Integrating engine rooms: Assessing post-merger administrative challenges

In January 2001, US firm Reed Smith merged with UK firm Warner Cranston. There were important similarities between the firms that made a merger beneficial, but there were also many differences that had to be addressed. Tim Stubbings, operational manager at the London office of Reed Smith, recalls the trials, tribulations and successes of integrating the administrative functions of the two firms, from both a physical and cultural point of view.

There is a well-worn, Anglo-American joke that goes something like this: upon the arrival of a New Yorker at a small and remote Cumbrian hotel, the tiny reception quickly became full of clubs, golf umbrellas and several boxes of balls. “Surely sir,” cried the manager eyeing the baggage with alarm, “there must be some mistake. We’ve no golf course up here.”

“Well now, that’s no problem,” said the tourist. “I’m having one sent over with my heavy baggage…” The central point here is that when you’re dealing with America, one should expect horizons to be widened, comfort zones challenged and a strong desire to constantly improve. As Dale Carnegie is reputed to have said: “When fate hands us a lemon, let’s try to make lemonade.”

One of the great successes of good management, cited by Philippe Bourguignon (the former chief executive of Disneyland), is that strong cross fertilisation will thrive through cultural integration. If there is a story to tell of this in the UK legal sector, then I believe that Reed Smith is a case in point. It is now three years since the UK practice Warner Cranston merged with US firm Reed Smith. At the time, Reed Smith was ten times larger than the UK firm, with twelve US offices to Warner Cranston’s bases in London and the Midlands. Since then, the overall practice has grown to nearly 1,000 lawyers with 18 offices across the US and UK. The combination has been a great success. The UK practice has enjoyed over 50 per cent growth in people and turnover with extremely low lawyer attrition.

For the UK partners, a fundamental driver for the merger was the ability to access and provide international legal work to the large pool of Reed Smith’s US corporate clients. To support this, they knew they needed a US firm with a real one-firm business approach and culture. Full integration with the US practice and its partners, rather than clinging to a semi-detached satellite existence in the UK, was a critical part of the plan. The US and UK partners are very comfortable with the way the practices have integrated to create a true transatlantic firm. Indeed, Reed Smith has applied lessons learned in the UK process in its integration this year of the 200-lawyer West Coast firm, Crosby Heafey, which joined Reed Smith at the start of 2003.

Effective integration of law practices has different aspects. At the core is integrating structures and systems for management and administration and, as in Warner Cranston’s case, this will usually take the most work and have significant challenges to be dealt with. The remainder of this article case studies the integration process for the administration teams and systems of Warner Cranston and Reed Smith, the success of which has been underpinned by the cultural fit of the two organisations. It looks at the different areas this involved, the challenges and problems faced, how issues were overcome, and the impact on the individuals involved.

Jack Welch, former chief executive of GE, believes that leaders must create an atmosphere in which people understand that change is a continuous process. As 2003 draws to a close, the synthesis of the UK and US administration and management is at a very strong and positive stage of an ongoing process of change and integration that began in November 2000. That is not to say that there have not been significant challenges and at times a steep learning curve at various levels.

With integration, issues emerged for each of the administrative functions in the UK. There was also a degree of commonality that centred on three main themes:

The forming stage of the new firm, where everything was new and unfamiliar;
The storming and norming process of understanding each other’s culture and style;
The current performing stage, where teamwork and co-operation are constantly improving and adding tangible value.

The forming phase

While the two businesses of Reed Smith and Warner Cranston had the makings of a successful partnership in terms of client base and overall cultural fit, from a structural perspective they could not have been more different. Warner Cranston had evolved by the middle of 2000 to be a medium-sized firm of around 150 people with offices near London Bridge as well a Midlands office in Coventry. In contrast, Reed Smith was spread over ten East Coast cities of the US and employed approximately 1,800 staff. Approaching the merger as a full combination of the businesses produced different expectations among the staff as to what this would mean in reality – partly as the two firms were so different in terms of size:

The first was that it would be a joining together of two firms with an equal part to play in a newly combined future;
The second was that it would be a “takeover” rather than merger, with limited ability to influence and shape events.

The pressure of a six-week deadline to have all core systems in place before 1 January 2001 produced initially more of a takeover feel for the UK admin functions:

The Elite financial databases of each firm had to be combined so that for the first time the UK would not be in control of month-end procedures;
A new financial year had to be adopted, effective 1 January 2001;
Templates, library databases, usernames and password security all had to change;
The network and PCs had to change – out went the Windows 95 operating system and Dell desktops, in came Windows 2000 and Compaq desktops and laptops;
Software was either upgraded or replaced, which created an intensive training period (at a time when people did not have time to spend away from their desks): Office 95 was replaced by Office 97; Exchange client was adopted for e-mail; MS Scheduler was replaced by Outlook 98;
A global address book and telephone directory bulging with new and unusual surnames brought home that we were a small fish in a much bigger pond.

While the merger has been a process of identifiable stages, this initial phase was something of a big bang, with this high-energy mass of new matter revolving at a tremendous speed, gathering proportion, cohesion and taking shape into something quite special. There also had to be a heightened sense of trust in the firm’s superiors that all of this activity was anchored in a clear, mutually beneficial and agreed strategy.

The early stages of integration were, out of necessity, about bringing key systems together, rather than people. Throughout this period, however, core messages, including the benefits and the broad strategy of the merger were repeated at various levels to stabilise the process and set initial expectations. HR data had to be streamlined to ensure consistent categorisation of job profiles, accurate reporting of headcount, remuneration and personal details – all within tight deadlines. But the key was to keep talking so that both the US and UK could appreciate the strength of the integration while respecting the uniqueness of each other’s market.

Because of the impracticalities of getting large numbers of lawyers and support staff together from both firms, the first initial contact for most was new systems, new phraseology and a lot of hard work on translating policy and procedures – from getting used to a new time zone and date format to reports and budgeting in a new currency.

Throughout the first year of the merger, regular updates and internal publications fed two appetites – to know how things were going but also to introduce in drip feed, from key people, more informal networks and a sense of cohesion. Early on in the process, an all-lawyer retreat in Baltimore helped to locate UK lawyers within the new practice-group structure.

From a business-development perspective, structural issues were not immediately apparent as the synergies between practice areas and their client bases produced immediate joint activity and projects. The merger provided immediate opportunities for partners to grow their own practices for international work and clients and in the first year, approximately £2m of work was referred between the UK and US. Fee earners began to foster relationships fairly quickly through client work and the practice-group structure. Within the initial 6-12 months, it was clear that there was a cultural fit, both in terms of working practices and staff.

The commitment to cross-selling was further cemented by the relocation of a well respected US corporate partner to the London office to concentrate on exploiting the joint firm business opportunities. For many people, and for obvious reasons, the year went by very fast.

Working through the differences

With the dust settling in January 2001, the real non-systems integration could begin.

One issue that had come to light in the latter part of the systems integration was getting the right people together to address particular problems quickly. A prolonged Elite integration, combined with a more thorough conflicts-procedures system (which replaced the more informal Warner Cranston arrangements), drew attention to how other integration projects should be planned and delivered. Furthermore, questions surfaced as to whether the US management resources were coping at a time when Reed Smith itself was going through a significant period of change (including moving to a new practice-group structure based on client and work types rather than a geographical basis).

It was important for the Warner Cranston team to recognise and resolve these issues. During the late 1990s, it had created a lean administration under the leadership of a chief executive, and with it a strategic approach and focus on delivery. For its size, Warner Cranston had also developed a sophisticated management model. Together with UK market considerations, a one-size-fits-all integration programme, more suited to a US domestic combination would require modification in a few areas in order to translate effectively into a unique set of cultural values.

These challenges materialised essentially from the creation of new teams of people being brought together quickly. Added to this was a backdrop of objectives that were both changeable (as the structure found an optimum level), and hard to put in context in a rapidly changing environment.

There was a realisation at Reed Smith that the strength and quality of its non-lawyer central management needed review and strengthening to effectively support the expanding entity and integrate new mergers or acquisitions. Significant changes and additions were therefore made to the senior-management structure, following the commissioning of a review by Hildebrandt in the summer of 2001.

Combined with the new administrative structure, people could now really start to do business with increased face-to-face contact, building up trust and genuine understanding. This was a critical stage in the administrative component of the merger’s development, as the determination, flexibility and commitment of both organisations started to pay off.

Early on, it was natural that joint visits would be at the attorney level, to establish the basic foundations of a cross-selling initiative and to leverage each other’s practices. However, behind the scenes, the engine room (admin) was suffering through not having this growing sense of belonging or being plugged in – misunderstandings would prevail unless relationships could be developed. For me, things really took off when I spent a week in the US meeting a number of people and establishing a rapport.

Another dimension to the growing sense of collaboration was recognising expertise in each firm. For example, it was decided that the UK should manage the wholesale redesign of the Reed Smith website. A year on after the merger, it was clear that the firm needed to create an integrated global website, which reflected the unique ethos of the firm in both the US and European markets. Until that time, the firms had existed with two concurrent sites, the US Reed Smith site and the UK Warner Cranston site. The UK marketing department and a team from the US embarked on putting together a proposal, which would provide enhanced functionality for our users, particularly in terms of personalisation options and internal linking of related information. The project took nine months of development to the site’s visualisation and launch in January 2003. This was our first major integrated marketing project and it has been vital in assisting the cohesion of the firm-wide marketing functions. It not only encouraged extensive and continued interfacing between the teams, but was also an education to both sides about different working practices. What’s more, the new website was recognised by The Internet Marketing Attorney Awards as among the top ten of the largest 250 law firms.

The benefits of clearer reporting lines and face-to-face contact were fast flowing:

The IT systems and teams became properly integrated;
Jointly drafted policy and existing firm-wide policy became easier to apply;
Transparency increased.

This is unlikely to have been possible had Reed Smith’s senior management not been flexible in dealing with local market and cultural issues, both during the early transition and the long term.

The performing phase

By the nature of its size, the UK is a small part of the whole firm, but the culture and value of taking and using ideas and qualities from UK staff on a wider firm level has developed strongly. Mark Dembovsky (former Warner Cranston CEO) and David Duckhouse (head of finance) have moved on from being executive non-lawyers in the UK structure to senior firm-wide positions. Other areas of administration have aligned with their respective US chiefs so that in core areas, the organisation moves in a common direction and to uniform standards.

In terms of premises, part of the commitment to develop and invest in the UK was the move to London offices at Minerva House, remaining close to London Bridge. The style of the fitting out of the 38,000 square-foot space continues to produce a high degree of interest, surprise and praise from clients simply because it is unique. When you walk through the door it restates that this is a different type of law firm, and the success of hosting many client events continues to make it a popular venue.

On the systems side, a strong in-house team was recruited to replace the former outsourcing solution. This has produced many benefits. From a network administration perspective, the UK team is fully integrated with all aspects of the central IT function in Pittsburgh. The stability of services provided to lawyers is very high, as well as the training they receive, which has been developed with a significant amount of local expertise.

Next year, we are looking forward to the development of a KM solution that will further draw both legal and non-legal firm-wide information together. Firm-wide has come to mean just that – not the US firm or the UK firm. While universal programmes will always require slight local variation (simply because of UK legislation, culture or the nuances of language), the sense of identity (enforced by the dropping of the Warner Cranston name in January 2003) is of being part of “Reed Smith”.

The current state of development is very good. Growth continues, staff retention is high and while the UK still has an identity, there is no schizophrenia as to whether it is part of a global firm or not. The initial and natural temptation to resist change and maintain an element of UK autonomy is now far outweighed by the benefits of sharing with, and complementing, each other. We take the best from the US and the best from the UK and are continuing to establish some pretty sound and attractive initiatives, which as unique entities may have taken a few years yet to come to fruition. Professionally and personally the benefits of a larger peer network is proving invaluable, experiences are shared and stronger resolutions concluded.

However, the best in many ways is yet to come. The various admin teams are achieving results, and there is clear evidence of greater trust, tolerance and understanding. The progressive evolution from the old management structure towards a full match with Reed Smith roles and responsibilities is almost complete. Not a bad way to make lemonade really.

Tim Stubbings is operations manager at Reed Smith. He can be contacted at: tstubbings@reedsmith.co.uk.