type of member firms. They will also vary by the size of the network, i.e.,
the number of members, and the geographic coverage of the membership. This section will focus on Level 2
and 3 networks since Level 4 networks often have corporate type structures and corporate authority to
command and control their members.
Level 1 networks are almost too informal to have governance issues. The simplest networks are without staff
and have few organized activities. Dues structures, if they exist, cover essential costs. An informal
association is created by a group of “best friends.” There is no organization other than the relationship
between these friends. The contact among the members is usually at an annual get-together and/or by way of
referrals. There is little knowledge of the association of the members. A staff person at one of the firms
usually administers the network. The governance issues are simply related to the personalities of those
involved. Since the network is not organized, there are no real costs associated with a malfunction of the
governing process.
Governance issues are first found in Level 2 networks. As seen in Table 1, the size of the budget and scope
of the activities are going to create governance issues. In addition, since a number of Level 2 networks are
international, there are some additional issues involving culture and business practices. For example,
different cultures have different attitudes toward payment of fees. While timely payment of dues is expected,
it is not uncommon to have members from different regions perennially pay late under network standards.
This creates a conflict between the governing body and the members.
Because Level 2 networks are commonly composed of comparatively small firms, the firms have a lot in
common. There is a general consensus on the purposes, goals, and objectives of the network. The scope of
the activity is defined and restricted by the amount of funds available. The combination of these factors
makes governance of Level 2 networks relatively straightforward.
225 Van Alstyne, supra note 9, citing R. Howard, The CEO as Organizational Architect: An Interview with Xerox's Paul Allaire, HARV. BUS. REV.
(Sept.-Oct. 1992); see also T. PETERS, LIBERATION MANAGEMENT: NECESSARY DISORGANIZATION FOR THE NANOSECOND NINETIES 834 (1992).
226 Van Alstyne, supra note 9, citing S. J. Grossman & O. D. Hart, The Costs and Benefits of Ownership: A Theory of Vertical and Lateral
Integration, 94 J. OF POL. ECON. 691, 719 (1986).
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collective productivity, however, groups concern themselves with identity maintenance
where recognition, fear of shame, and peer pressure play a role. (Author’s Note: This is
very different from hierarchical arrangements because the members have their own self-
identities.)
Governance strategy must assure communications, be consistent with long-term
objectives, and offer collective solutions for global problems. Consensus building is a key
part. Shared control in network organizations leads to more consensus management
which tends to increase “buy-in” among employees affected by new decisions.
Participatory involvement of committees and line management in the process of setting
strategy increases group member acceptance of and responsibility for final
recommendations.225 The upside is higher levels of commitment to the network. Sharing
control almost always involves investment inefficiencies.226
As the network evolves into business with both formal and informal internal structures, it will adopt and
modify governance structures. The success of the structure and management will determine the success of
the network. They will effectively set the natural limits for growth and development.
Governance – Applications to Professional Services Network. The significance of governance issues will
vary by the level of network and type of member firms. They will also vary by the size of the network, i.e.,
the number of members, and the geographic coverage of the membership. This section will focus on Level 2
and 3 networks since Level 4 networks often have corporate type structures and corporate authority to
command and control their members.
Level 1 networks are almost too informal to have governance issues. The simplest networks are without staff
and have few organized activities. Dues structures, if they exist, cover essential costs. An informal
association is created by a group of “best friends.” There is no organization other than the relationship
between these friends. The contact among the members is usually at an annual get-together and/or by way of
referrals. There is little knowledge of the association of the members. A staff person at one of the firms
usually administers the network. The governance issues are simply related to the personalities of those
involved. Since the network is not organized, there are no real costs associated with a malfunction of the
governing process.
Governance issues are first found in Level 2 networks. As seen in Table 1, the size of the budget and scope
of the activities are going to create governance issues. In addition, since a number of Level 2 networks are
international, there are some additional issues involving culture and business practices. For example,
different cultures have different attitudes toward payment of fees. While timely payment of dues is expected,
it is not uncommon to have members from different regions perennially pay late under network standards.
This creates a conflict between the governing body and the members.
Because Level 2 networks are commonly composed of comparatively small firms, the firms have a lot in
common. There is a general consensus on the purposes, goals, and objectives of the network. The scope of
the activity is defined and restricted by the amount of funds available. The combination of these factors
makes governance of Level 2 networks relatively straightforward.
225 Van Alstyne, supra note 9, citing R. Howard, The CEO as Organizational Architect: An Interview with Xerox's Paul Allaire, HARV. BUS. REV.
(Sept.-Oct. 1992); see also T. PETERS, LIBERATION MANAGEMENT: NECESSARY DISORGANIZATION FOR THE NANOSECOND NINETIES 834 (1992).
226 Van Alstyne, supra note 9, citing S. J. Grossman & O. D. Hart, The Costs and Benefits of Ownership: A Theory of Vertical and Lateral
Integration, 94 J. OF POL. ECON. 691, 719 (1986).
- 33 -
