Senior leaders at law and tax firms often describe referrals as critically important for business.
Yet not all firms put equal efforts into formally tracking referrals and ensuring they get enough return on their investment in building and maintaining networks.
That’s perhaps because some firms benefit more from referrals than others, depending on the market they are based in or the practice area they specialise in.
Having said that, even firms that don’t formally track inbound and outbound referrals usually have a fair idea about which partner firms send the most work their way.
Tracking targets
Some firms use a combination of in-house technology and human resources to help keep track of relationships with other firms.
Plasseraud IP, for example, has a designated group of partners who manage referral s and decide which firms to send work to. People at the firm can use an in-house app to track referrals and look up which foreign associate to use for a specific case.
Attorneys and paralegals cannot send work to just anyone – they must use the partner firm decided by the group, says Plasseraud IP’s owner Cyra Nargolwalla. “I think it’s an organised way to manage the situation,” she adds.
If someone has a good reason for not wanting to send a particular file to a specific agent, they can raise a request in the app to bypass the preferred firm. The partner in charge of the referral relationship will decide whether to allow that.
Some others, such as international law firm Mourant, are part of law firm networks that monitor work generated by member firms to evaluate proactive engagement and participation. In Mourant’s case, the network is Lex Mundi.
However, Lex Mundi’s tracking depends on member firms self-reporting details about work generated through the network. That means it’s not necessarily comprehensive, explains Mourant’s Hong Kong-based Asia managing partner Paul Christopher, who is also the practice leader of the firm’s corporate and investment funds team.
He highlights a key problem with tracking referrals: “You can be working alongside law firms, but that doesn't necessarily mean it’s a referral relationship. It’s quite hard to categorise what’s a referral and what’s not sometimes.”
That’s exactly why some firms aren’t keen on tracking whatsoever. One of India’s oldest intellectual property firms, Remfry & Sagar, doesn’t formally monitor the volume of work brought in through referrals.
The reason, says partner Samta Mehra, is that it’s often hard to know what qualifies as referred work.
“Often, new clients directly approach us and don’t mention that our firm was referred to them by another firm,” she says.
Balancing act
Even so, most firms usually know who their most trusted partners are in different jurisdictions and who regularly sends work.
Vishal Sharma, managing director and UAE tax practice leader at Alvarez & Marsal, notes that the firm doesn’t formally track the percentage of revenue generated from referrals but keeps tabs on which firms are referring the most work.
While reciprocity is important to maintain relationships with top partner firms, it’s not always easy to balance outbound and inbound referrals, according to sources.
Mehra says Remfry & Sagar tries its best to give work back to the firms that send referrals its way, but it’s not as easy as one may think.
"The volume of work going out of, and coming into, India is not the same because India is an important market for many foreign companies, so we see considerable inbound work.
“But Indian companies aren’t doing as much IP litigation and filing outside the country yet, and they tend to be very cost-conscious. So, several considerations play into whether we can refer back as much work as we receive.”
Mehra is upfront and honest with her foreign associates when it comes to this issue, she says: “I tell them that I will try to send as much work as I can, but there’s only so much I can do.”
Nargolwalla at Plasseraud IP faces a similar issue.
She says it's usually quite easy for the firm to do a 50-50 arrangement with a Japanese firm because it has a lot of work that goes to Japan and vice versa.
“But it’s a different situation with the US because not many US companies naturally send work to a French firm for European Patent Office matters. So we send more work to the US than we get back,” she adds.
There could also be cases where a client specifies which firm it wants to work with in a specific jurisdiction, notes Nargolwalla.
This again constrains a firm’s ability to send work to its preferred firm, but could open up opportunities for new long-term partnerships if the other side is happy to reciprocate, she adds.
Different strokes
The volume of work that comes to a firm through referrals also varies greatly across practice areas.
Sharma at Alvarez & Marsal says 60 to 70% of the revenue in its disputes and investigations business depends heavily on referred work from law firms.
Referrals also come into play when the firm handles issues such as tax controversy, tax structuring and M&A transactions.
Areas where the firm itself refers considerable outbound work to law firms include M&A and corporate finance.
At IP firm Remfry & Sagar, litigation brings in a lot of referred work, says Mehra.
“For litigation, companies are very conscious about who they choose to represent them,” she says.
Size and reputation matter, adds Mehra: “We recently got a call from a client that wanted to engage us because the other side had engaged a big-sized firm, so they wanted a firm of a similar size to represent them.”
Nargolwalla at Plasseraud IP says while referrals don’t generate the bulk of the work at her firm, they are important for new business in some areas.
“As patent agents, we can't represent our clients in court, so we work with barristers and firms that offer complementary services. These relationships are important for us to get new patent litigation work.”
Receiving recognition
Of course, whether a firm will ultimately win business from a referral depends on several factors. One of them is specialist knowledge and experience.
Christopher at Mourant notes that it is important to refer a firm or individual with the right level of specialism so that the client receives the best advice.
“This can relate to a particular type of work, sector, market or geography, depending on the client’s requirement.”
Often, referring a firm with a solid reputation guarantees that the person handling the case has the experience and expertise, notes Nargolwalla at Plasseraud IP.
“In certain cases, sometimes due to a client’s specific request, or in an extremely important case, or a very specific technical area, we would of course have to validate the person or firm’s expertise and experience,” she adds.
However, according to Wilson Chu, partner at McDermott Will & Emery in the US, first-hand experience trumps everything else.
“It’s more about how comfortable we are with them [the firm in question], usually when working together on deals.”
Industry recognitions received by a firm or the relevant team or partner also matter greatly.
Christopher notes that receiving a legal award or ranking provides validation from peers and the broader legal community.
“It acknowledges a lawyer's or a firm's expertise, dedication, and success in their field, making them more attractive to potential clients.”
Nargolwalla agrees that awards and rankings aren’t just superfluous: “They’re more a part of the bigger picture and reputation of the firm or expert."
Client first
Firms must also be careful about who they pick as their partners to avoid losing a client because of a bad referral.
Allan Fallet, partner at Mauger Muniz in Brazil, says the firm values craftsmanship and high-quality work. That’s the starting point it uses to refer clients, even if the firm it’s sending work to is not yet its business partner or does not reciprocate with referrals.
“The important thing is the trust placed by our client and the high-quality delivery that we value so much,” he explains.
All sources concur that client interest is paramount when referring work and that they try to be agnostic when a client asks for a referral, meaning they may not necessarily send work to a firm simply because it refers considerable work to them.
It’s something that resonates with Chu at McDermott Will & Emery. However, he adds: “It’s also a matter of human nature that if a firm has given us a lot of work, we will obviously convey to our client that we work with them all the time and are highly confident in their team and capabilities versus somebody who we have had less contact with.”
It seems that while quality of service matters the most, a strong referral relationship will go a long way in helping a firm secure new work, especially when it’s just as competent as its local rivals.
As Chu puts it: “If our client wants us to refer an investment bank, there are five top candidates that will likely do an equally good job.
“So why would I want to refer to somebody who doesn't care about me and refers work to my competitor when the other four are just as good or better?”
Ultimately, whether firms choose to formally track referrals or not, they would do well to remember the importance of reciprocity if they want to secure new business.
