Page 62 - The Handbook - Law Firm Networks
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Law Firm Networks – The Future of the Legal Profession
purposes.287 Consensus management has been cited as a prime cause of failure to conduct
organizational change.288
In effect, no one party wishes to have their own “ox gored” to improve the whole
organization. Particularly in times of crisis, participatory management can misallocate
resources since it often leads to proportional burden sharing rather than complete
restructuring. Continuous and strong senior management support is necessary to effect
radical change.
Consensus management and empowerment can change organizational behavior, as
individuals, once given authority, grapple to extend it. Networks, more than hierarchies,
tend to fall victim to corporate politics and local turf battles.289 Increased political
influence costs balance, to a limited extent, the benefits of an option to replace non-
performing network members. When titular authority yields to expertise, task delegation
which was formerly a matter of fiat becomes a matter of persuasion and negotiation.290
In short, shifting between networks and hierarchies has social ramifications with respect
to modes of influence. Interpersonal skills come to the fore and persons are free to
challenge the authority on which demands are based. Network structures ... are flexible,
flat, complex and rife with conflict and “recurring conflict is inevitable.”
Hierarchies solve these problems by vertical integration and owning the assets they use.
Networks typically solve them by granting multi-party residual claims to the output from
co-specialized production in order to align incentives.291
Sharing control almost always involves investment inefficiencies and overhead in
governance structures, but it may be that agents cannot be separated from their assets i.e.
they are indispensable to asset deployment. This occurs, for example, in the case of
consulting know-how but it also implies that organizations cannot simply purchase such
assets and vertically integrate them. If combining complementary assets creates more
value than sharing control with indispensable agents, network organizations might
emerge in preference to hierarchy.292
287 DUPONT LEGAL NETWORK, supra note 241: “But all other things are seldom equal. A number of significant barriers exist to building teams that
consist of members from different firms. Inter-firm competition can lead to sharp elbows among team members and can detract from team
performance. Lack of communication about client goals or group objectives can lead to a lack of focus and can reduce team effectiveness. Team
members may resist sharing intellectual capital gathered in other cases, such as research and forms, with other team members whom they view as
competitors. Incompatible technology, such as different word processing and database management software, can also pose a barrier to the sharing of
work product.”
288 Van Alstyne, supra note 9, citing B. J. Bashein et. al, Preconditions for BPR Success, 11 INFO. SYS. MGMT. 7, 7-13 (1994).
289 Id., citing C. C. Snow et. al, Managing 21st Century Network Organizations, 20 ORG. DYNAMICS, 5, 5-20 (1992).
290 Id., citing R. M. Kanter, The Future of Bureaucracy and Hierarchy in Organizational Theory: A Report from the Field, HARV. BUS. SCHOOL
(April 1989).
291 Id., citing J. Rockart & J. Short, The Networked Organization and the Management of Interdependence, in THE CORPORATIONS OF THE 1990S 189-
216 (M. S. Morton, Ed. 1991).
292 Id., 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, 691-719 (1986).
51
purposes.287 Consensus management has been cited as a prime cause of failure to conduct
organizational change.288
In effect, no one party wishes to have their own “ox gored” to improve the whole
organization. Particularly in times of crisis, participatory management can misallocate
resources since it often leads to proportional burden sharing rather than complete
restructuring. Continuous and strong senior management support is necessary to effect
radical change.
Consensus management and empowerment can change organizational behavior, as
individuals, once given authority, grapple to extend it. Networks, more than hierarchies,
tend to fall victim to corporate politics and local turf battles.289 Increased political
influence costs balance, to a limited extent, the benefits of an option to replace non-
performing network members. When titular authority yields to expertise, task delegation
which was formerly a matter of fiat becomes a matter of persuasion and negotiation.290
In short, shifting between networks and hierarchies has social ramifications with respect
to modes of influence. Interpersonal skills come to the fore and persons are free to
challenge the authority on which demands are based. Network structures ... are flexible,
flat, complex and rife with conflict and “recurring conflict is inevitable.”
Hierarchies solve these problems by vertical integration and owning the assets they use.
Networks typically solve them by granting multi-party residual claims to the output from
co-specialized production in order to align incentives.291
Sharing control almost always involves investment inefficiencies and overhead in
governance structures, but it may be that agents cannot be separated from their assets i.e.
they are indispensable to asset deployment. This occurs, for example, in the case of
consulting know-how but it also implies that organizations cannot simply purchase such
assets and vertically integrate them. If combining complementary assets creates more
value than sharing control with indispensable agents, network organizations might
emerge in preference to hierarchy.292
287 DUPONT LEGAL NETWORK, supra note 241: “But all other things are seldom equal. A number of significant barriers exist to building teams that
consist of members from different firms. Inter-firm competition can lead to sharp elbows among team members and can detract from team
performance. Lack of communication about client goals or group objectives can lead to a lack of focus and can reduce team effectiveness. Team
members may resist sharing intellectual capital gathered in other cases, such as research and forms, with other team members whom they view as
competitors. Incompatible technology, such as different word processing and database management software, can also pose a barrier to the sharing of
work product.”
288 Van Alstyne, supra note 9, citing B. J. Bashein et. al, Preconditions for BPR Success, 11 INFO. SYS. MGMT. 7, 7-13 (1994).
289 Id., citing C. C. Snow et. al, Managing 21st Century Network Organizations, 20 ORG. DYNAMICS, 5, 5-20 (1992).
290 Id., citing R. M. Kanter, The Future of Bureaucracy and Hierarchy in Organizational Theory: A Report from the Field, HARV. BUS. SCHOOL
(April 1989).
291 Id., citing J. Rockart & J. Short, The Networked Organization and the Management of Interdependence, in THE CORPORATIONS OF THE 1990S 189-
216 (M. S. Morton, Ed. 1991).
292 Id., 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, 691-719 (1986).
51
