The forms of globalization

Not too long ago, Business Week had an interesting article about the phases of globalization for business. Much of what Business Week said about business is relevant to law firms.

Initially, businesses approached globalization through what Business Week called the "colonial model." Companies had management, capital, etc., centralized at their head office which dispatched people to the colonies when needed. Everything depended on the head office, and everything flowed through the head office. This model was in vogue, Business Week said, until shortly after the Second World War.

The next phase was the "multinational company," which dominated the second half of the last century. In the "multinational company," there was a headquarters, but headquarters management gave much more freedom to regional operations which were, in most cases, relatively independent of headquarters, with their own management, financial resources, and product and/or service variations suited to the region served. These regional operations were also relatively independent of other regional operations, usually having little contact with them.

Towards the end of the Twentieth Century, a new business model started to emerge, the "globalized company." In the "globalized company," model, there is great mobility of capital, of resources of all types, and of people. What ever needs to be done will be done wherever it can be done competently, on time, and at the lowest cost. Flexibility and rapid response is the focus. Time and location are irrelevant. The globalized business is an interconnected whole operating twenty-four hours a day, seven days a week, fifty-two weeks a year without letup. Whether human managers are able to perform long term this way remains to be seen, of course.

It seems to me that a significant percentage of multi-office law firms are still operating in the so-called "colonial model" mode. There is a principal office and everything radiates out from that office and back to that office. If the experience of business is of any value to law firm models, this mode of operation is not going to lead to long term success.

If law firms follow the evolutionary process of business and make the transition to the "multinational company" model, there are many pitfalls in this model for law firms, especially in the regional independence of its various components, that must be considered. If a regional group has a great deal of independence from the firm's principal office and little contact with the firm's other regional operations, how long will it be before these regional operations seek complete independence or to join with another law firm that promises more? We are starting to see some of this now where large groups of lawyers, and even entire offices are changing firm affiliation. For example, last Friday's legal press was full of news about the Mexico City office and Latin practice of a well-known New York City firm jumping ship and joining with another well-known New York City law firm.

If law firms explore moving forward from the "multi-national model,' I think there are serious questions as to whether a law firm can adopt the "globalized company" model, because of the unique nature of the practice of law, which, after all, even though a service business, is also a licensed profession. There may be very cost effective resources in other jurisdictions that have time available, but, if none of the professionals at that location have the requisite licenses, can they deliver a suitable work product? Is it really possible to do high quality legal work of a specific nature in multiple locations throughout a law firm? Can a "global law firm" afford to have appropriately licensed professionals spread throughout its multiple offices across time zones so that there are competent professionals always available throughout the world who are able to work on specific projects that require their licensed skills?

The globalized company model no doubt works well for many businesses, because there are common products, common technology, shared knowhow, copyrights, trademarks, and brands, etc., that can be easily made available to regional operations under appropriate licensing agreements, technology transfer agreements, or otherwise. For most business products and non-licenced services, unlike with law firms, there are no restrictions on the persons who can be called upon to do the work required. Thus, any reasonably intelligent, competent person can do what is needed in the business environment without fear of violating ethical standards or engaging in the unauthorized practice of law.

Finding the best way to address the rapidly growing need to provide globalized clients with the legal services that these clients require is going to be one of the most significant challenges of the coming years. The large, integrated, global law firm is one way of addressing these needs. Another is a "best friends" approach. Legal networks are another way of filling the needs. Each of these methods has its own strengths and weaknesses. Hopefully, we can interest people in sharing there view on the strengths and weaknesses of these approaches and the viability of other approaches as well.